Rush Enterprises, Inc. (NASDAQ:RUSHA) Q1 2025 Earnings Call Transcript

Rush Enterprises, Inc. (NASDAQ:RUSHA) Q1 2025 Earnings Call Transcript May 2, 2025

Operator: Thank you for standing by. My name is Janice, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rush Enterprises, Inc. Report First Quarter 2025 Earnings Results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would like to turn the call over now to Mr. Rusty Rush, Chairman, CEO, and President. Please go ahead.

Rusty Rush: Well, good morning, everyone, and welcome to our first quarter 2025 earnings call. With me on the call 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. Before we begin, Steve will say a few words regarding forward-looking statements.

Steven Keller: Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31, 2024, and our other filings with the Securities and Exchange Commission.

Rusty Rush: As we stated in our news release yesterday, in the first quarter, we achieved revenues of $1.85 billion and net income of $60.3 million or $0.73 per diluted share. We remain committed to returning value to our shareholders. So I’m proud to announce that our Board of Directors has again declared a cash dividend of $0.18 per common share for the quarter. The business environment in the first quarter was difficult to say the least. The industry continues to struggle with the freight recession, economic uncertainty, growing concerns around U.S. trade policies and tariffs, and future — and the future of emissions regulations. These factors caused a slowdown in customer activity, particularly in the Class 8 over the road segment.

Truck sales to Class 8 customers were weaker as we began the year. However, thanks to our continued focus on strategic initiatives and our diversified customer base, we managed to outperform the broader market in the first quarter, primarily due to strong sales to vocational and public sector customers. In the medium duty truck sales market, while the overall market was down, our unique ready to roll inventory program was particularly effective, and again, we outperformed the industry with steady Class 4 through 7 sales in the quarter. From a used truck perspective, we saw a typical seasonal pattern, slower sales in January and February, but a good pickup in March, giving us sequential growth from the fourth quarter. With respect to our aftermarket results, our parts, service, and body shop revenues were $619 million in the quarter, down 4.6% compared to last year.

Our absorption ratio was 128.6% compared to 130.1% in the quarter Q1 of 2024, but still very strong. Despite tough market conditions, we experienced a slight improvement in aftermarket sales revenues compared to the fourth quarter of last year, with demand from our public sector, vocational, and medium duty leasing customers remaining steady and sales to the energy sector beginning to pick up. We also expanded our aftermarket sales force in the first quarter, which should help us provide an even higher level of service to our customers going forward, all things considered, operation in the first quarter. Looking ahead, we expect to see some improvement in aftermarket revenues in Q2. We added service technicians during the first quarter, which will allow us to decrease customer dwell time going forward.

We also continue to optimize our parts delivery routes and improve our call center operations, which help us serve more customers efficiently. With respect to the second half of the year, we are actively monitoring the supply chain, and the impact that proposed tariffs may have on parts availability and pricing. We believe that we are well positioned with our parts inventory to mitigate the effects of any potential supply chain disruptions. The Class 8 new truck sales market continues to face challenges. ACT Research says that U.S. and Canadian retail truck sales totaled 57,946 in the first quarter, down 9% year-over-year. By comparison, we were down 7.8%, selling 3,222 new Class 8 trucks and accounting for 6.1% of the total U.S. market, and 1.1% of the new Class 8 market in Canada.

While this was a tough quarter, I’m pleased that we outperformed the market. Looking ahead at Q2 and the back half of the year, ACT Research revised its U.S. and Canadian Class 8 sales forecast downward to 234,600 units in 2025, a 14.7% decline compared to last year. However, we do anticipate a slight improvement in Class 8 sales in the second quarter due to the timing of some fleet deliveries. At this point, there is too much market uncertainty to predict what demand will look like in the second half for our over the road customers, but we remain optimistic about demand from our vocational and public sector customers throughout 2025. In medium duty sales, the overall market declined 3.5% in the first quarter, but our performance remained stable and we sold 3,329 new Class 4 through 7 trucks, outpacing the market and increasing our market share to 5.6% of the U.S. Class 4 through 7 market, and 3.1% of the Canadian Class 5 through 7 — excuse me, Canadian market.

ACT Research forecasts U.S. and Canadian sales of Class 4 through 7 trucks to be 254,050 in 2025, down 7.2% compared to last year. Going forward, we expect customers to be cautious, replacing vehicles rather than expanding their fleet. But our strategic approach to stocking work ready vehicles should allow us to meet customer needs when and where they need vehicles, and we expect to continue to outperform the market this year. We sold 1,769 used trucks in the first quarter, down 2.7% compared to 2021. As of now, demand remains soft and tariffs haven’t yet affected used truck pricing. But we’ve been proactive in increasing inventories slightly, in preparation for the spring and summer selling season. And we believe our stock levels are where they need to be to meet customer needs.

Our Rush Truck Leasing division delivered solid results again in the first quarter. Leasing and rental revenue increased 2.3% compared to Q1 of 2024, and totaled $90 million for the quarter. Rental revenue was down just slightly year-over-year due to lower utilization rates with full service leasing continues to perform well as we put additional vehicles into service. I’m confident that our leasing and rental business will stay strong throughout the year. While we faced our share of challenges in the first quarter, I’m proud of how our team has navigated the uncertainty that is currently impacting the commercial vehicle industry. As I said in the news release, what remains unclear for us and for the industry as a whole is how the second half of the year is going to play out.

The ongoing concerns around tariffs, their impact on the economy, and our current emission regulations may be modified for making some customers hesitant to move forward with vehicle purchasing decisions. That said, I’m confident in our position as we navigate these challenges, and I believe our dealer network, strong relationships with customers and manufacturers, and our broad product offerings will allow us to respond quickly, as these policies take shape. Before I close, I want to take a moment to thank our employees. The first quarter of 2025 has been tough, but our team has shown incredible resilience. They worked tirelessly to help customers through certain — through these uncertain times, while keeping our long term goals in sight and continuing to manage expenses.

Their dedication directly contributed to our performance this quarter, and I am extremely grateful for their efforts. And with that, I’ll take your questions.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Daniel Imbro with Stephens. Please go ahead.

Daniel Imbro: Yeah. Hey. Good morning, guys. Thanks for taking the questions.

Rusty Rush: Good morning, Dan.

Daniel Imbro: Rusty, obviously a lot of moving pieces out there. Maybe we’ll just start on the demand backdrop.

Rusty Rush: Sure. Please.

Daniel Imbro: Exactly. Can you talk about maybe how new unit sales trended through the quarter, and maybe here into April? We’ve seen a lot of the larger fleets lowering their CapEx orders. I know those aren’t always your customers, but are your customers behaving in a similar way? Kind of what are your customers telling you about their planned expenditures for the rest of the year?

Rusty Rush: Well, I think I’m taking — we’re taking the approach that hopefully as we get through the back half of the year, it’ll be somewhat similar to what Q2 was, right? With these ever moving tariffs that are going on, besides business being rough, right? I mean, you’ve seen the earnings releases that have come out from all of the carriers, right? And we do business with those carriers, not a lot of them — not all of them by any stretch, but they are a component of what we do. So that the tariff bouncing around has made it very difficult. If you come to me 60 days ago, I would have said the same thing about Q2 that I’m telling you about the back half of the year, okay. But once we got a little clarity, when I say clarity, we got clarity like 60, 90 days out, but we don’t have clarity throughout the whole year, and that’s the toughest thing we’re dealing with, right?

So, I would have said, boy, I’m really concerned about Q2 because as I mentioned in there, we expect deliveries to be slightly up, not dramatically, but slightly ahead of what Class 8 deliveries were in Q1. So, I mean, it’s just those uncertainties, Daniel, I mean, it’s like you said, a lot of people — I know people — I’m not going to name names, but I know people that have shut off total buy for the back half of the year. And it’s understood that, that it’s just really, really difficult. I don’t want to give you — so I’m hoping the same thing happens with Q3 and Q4. You’ve heard me use this phrase a few times over the last year or so, it’s hand to mouth, maybe. And — but it’s not something we’re not used to. I would tell you that backlogs, while the OEMs we deal with are not full through Q2 still.

There are still slots available in June. So as you can see, it’s hard to put your arms around where Q3 is going to be when you still got slots available in Q2, not a whole lot, but there are some slots that are available and you do. And it’s — we won’t — it’s very difficult to price right now, because tariffs just came up again last week, they’re being relooked at again. I mean, we still don’t have certainty around the emissions, okay? You saw that the House maybe yesterday passed a bill, as the house maybe yesterday passed a bill as the federal government’s going back and forth with CRAB in California. We’re going to see how that all plays out as we still be able — we do not have established emissions. We have them, but they are underseas, right now, right or wrong for January 1 of ’27, right?

So I expect those to change. I don’t have the detail. I’m not here — I’m not going to project on what that will — how it will change. But with the current administration that’s in it right now. So there’s no question. It’s going to change this and it should change. But all these uncertainties just create — it’s hard to run a business living in an uncertain world like that. So it may be this way for a while, until things smooth out, and I can’t tell you when that is. I think there’s another — I don’t think we’ll get any — on the emissions side, I think we’re still 45 days or so away from getting more clarity. And I know the bill is going to be going to the house as we try to come up with a solution that makes sense, not the one that’s in place currently, which does not make sense.

And the tariff thing, like I said, they’re relooking at it again as of last week. So I mean, I think we’re going to see us operating in these short windows. I don’t think you’re going to see these big backlogs out through the rest of the year. And if you do and if you’re counting on backlogs in the fourth quarter being worth the paper they’re written on, good luck because things change quickly right now. So I think there will be some demand, but I’m in line with what ACT said when it comes to — they’re off, we’re around 15%. I’ll take right now, to be honest with you for the year, as I look out there and see. I’m not — and I’m not trying to be Debbie Downer hear about it, but it’s just a reality of what we’re dealing with. But I think you see that we were still able to put on a pretty good quarter, given everything we’re dealing with.

And I would hope that we’ll be able to continue to operate it. Look, let’s go back — we don’t talk about Russia in particular. I know I’m ramping along, but here we go. Let’s go back to 2020, right? Let’s go back to COVID, go look at the performance of the organization, whether we had allocation, we’re five week lead times. We’ve been able to perform, and I think this to continued performance as we go forward, no matter what the environment is.

Daniel Imbro: Yeah. Well, that’s a tandem out, at least you guys have the experience and done this before. Maybe for my follow-up, Rusty, if you could just expand a bit on the parts and service. Obviously, it was softer in 1Q, was that more in any one part of the business, collision, big fleets for small fleets? And then you mentioned you expected an improvement in 2Q. Did you mean a return to year-over-year growth or just sequentially higher than the first quarter?

Rusty Rush: Sequential, okay? I’m hoping, but I’m not here to guarantee any year-over-year growth, right? I think, one of the key things, as you asked about Q1, we’ll start there. It started off slow. I mean, weather in January, I know there’s always weather, but we had more store shutdown days this year than we did the prior year in January with some of the rough weather that came through. I was very concerned in January. We saw a pick-up in February, and we saw a pick-up from there into March. I mean, I’ll be honest, we just looked at April this morning, obviously, it’s 1st of May. April was solid. It was choppy, maybe a little off per day average. But it looks like our backlog is similar when I talk about that, that’s work in process as to what we were at the end of March, very similar within a point or so.

So I’m not — it’s just a little bit — it’s choppy, right? Again, the uncertainty has wrapped around, but right now, you can ask anybody, what you’re seeing lots or less of is miles driven. Miles driven is not really good. You’ll see that customers, especially the over the road customers are not putting the miles on their vehicles that they historically had. And obviously with less miles, probably needs less maintenance and less repair to go with it. That said, given the dynamics of all the programs that we have out there, I do believe we’ll be able to have sequential growth because January and February were softer, all right. We picked up through March, not a little bit choppy, and maybe here, I’m just looking at numbers today for April, but we’re real close.

So — and typically these months are better months for us. When you get into May and June and July, get into summer, and your air conditioning work picks up and things like that around the country because we have a lot of stores in the South. So I would look for sequential growth. I’m not here to commit to year-over-year growth. What I have to able to commit to is, if you look at our expense management, year-over-year, we were down in G&A, which is what I really look at. I mean, S is nothing but a derivative of sales, but G&A was off 5.5% year-over-year. That’s why you only saw a 1.5% drop really in the store operating absorption number, right? They are 4.5% down, but only 1.5%, you made a lot of it up from an expense perspective, right? That’s the key thing as we do have more than one lever to hit as we go without tearing it apart.

So again, choppy, but we’re pretty fluid, as I’ve said, but likely, we proved that out over the last five years in the business model and we’ll continue to operate in the environment in the hand we’re dealt. And I’m confident in the company, I’m confident in our folks, and I’m confident in our leadership that we’ll make the right decisions to continue to — in my mind outperform the market, even though we’re the only public truck dealer, really that’s just a truck dealer. I know that I’ve got one or two other comps out there, I do expect us to outperform like we have — like we usually do in the past.

Daniel Imbro: All super helpful color. Really appreciate it and best of luck.

Rusty Rush: You bet. Thank you.

Operator: Your next question comes from the line of Andrew Obin with Bank of America. Please go ahead.

Andrew Obin: Hey, Rusty. How are you?

Rusty Rush: I’m good, Andrew.

Andrew Obin: Okay. So just — as I hear you correct on second quarter, sequentially, Class 8 is going to be better and sequentially parts and services is going to be better, that’s right, right, I heard that correct?

Rusty Rush: Well, is — Andrew, slightly.

Andrew Obin: But no, I got it. Yeah.

Rusty Rush: Slightly. I’m not — let’s don’t get carried away here. The problem — the problem is the uncertainty, man. I’d tell you what it was exactly like if I knew. But if you hadn’t noticed since we had our first 100 days, every day has been different since January [indiscernible], and I’m not being critical there, but the timing stuff changes on a daily basis and it’s just — it makes it very difficult running a business and for me to give forecasts that are out there. That’s why I’m only going. You don’t see me going out in the back half of the year. Like I told you a minute ago on the call, on 69, I told you Q2, 60 days ago, but we were able to put something together when we got some clarity on what pricing was going to be in Q2, right? But I don’t — again, they’re relooking at tariffs again. So the back half of the year is still up in the air. Look, and also dealing with what’s going on in the economy. We need to take this slightly.

Andrew Obin: Okay. No, I totally appreciate it. And can you just tell us sequentially, and I know in April, there were some holiday timing issues, but parts and services in April, did that get better or did that from — did that stay stable from March or did that slow down? And, how would — I know, we’re getting hyper granular here, but was there a slowdown in April?

Rusty Rush: A slightly less than April per day average. But I attributed it, hopefully, I’m right, I’m attributing it to the Easter week, okay? Easter week, we did not have a very good week, right? I will tell you this. We closed it. We didn’t catch it all up here at the end, but we did close better here over the last week. So I’m hoping that we can maintain some of that. And by the way, it was still better than January and February, okay, per day average. So it wasn’t quite to where April was on a per day average. But we — Easter week was a rough week, and if you’d ask me where we ended up today, if you’d asked me a week ago, I would have taken it. So I felt we had a good close to the month. I know we’re getting granular. But there are certain pockets in the country that I can attribute.

I know you always like to know where around the country, where things are, but there are certain pockets that you can attribute some of this, a little bit of softness to be honest with you.

Andrew Obin: Okay. And then as I think just I assume that G&A is just fixed is what it is, but as I think relative to ’22, right, as I think about SG&A cost, is that a good baseline for what SG&A can be or were you so bare bones during COVID that it’s not applicable? And I should just assume that there has been some inflation over the past two, three years?

Rusty Rush: Yeah. No, let’s not go back that far, down there. There’s no way I’m going to get back down to that number right now. I’ll be cutting meat and bone out of the place, because it cost a little bit more money. We didn’t give back all that inflationary pressures that we took in ’23 and ’22. It’s not like we’ve had deflation. So you continue to have inflation. That’s why we’ve maintained pretty flat. Since I made those cuts last year around this time. Right now, a year ago, we’ve maintained, which is what’s allowed us, that’s why Q1 was off 5.5% over last year’s Q1. We’ve been able to hold it. Is there more we can do? Possibly. But we’re continuing to look at that on a — rather or daily, weekly basis. But again, as I get clarity, I make those decisions.

I try to continue to get clarity of the market I’m in, right? I’m going to see how April closes. I’ll get the nets on April, look at where we are from a G&A perspective. I mean, when I say hand to mouth, it’s hand to mouth in every facet of the business. Is that — is that a bad thing? No, it’s just the reality of it, right. And I don’t think anybody — I’m very confident in our ability to react. Maybe I can’t project as well as I’d like to project for you, but I’m very confident in our ability to react or proactively act, should I say given what we see in front of us, it’s just the runway is really short. There’s a lot of haze, a lot of fog, and when I rolled off all the things that are going on. And that’s not just for me, that’s for our customers.

I mean, we’re driven by what customers see, what they do, what affects them. It’s hard to make a decision if you’re a customer, to go out and make an acquisition of product and you’re not going to see any growth even to — which you’re running less miles, maybe you don’t have to replace it as often, right? I mean there’s a lot of things that are not positive, but out there from the macro perspective, the most positive thing is our ability in my mind to be able to navigate and make the right decisions given the market that we’re handed. So again, though, I’m not projecting doom and gloom in the back half, I’m just giving uncertainty because I don’t have clarity for it. And as I get it, I’ll be happy to tell you that’s why we…

Andrew Obin: And what do you think — what do you think it would take for OEs to sort of get more clarity on sort of production schedules for the second half. Is it clarity on — and I appreciate that it’s both uncertainty about whether or not we’re going to recession, but it’s also uncertainty about sort of treatment of their content under the new tariff rules. Do they go together hand in hand or I know that one of the competitors has sort of — has given pricing, but it doesn’t seem to sort of drive demand for trucks. What sort of unclogs this bottleneck?

Rusty Rush: Well, one has, but there’s stipulations wrapped around. And remember though sometimes the devil is in the detail, always remember that. And so as you look at it — look, Andrew, it’s all the above, it’s our customers’ business. It is our — the clarity with curbs (ph). As I said, they just announced they’re going to do a relook last week, that’s supposed to happen over the next few weeks. That it could change again, just like it did on the automotive side this week, right? I mean, we don’t — I mean, their business — our customers’ business is — I think, we saw that first quarter GDP results. Look at the earnings releases of the public carriers. They’re not that good. They haven’t been, and it’s no disrespect to them, it’s just the facts of the market they’re dealing with, okay.

Fortunately, as I’ve talked about, we’ve had decent vocational business, decent municipal business that have allowed us to continue to perform. I — what’s going to have to happen is business has to get better. We can’t have contraction in GDP and expect us to — for business to get any better. But people are going to have to start running more miles. We’re going to — and we got to get clarity on tariffs. I mean, we think we have them right now. But as I said, we just announced last week to go to relook at it again. So — and we do not know about emissions. I do believe it’s not going to be a stringent in ’21. We were supposed to have this big pre-buy, right? Big pre-buy, going to start in ’25. That’s the back half of ’25. Now, nobody even talks about it.

Why? Because we don’t even know the regs. The regs are not done. It’s probably 45 days. The house passed yesterday some stuff around it. The Senate is going to take it on. But — so, again, I think that’s clarity, right? Are we going to need it? So price going to go up next. Are we going to require these super long extended warranties? What is — what are the milligrams going to be when they’re in the mile stuff. I mean, all we need to get — we were pushing out GHG3 out into 2030, but there’s no solid answer on all of that. And you throw all these things in, along with a tough economy, and less lot miles being driven, and I don’t have an answer. All I can tell you is, I’m not producing it. It’s doom and gloom. I’m just saying, it’s very — it’s a short window.

I cannot see out that far and I don’t think anybody can really right now…

Andrew Obin: And just the last question for me. What’s been access to credit? Are people still willing to finance customers or sort of people who provide credit to the industry? Are they providing — are they pulling on credit or they’re providing incentives? What’s happening in terms of sort of liquidity in the market and ability for you and your customers to access credit? Easy or hard at the same? Thank you.

Rusty Rush: Not the same. Credit is not — I don’t see any issues with credit, at the moment. I mean, there’s not a lot of people running around taking subprime credit. But other than that, if you’ve got a good balance sheet, a good customer. No, I don’t think there’s still availability of money out there for you. That’s not an issue. And when you say incentives, I don’t know if you’re talking about vehicles or not, there really is nothing like that going on because we’re just pricing out a few months right now, most of the manufacturers are. As I keep saying, one manufacturer stepped out, devils in the details, understand sometimes, and that could be under lens, since they announced last week that they’re relooking. I would be very concerned, but I understand why manufacturers have not been able to stretch out.

I don’t like it, neither do customers. Look, but you’re living in an environment that changes, it was changed in February to March to April. And now we’re doing another relook. So it’s just — it’s just difficult. All I can tell you is, I’m very confident in us. Our track record speaks for itself. We’re nimble. We will make — we will sell trucks. We will work on trucks, and we will continue to produce solid results. We have many levers to pull. It’s not just — we don’t just sell trucks. We don’t just work to sell parts, we don’t just sell service. We sell a lot of different things. We have dispense lines to work with. We have many different levers to outperform the market regardless of the hand we’re dealt. That’s all I can tell you about it.

I don’t have the answers as to what the back half is going to look like, but I can tell you, as soon as I will, I’ll let if you want to know.

Andrew Obin: I’ll take it. Thanks so much, Rusty.

Rusty Rush: You mention.

Operator: Your next question comes from the line of Avi Jaroslawicz of UBS. Please go ahead.

Avi Jaroslawicz: Hi. Good morning, guys.

Rusty Rush: Good morning.

Avi Jaroslawicz: So I know it’s got to be hard to parse this out, but just in the hesitancy that you are seeing from customers, would you say it’s more from the uncertainty to the prices or more just the uncertainty on the macro impacts that would affect their revenues or profitability?

Rusty Rush: I would say, first and foremost, their business. I mean, I don’t know that I could — I’m not going to say, 60/40 or 55/45, it’s both. The first thing that needs to happen for someone to get confidence is your own business has to be solid, right? And I think if you read some of these reports, they’ve been really difficult, right? So — and people can stretch out lives on vehicles. But it’s also very difficult when I can’t price them and tell them what I’m going to sell them a truck for in October or November or any of those things. So I — you do it with — here your price exist with a caveat unless somebody decides to change the tariff laws and rules and customers understand that. They don’t like it. We don’t like it.

But for me to say which is more, it’s both. I know that’s kind of a lame answer, but it’s the truth and that’s all I’ll tell. So it’s a truth is both, but first your business has to be good. Why am I — first off, no one is growing their fleet, let’s get real, okay? The only people that — you’re just trying to get replacement, but people can slow replacement down too. Products are not what they were 30 years ago, they’re much better. You could put more miles on product. And by the way, if you’re not running as many miles, I can run it longer to keep appreciating what I got. And mileage, as I said earlier, mentioned a couple of times, miles big run on vehicles, I’m not getting the ton miles, I’m getting the vehicles themselves or not, we’re are down.

So I can probably stretch it out a little bit. Again, it’s just — we just need some certainty around all of this, by the way. Well, tell me what it’s going to cost for a vehicle in January ’27? I don’t know. We know it’s going to be less than what it was projected to be a year ago. We just don’t know how those regs come out and how that affects the OEMs and the engine manufactured, and how it affects their — what it’s going to take from a cost perspective, from their perspective, especially on the warranty piece. So, their business first and then tariffs next. But we can — I can price you for 60 days, but I really can’t price you six months out without a caveat.

Avi Jaroslawicz: That definitely makes sense. I guess part of what I’m trying to understand is just, if the economy does end up holding up okay, what kind of demand destruction we could see just from the higher price, I don’t know if you have a view on that, I’d be curious?

Rusty Rush: Well, I think we’ll see, if the economy would hold up and just — this is what it’s going to be. It’s something I’ve always told you, but you tell me the rules and I’ll figure out how to play the game. Problem is they keep changing the rules, man. And so, that’s made it a little bit difficult, not just for me, but for my customer base. So the cost is what the cost is. Unfortunately, prices of trucks have gone up dramatically as we all know. It’s crazy to me. I think back of how much they’ve accelerated over the last few years, especially the last couple of three. But — and then your business has to be better, why? So you could push those costs through and that has not been the case. We had an oversupply of trucks for a couple of years, remember.

We sold all those trucks in really in ’22 and ’23, and we still had a pretty big, big year in ’24, more than we were anticipating when we went into it. So there’s been an oversupply of trucks for the freight that’s out there. And it’s just — she’s been a — I’ve never seen a freight recession last this long, right? It’s been quite unique from the negative side of uniqueness, by the way. So I mean, I know it’s — I’m hoping that we can get some stability in the overall economy. And continue to — I’m not sure where we’re at in the last couple of months and taking trucks out of the marketplace because we had to get a balance between supply and demand. So the customers — we thought — remember, six months ago, we thought we saw it turning right.

We’re going to get it turned and buy it right now. They’re going to get rate increases. If they are, they’re really slight. And you’ve seen the reports that are out there. They’re not what we were anticipating and giving on contracts six months ago. But who have anticipated all this upheaval with the tariffs and everything else, and you look at what’s going on, it will be going on with the ports, we haven’t seen all the effects of it yet either. Those effects are still coming downstream. Again, I’m not being there every day, I’m just a realist. And I have concern for my stuff in California. Those ports with all that Chinese stuff that comes in, and how much flows through the Port of LA and the port of Long Beach. Now we’ll navigate it, but it’s still not good for business overall.

Because what we’re doing is more of a longer term, all these tariffs to drive manufacturing back to our country. You don’t just add water and stir, flip a light switch, and we hope to pop it up at new manufacturing plants. That takes time. Well, there’s an interim of a pain, even our President said that, there’s going to be some pain. And that’s what we’re dealing with. And I think that’s what we will continue to deal with for the near term future. Because it’s just — we haven’t — we haven’t gotten all over yet by any stretch and I can tell you that. And then it keeps changing. So it’s just hard.

Avi Jaroslawicz: Yeah. I definitely understand that. I just want to circle back to the regulations quickly. Last quarter, you felt pretty confident that we would still see the low NOx regulations take place with or without the warranty. You still think that’s the case or just no comments…

Rusty Rush: Well, I don’t want to get in where I shouldn’t be. I think you’re going to have something lower, yeah. But it’s not — it may not be as low as what they had, okay. That’s being debated right now by people above my pay grade. So I would tell you that, sure it’s is going to be lower than what it currently is, but it’s — it may not be as low as what was originally said, originally were put out there. So — but that’s going on as we speak and that debate is going on as we speak. I don’t — I’m giving insight into that would probably be a little out of my — I don’t think I should. So I don’t know, let’s see someone is going to do it. Yeah, we’ll know, but we’ll know in this quarter. That’s what I said earlier. We’ll know about 45 days or so.

We’ll know where we’re at. By the time this quarter is over with, we’ll have the answers. So I will just let it play out and stay out of it, but I — it’s going to be a good thing, okay? There’s nothing wrong. What we were trying to do was just not right. This trucker in no way was prepared to flip a switch and everything go electric and all this stuff, we didn’t — we don’t have the grid, the infrastructure. That’s a long term equation. And we had people running with it like, it’s just easy like add water and stir it. There’s 120 years of infrastructure, investment, internal combustion. You’re not going to change it in five or six years. That was absolutely not to believe you can do that. So it’s a good thing, how it works itself out as to what the levels are as for smarter people than me to figure out, but it’s going to be the right thing, right?

It is the right thing to do. So that’s all I can tell you. But what that does is it probably doesn’t drive as big a pre-buy, right, especially with the tough overall economic situation that we’re certainly we’re liable to see caused by tariffs and caused not just by tariffs, but just everything that’s going on right now. So I will — I’m not closing the door to a pre-buy ’26 by any stretch, but every day that goes by, January 1, ’27 gets closer. So you’re condensing it, right? You’re condensing that timeframe, and you’re fighting an uphill battle, when you’ve got news, all the reports about how rough it is on customers anyway. Regardless, I got to have business, regardless of the price of a truck, regardless of the technology. I’ve got to have my business fairly straight, so I can go buy something, right?

So those are some headwinds. But I would expect to pre-buy sometime. I just don’t think it’s — you can clearly say what it will be, given the unknowns or regulations first off, and the unknowns around the tariffs. But really, when you talk about the federal — unknown regulations. Those regulations will have a lot to say. And then their business, remember, first and foremost, it’s your own business. I mean I can take it back. I remember at 2010, when we switch to SCR, okay, we were going to have this big, big year at ’09. You remember ’08 and ’09, well, the economy kind of rode over all that, didn’t it? And you can go look at the numbers, ’09 never made the pre-buy, it was supposed to do. So again, hopefully, we can get the economy straight, hopefully we can get some of this settle down, some of this uncertainty that’s out there that’s been created in these last 100 days, and get back on where we can see a window, see a path in front of us to where, okay, I can make that investment.

I could do this. I could — I know where my business is going. That’s the key thing. All these things getting flushed out and giving us some direction. That’s the most important thing I can tell you for someone like myself, I know running my business. But I’ll say it one last time is the fact that, I am very confident in Rush Enterprises being able to make adjustments and navigate the uncertainties of the world we’re in, and give performance above and beyond of our peers.

Avi Jaroslawicz: All makes sense to me. All right. I appreciate the perspective. Best of luck.

Rusty Rush: You bet.

Operator: I will now turn the call back over to Mr. Rusty Rush, Chairman, CEO, and President for the closing remarks. Please go ahead.

Rusty Rush: Sure. Well, I appreciate everyone’s attendance this morning, and I look forward to talking to you sometime in late July. Hopefully with some more certainty and clarity. Maybe I can give you a six month window instead of a three-month window, okay. Anyway, everybody, have a great day. Thank you very much.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.