Rush Enterprises Inc (NASDAQ:RUSHA) Q3 2018 Earnings Conference Call Transcript

Oct 24, 2018 • 10:00 am ET

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Rush Enterprises Inc (NASDAQ:RUSHA) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Rush Enterprises, Inc. Third Quarter 2018 Earning Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Chairman, CEO and President, Rusty Rush. Sir, you may begin.

Executive
Marvin Rush

Good morning, everyone, and welcome to our third quarter 2018 earnings release conference call. On the call today are Mike McRoberts, COO; Steve Keller, CFO; Derrek Weaver, EVP; Jay Hazelwood, VP and Controller; and Michael Goldstone, VP, General Counsel and Corporate Secretary.

Now Steve will say a few words regarding forward-looking statements.

Executive
Steven Keller

(Forward-Looking Cautionary Statements)

Executive
Marvin Rush

As indicated in our news release, we achieved third quarter revenues of $1.38 billion and net income of $42 million or $1.03 per diluted share. I'm pleased with our company's impressive financial performance in the third quarter, and we were to declare our second quarterly cash dividend of $0.12 per common share. We remain confident in our strategic plan, which includes a 2022 revenue goal of $7 billion with a 5% pretax return on revenue as well as capital allocation strategies to return 35% to 40% of our free cash flow to shareholders.

During third quarter, we repurchased $12.1 million of our common stock and $58.2 million during the first nine months of 2018. We also paid the first cash dividend in the company's history of $4.7 million in the quarter and still substantially increased our cash position during the quarter. The company's ability to continue to generate free cash, combined with our strong balance sheet, have us well positioned to invest in our strategy.

During the third quarter, we continued to successfully execute our strategic initiatives, which are positively impacting our growth. A healthy economy and widespread activity throughout the commercial vehicle market also contributed to our results in the quarter. In the aftermarket, our parts, service and body shop revenues were $427 million in the third quarter, an increase of 14% compared to the same time period in 2017. Approximately half of the growth was a result of robust activity in the commercial vehicle market, and the other half was a direct result of our employees' execution of our aftermarket strategic initiatives, particularly all-makes parts, growth in our technician workforce and technology solutions.

Our absorption ratio for the third quarter was 122%, while we expect industry demand for aftermarket parts and services to remain strong and for us to continue to execute our strategic initiatives, we also expect normal seasonal declines through the winter months.

Turning now to truck sales. We sold 3,325 units new Class 8 trucks in the third quarter or 4.8% of the total U.S. Class 8 market. A strong truck market contributed to a solid quarter for new Class 8 truck sales, though our results were down year-over-year, primarily due to the timing of large fleet