Rush Enterprises, Inc.

And welcome to our first quarter of 2023 earnings release conference call. On the call are Mike McRoberts, 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. Now Steve will say a few words regarding forward-looking statements.

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 risk 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, 2022, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, we achieved first quarter revenues of $1.9 billion and net income of $90.5 million, or $1.60 per diluted share. We are proud to declare a cash dividend of $0.21 per common share. In the first quarter, we experienced strong demand for new Class 8 and Class 4-7 trucks, largely due to the limited new truck production of the past few years. There was a healthy, widespread demand for aftermarket parts and services as well, and we maintained our focus on strategic initiatives support to large national fleets, and operational excellence. We significantly outpaced the industry in medium duty truck sales, as well as aftermarket sales, and we are proud of our results in the first quarter. In the aftermarket, our parts, service, and body shop revenues were $648 million, up 19.3%, and our absorption ratio was 136.5%. In the first quarter, we expect strong demand for parts and service for most of the customer segments we support. We continue to add service technicians to our workforce, notably mobile technicians, which supports our long-term strategy to expand our mobile presence across the country. Looking ahead, we anticipate the rate of inflation to continue to slow, and the parts revenue growth will moderate throughout the year when compared to our first quarter results. However, with our continued focus on long-term initiatives, including strategically expanding our workforce to support mobile service efforts and national accounts, we believe our aftermarket revenues will remain strong this year. Turning to truck sales, we sold 4,365 new Class 8 trucks, accounting for 6.4% of the total U.S. market and 2.2% of the Canada market. While there's still pent-up demand for new Class 8 trucks, we experienced healthy demand for most market segments, particularly over-the-road, vocational, car hours, energy customers, and large national fleets. ACT research forecast U.S. class retail sales to be 259,000 units in 2023, essentially flat compared to 2022. Our continued truck allocation may limit our growth potential. Our backlog remains strong, and we believe our second quarter Class A truck sales will align with our first quarter results. Overall, we expect our results will be consistent with the industry this year. Our Class 4-7 new truck sales reached 3,038 units in the first quarter, accounting for 5.3% of the U.S. market and 3.2% of the Canadian market. We experienced healthy demand from a variety of market segments. Further, while supply has not yet caught up with the needs of the market, we began to see truck manufacturers shift more resources back to producing medium-duty trucks. ACT research forecast U.S. Class 4-7 retail sales to be 253,600 units in 2023, up 8.6% from 2022. As production continues to improve and as customers prepare for upcoming emission regulations, we believe there will continue to be strong demand for medium-duty commercial vehicles for the remainder of 2023. Our used truck sales reached 1,684 units in the first quarter, down 29.7% year-over-year. Demand for used trucks remained low, largely due to the continuing increase in new truck production. As new truck production continues to improve, We expect further deterioration in used truck pricing, and we plan to carefully manage our used truck inventory levels until demand begins to increase and values stabilize. Our lease and rental revenue was up 21.5% compared to the first quarter of 22. We continue to experience strong demand for leased vehicles, and our rental utilization rates were solid in the first quarter. We expect our lease and rental operations to continue to make significant contributions to our overall profitability for the remainder of 2023. Looking ahead, we will continue to monitor economic factors which may impact our industry, but we believe our overall financial results will remain strong through the rest of 2023. Before closing, I would like to thank our employees for their great work and for their dedication to our company's goals, as well as providing superior service to our customers. With that, I'll take any questions.