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…

[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…

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…

[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…

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…

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.