Rush Enterprises Inc (NASDAQ:RUSHA) Q3 2019 Earnings Conference Call Transcript

Oct 24, 2019 • 10:00 am ET

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Rush Enterprises Inc (NASDAQ:RUSHA) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Rush Enterprises Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Rusty Rush, Chairman, CEO and President. Thank you. Please go ahead, sir.

Executive
W.M. Rush

Well, good morning, everyone. Welcome to our third quarter 2019 earnings release conference call. On the call today are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Derrek Weaver, Executive Vice President; Jay Hazelwood, Vice President and Controller; and Michael Goldstone, Vice President, General Counsel and Corporate Secretary.

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

Executive
Steven L. 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, 2018, and in our other filings with the Securities and Exchange Commission.

Executive
W.M. Rush

As stated in our news release, we achieved quarterly revenues of $1.6 billion and net income of $39.1 million, or $1.05 per diluted share. We are pleased with our financial performance this quarter, which was positively impacted by the continued successful execution of our aftermarket initiatives by significantly outpacing the market on both Class 8 and Class 4 to 7 new truck sales.

We are also proud to declare another quarterly cash dividend of $0.13 per common share. In the aftermarket, our parts, service and body shop revenues were $455 million or 6.5% over the third quarter of 2018. Our absorption ratio was strong 120%. Given the modest increase in aftermarket activity in the industry and the continued decline of energy sector activity, our aftermarket growth this quarter was a direct result of our strategic initiatives, which include our technology solutions, e-commerce parts ordering platform, expedited service and the addition of aftermarket sales representatives, and technicians to our dealership network.

We expect industry parts and service activity to remain stable in the fourth quarter, factoring any normal seasonal declines through the winter months. With continued successful execution of our strategic initiatives, we expect our aftermarket revenues to outperform the market in the fourth quarter and through 2020.

Turning to truck sales. We sold 4,318 new Class 8 trucks, up 30% year-over-year and accounting for 5.5% of the total US Class 8 market. Our healthy truck sales performance was driven primarily by over-the-road and vocational customers. ACT Research currently forecasts US Class 8 retail sales to be 277,300 units in 2019. We believe Class 8 retail sales have peaked in the third quarter. And as a result, we expect our Class 8 new truck sales to decline in the fourth quarter compared to the third quarter.

We are confident