Rush Enterprises(RUSHB) - 2024 Q2 - Quarterly Results

Q2 2024 Earnings Release Financial and Operational Highlights The company reported slightly higher Q2 revenue but lower net income year-over-year and increased its quarterly dividend Q2 2024 Key Financial Results vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues | $2.027 billion | $2.003 billion | | Net Income | $78.7 million | $98.3 million | | Diluted EPS | $0.97 | $1.17 | - The Board of Directors declared a quarterly cash dividend of $0.18 per share, representing a 5.9% increase over the prior quarter's dividend[1][3] - The company's absorption ratio for the quarter was 134%[1] Management's Commentary and Outlook Management cited a persistent freight recession impacting demand, with recovery not expected until 2025 - The company is experiencing weak demand for Class 8 trucks and aftermarket services due to the lingering freight recession and high interest rates[2] - Strength in public sector and vocational customer segments positively impacted Class 8 truck sales revenues, helping to offset weakness elsewhere[2] - The company anticipates the freight recession will continue through 2024, with a meaningful recovery not expected until 2025[4] - To mitigate expected revenue decreases, the company made responsible reductions to operating expenses in the second quarter[4] Operational Performance The company saw mixed results with declining aftermarket services and Class 8 sales but growth in medium-duty vehicles Aftermarket Products and Services Aftermarket revenues and absorption ratio declined due to reduced demand from key customer segments Aftermarket Performance Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Parts, Service & Collision Revenues | $627.4 million | $651.1 million (-3.6%) | | Absorption Ratio | 134.0% | 139.7% | - Aftermarket products and services accounted for approximately 60.0% of the Company's total gross profit in Q2 2024[6] - Demand from wholesale, independent parts distributor, and energy customers decreased, while growth was seen from vocational, public sector, and medium-duty customers[7] - The company expects demand for aftermarket parts and services to remain steady in Q3, with results consistent with Q2 performance[8] Commercial Vehicle Sales Class 8 truck sales outperformed the market despite a unit decline, while Class 4-7 sales grew Q2 2024 New Truck Sales Performance | Vehicle Class | Company Unit Sales | Company YoY Change | U.S. Market YoY Change | | :--- | :--- | :--- | :--- | | Class 8 | 4,128 | -4.0% | -18.6% | | Class 4-7 | 3,691 | +6.2% | -3.0% | - The company sold 1,723 used commercial vehicles in Q2 2024, a 7.8% decrease compared to Q2 2023[14] - Management has not seen any significant pre-buy activity related to 2027 emissions regulations and does not expect it to begin until 2025[11] Leasing and Rental Leasing and rental revenue decreased slightly due to lower utilization, but the outlook remains positive - Lease and rental revenue decreased 1% in Q2 2024 compared to Q2 2023, primarily due to lower rental utilization[15] - The division operates over 9,900 trucks in its lease and rental fleet and has more than 2,200 trucks under contract maintenance agreements[15] - The age of the lease and rental fleet continues to decrease, which translates to lower operating costs, supporting a positive outlook for the remainder of 2024[15] Financial Highlights and Shareholder Returns The company reported higher revenue but lower net income while continuing share repurchases and dividend payments Q2 2024 Financial Summary | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Gross Revenues | $2.027 billion | $2.003 billion | | Net Income | $78.7 million | $98.3 million | | Diluted EPS | $0.97 | $1.17 | - The company repurchased $4.0 million of its common stock during the second quarter[17] - A cash dividend of $13.5 million was paid during the second quarter[17] Financial Statements Financial statements show total assets of $4.51 billion and a year-over-year decline in Q2 net income Consolidated Balance Sheets Total assets grew to $4.51 billion, driven by an increase in inventories and floor plan notes payable Key Balance Sheet Items (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $2,377,701 | $2,260,304 | | Total assets | $4,506,526 | $4,364,241 | | Total current liabilities | $1,697,901 | $1,673,310 | | Total liabilities | $2,483,592 | $2,473,823 | | Total shareholders' equity | $2,022,934 | $1,890,416 | Consolidated Statements of Operations Q2 revenue rose slightly to $2.027 billion, but higher costs led to lower gross profit and net income Statement of Operations Highlights (in thousands, for three months ended June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total revenue | $2,027,028 | $2,003,052 | | Gross profit | $392,389 | $413,848 | | Operating income | $124,481 | $142,859 | | Net income attributable to Rush | $78,661 | $98,275 | Per Share Data (for three months ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Diluted EPS | $0.97 | $1.17 | | Dividends declared per share | $0.17 | $0.14 | Non-GAAP Financial Measures The company uses non-GAAP measures to provide a clearer view of core operational performance and capital structure - The company uses non-GAAP measures like Adjusted Net Income, Adjusted Total Debt, EBITDA, and Free Cash Flow to provide useful information about its operating results[24][25] Absorption Ratio The absorption ratio, a key metric measuring overhead coverage, decreased to 134.0% in Q2 2024 - The absorption ratio for Q2 2024 was 134.0%, compared to 139.7% for Q2 2023[26] - This ratio is calculated by dividing the gross profit from parts, service, and collision centers by the overhead expenses of all departments, excluding certain costs[27] Debt Analysis (Non-GAAP) After non-GAAP adjustments for fleet and floor plan debt, the company held an adjusted net cash position Debt Analysis as of June 30, 2024 (in thousands) | Metric | Amount | | :--- | :--- | | Total Debt (GAAP) | $1,760,423 | | Less: Debt related to lease & rental fleet | ($529,736) | | Less: Floor plan notes payable | ($1,226,651) | | Adjusted Total Debt (Non-GAAP) | $4,036 | | Less: Cash and cash equivalents | ($167,266) | | Adjusted Net Debt (Cash) (Non-GAAP) | ($163,230) | EBITDA (Non-GAAP) Adjusted EBITDA for the trailing twelve months declined to $471.4 million from $551.3 million year-over-year Adjusted EBITDA (in thousands, for twelve months ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | EBITDA (Non-GAAP) | $539,623 | $589,910 | | Adjusted EBITDA (Non-GAAP) | $471,430 | $551,265 | Free Cash Flow (Non-GAAP) Adjusted free cash flow for the trailing twelve months decreased significantly to $323.5 million Adjusted Free Cash Flow (in thousands, for twelve months ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operations (GAAP) | $297,562 | $350,566 | | Free cash flow (Non-GAAP) | ($58,180) | $28,732 | | Adjusted Free Cash Flow (Non-GAAP) | $323,542 | $564,491 | Invested Capital (Non-GAAP) Adjusted invested capital, a key metric for evaluating returns, increased to $1.84 billion as of June 30, 2024 Adjusted Invested Capital (in thousands, as of June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Shareholders' Equity (GAAP) | $2,003,461 | $1,868,170 | | Adjusted net (cash) (Non-GAAP) | ($163,230) | ($187,715) | | Adjusted Invested Capital (Non-GAAP) | $1,840,231 | $1,680,455 |