Rush Enterprises Inc. announced Monday it achieved revenues of $1.791 billion and net income of $110.2 million, for the quarter ended June 30, 2022, compared with revenues of $1.316 billion and net income of $58.0 million in the quarter ended June 30, 2021.
On May 2, 2022, the company closed on its acquisition of an additional 30 percent interest in Rush Truck Centres of Canada Limited, which resulted in a $9.8 million gain. Excluding the one-time gain related to the acquisition, the company’s adjusted net income for the quarter ended June 30, 2022 was $100.4 million, or $1.75 per diluted share. Additionally, the company’s board of directors declared a cash dividend of $0.21 per share of Class A and Class B common stock, to be paid on Sept. 12, 2022, to all shareholders of record as of Aug. 12, 2022.
“We are very proud of our strong financial performance in the second quarter, which resulted in record second quarter revenues and net profits,” says W.M. “Rusty” Rush, chairman, CEO and president, Rush Enterprises.
“Our second quarter results were largely the result of strong freight demand and generally healthy consumer spending, which continues to drive strong demand for new commercial vehicles and aftermarket services. New truck production capacity continues to be limited due to ongoing component part supply chain issues, but our Class 8 new truck sales substantially outperformed the market in the second quarter. In addition, we achieved strong aftermarket revenue growth due to strong demand for parts and service,” says Rush.
“Further, we continue to see growth and a strong financial impact in connection with our acquisition of 19 dealership locations from The Summit Truck Group in the fourth quarter of 2021. These additional locations, in addition to the 15 locations in Canada whose operating results are now consolidated into the company’s financials as a result of the acquisition of an additional 30 percent interest in Rush Truck Centres of Canada Limited and the $9.8 million gain associated therewith, positively impacted our financial performance in the second quarter,” he says.
“Our board of directors approved a $0.02 increase in our quarterly cash dividend, our fifth increase since we announced our intent to begin paying a quarterly cash dividend in July 2018 as part of our capital allocation strategy. This dividend increase represents a 10.5 percent increase over the first quarter of 2022 dividend and is further evidence of our intent to increase the dividend on an annual basis, although future declarations of dividends are subject to approval by the company’s board of directors and may be adjusted as business needs or market conditions change. In addition, the dividend increase also reflects our continuing ability to return value to our shareholders while also investing in our company’s future,” says Rush.
“Though economic growth may have slowed slightly from previous quarters, our industry remains healthy. However, we are cautiously monitoring inflation and rising interest rates, which may negatively impact consumer spending moving forward. We also note that elevated fuel prices are negatively impacting spot market rates. Despite these negative headwinds, the supply constraints our industry has experienced have led to pent up demand for new commercial vehicles and aftermarket parts and services, which we believe will continue through the rest of 2022,” he says.
“We believe our financial results will be strong for the remainder of 2022 as we continue to manage expenses company-wide, while also continuing to focus on our long-term strategic goals,” Rush says. “As always, I would like to thank our employees for their incredible dedication and hard work, which makes it possible for our company to achieve its financial goals, while also providing best-in-class support to our customers.”
Aftermarket products and services
Aftermarket products and services accounted for approximately 62 percent of the company’s total gross profit in the second quarter of 2022, with parts, service and collision center revenues reaching $598.3 million. The company achieved a quarterly absorption ratio of 136.4 percent in the second quarter of 2022, compared to 129.1 percent in the second quarter of 2021.
“In the second quarter, we continued to experience strong demand for aftermarket parts and service in most market segments we support. Our strategic focus on growing our dedicated aftermarket sales team, including in our newly acquired locations, has enabled us to leverage our extended reach with large national fleets, resulting in notable growth in aftermarket sales,” says Rush. “Additionally, we remained focused on our strategic initiatives, including expanding and improving the proficiency of our technician workforce and growing revenues associated with our Xpress services and contract maintenance offerings, which contributed to our strong aftermarket performance in the second quarter.
“Looking ahead, while parts supply constraints will likely continue to impact the industry into 2023, we believe the scale of our nationwide parts inventory and our longstanding partnerships with parts suppliers will better enable us to navigate parts shortages across the country. Further, we continue to add service technicians and aftermarket sales professionals to our organization, as well as implement our strategic initiatives at our newly acquired locations, both of which enhance our ability to serve customers and grow aftermarket revenues. We believe parts and service demand will remain strong and our aftermarket results will significantly outperform the industry this year,” he says.
Commercial vehicle sales
New U.S. Class 8 retail truck sales totaled 63,993 units in the second quarter of 2022, up 8.8 percent over the second quarter of last year, according to ACT Research. The company sold 4,168 new Class 8 trucks in the second quarter, an increase of 41 percent compared to the second quarter of 2021, which accounted for 6.4 percent of the new U.S. Class 8 truck market and 1.7 percent of the Canada Class 8 truck market.
“We experienced widespread demand from most market segments we support in the second quarter, particularly over-the-road, construction and vocational customers. Though component parts supply chain issues continue to impact new truck production, the Class 8 manufacturers we represent were able to increase production slightly in the second quarter and we are pleased with our second quarter Class 8 truck sales,” Rush says. “As we look ahead, our backlog remains strong, and though production constraints remain, we are optimistic that our manufacturers will continue to increase production capacity through the year. Truck allocation may limit our growth potential this year, but our sales teams are focused on attracting new business and expanding to more customers across our network, and we believe our new Class 8 truck sales will continue to outpace the industry this year.”
New U.S. Class 4 through 7 retail commercial vehicle sales totaled 54,115 units in the second quarter of 2022, down 14.7 percent over the second quarter last year, according to ACT Research. The company sold 2,815 new Class 4-7 medium-duty commercial vehicles in the second quarter of 2022, which was flat compared to the second quarter of 2021, representing 5.1 percent of the U.S. Class 4-7 commercial vehicle market and 1.3 percent of the Canada Class 5-7 commercial vehicle market.
“In the second quarter, the medium-duty truck supply constraints continued to significantly limit new truck production, which negatively impacted our ability to meet the needs of the market. However, we continue to experience ongoing healthy demand from most market segments, especially vocational and food and beverage customers,” says Rush. “Looking to the future, we expect medium-duty commercial vehicle production will remain constrained for some time, though we do anticipate that some manufacturers may increase production later this year. We believe our medium-duty commercial vehicle sales will align with the industry in 2022.
“It should be noted that we are an industry leader with respect to alternative energy commercial vehicles, including both compressed natural gas (CNG) vehicles and electric vehicles (EV) and we are seeing healthy interest from both Class 8 and medium-duty customers with respect to such vehicles, which we expect to continue moving forward,” Rush says.
The company sold 1,629 used commercial trucks in the second quarter of 2022, a decrease of 22.2 percent over the second quarter of 2021.
“Weak spot rates and high diesel prices in the second quarter put an increased burden on owner-operators and small fleets, the largest segment of used truck buyers, softening the overall demand for Class 8 on-highway used trucks. However, demand for used trucks from medium-duty, flatbed, vocational and energy customers remained strong,” Rush says. “Used truck values have decreased significantly since they peaked earlier this year, and we expect those values to continue to soften through 2022. We are proactively managing our used truck inventory values and stocking levels and believe we are well positioned to support the needs of the market throughout this year.”
Leasing and rental sales
Rush Truck Leasing operates 57 PacLease and Idealease franchises across the United States and Canada with more than 10,100 trucks in its lease and rental fleet and more than 1,600 trucks under contract maintenance agreements. Lease and rental revenue increased 31.2 percent in the second quarter of 2022 compared to the second quarter of 2021.
“This increase was primarily related to the acquisitions of the Summit Idealease locations in the fourth quarter of 2021 and the consolidation of the RTC Canada Idealease locations into our financial results in the second quarter of 2022. Additionally, strong rental demand related to a healthy freight environment and supply constraints have positively impacted our lease and rental revenue. These factors, in addition to strategic operational improvements made by management, have led to our lease and rental operations growing to become a significant contributor to our Company’s overall profitability,” Rush says.
“We remain committed to both disciplined expense management and our long-term strategic initiatives, which we believe contributed significantly to our record revenues and profitability in the second quarter,” says Rush. “Additionally, we are proud to continue to return value to shareholders while continuing to invest in our company’s future and maintaining a strong balance sheet and cash position.”
More earnings information can be found here.