Good morning. I hope everyone has been able to get through obviously a little new technology to the lakes this morning. We had a couple of e-mails with a couple of folks having trouble. But hopefully, everybody will get sorted out this morning and be able to join us for the call. So I'm going to get started. Good morning and welcome to the Second Quarter 2022 Earnings Release Conference Call. On the call today are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; 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.

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, 2021 and our other filings with the Securities and Exchange Commission.

As indicated in our news release, we achieved second quarter revenues of $1.8 billion and net income of $110 million or $1.92 per diluted share. Earnings per share excluding the one-time gain related to our acquisition of a controlling interest in Rush Truck Centers Canada Limited or a $1.75 per diluted share. We are very proud of our accomplishments this quarter. Not only did we achieve record high quarterly profits, we also completed the conversion of our previously acquired Summit locations to our SAB businesses, acquiring additional 30% of Rush Truck Centers Canada Limited, repurchased $38.4 million of company stock and declared a cash dividend of $0.21 per common share or a 10.5% increase in our dividend and our fifth increase since 2018. Our results in the second quarter were due primarily to a strong freight demand and healthy consumer spending. New truck production continues to be constrained because of component supply issues. But our Class 8 new truck sales substantially outpaced the industry. Our aftermarket results also significantly outperformed the market due to strong demand from parts and service throughout the quarter. Our results were also positively impacted by 19 locations acquired in the fourth quarter of 2021, as well as 15 locations in Canada, through our additional investment in Rush Truck Centers Canada Limited, whose operating results are now consolidated in our financials. In the aftermarket, our parts service and body job revenues were $598.3 million, up 34.3% and our absorption ratio was 136.4%. In the second quarter there was strong widespread demand for parts and service from most market segments. We continue to strategically expand our workforce and service, technicians and aftermarket sales for vessels throughout our network, including our new locations extending our rigs to large national fleets. We expect supply constraints will continue to impact…

Thank you. [Operator Instructions] Our first question comes from Justin Long with Stephens. You may proceed.

Thanks. Good morning and congrats on the quarter.

Thank you, Justin.

I guess to start I wanted to ask about Class 8 sales. We saw pretty nice step up here in the second quarter versus the first quarter. Any thoughts on how that number trends sequentially headed into 3Q and 4Q?

It looks like it's going to be pretty flat, okay? I think manufacturers have pretty much gotten to where they're going to be still dealing with not really as much as we were last year of course, but there still are component supply shortages. There still are trucks being partially built, they're are offline. They're still dealing with those headwinds. So, if I was going to look somewhere -- and a lot of that has to do with timing, right and mix of what the trucks are. They need bodies. Do they have this? I don't have all that detail in front of me. But as far as what we're getting from a production perspective, I would call it basically flat. Not that only for new truck deliveries to change a lot over the next quarter and on that through to Q4 remember, we are still on allocation. So, it's more than -- it's more what we can get, right it's not what we have sold. Our backlog is still strong. Our backlog is as strong as it was at the end of the quarter last year -- last quarter excuse me at the end of Q1. So, we feel good about it. And as manufacturers are able to ramp up production some, then we will go forward, but I'm not going to -- I'm going to hedge out on that right now. I think they're doing a decent job of managing what they've had to manage -- dealing with the supply issues that we've had. We got pretty good. We've been dealing with it for like 15, 16 months now. So I think manufacturers have figured out how not to overpromise and under deliver after what we went through in 2021.

Got it. And you started the call and mentioned the strong and widespread demand for parts and service. Obviously, a big revenue number here in the second quarter. But could you share what the same-store organic growth rate was in parts and service and how you're thinking about that in the back half?

Well, it was robust. I think -- you remember right we were 18% in Q1. It was a fairly robust 19% obviously in Q2, right? So, I guess I missed the mark a little when I started coming in the first of the year and I told you it will be high singles, but I guess we missed it on the right side of it anyway. So, as we look forward, I would expect comps to get harder, but I still would expect some pretty solid double-digit growth rates on a same-store basis. I'm not sure we'll get 19%. That's to be seen. I can reflect upon where I'm at as of today, okay? And this far in July, we have continued to maintain the pace that we were setting in June. So, we've seen no slowdown or anything. There'll be subseasonal slight slowdown in the winter. That's just natural because we've got so many stores in the South, just because of the air conditioning work, etcetera. But it is not significant. That's just had normal seasonal things we deal with. But right now, demand remains robust, and we continue to believe and we have the initiatives that we have going on out there, whether it's mobile side or really chasing after the large fleet business. We've really been very focused on that, given our network, leveraging off the largest network in the country. We still believe that we can maintain pretty strong double digits. I'm not going to go into 19%, but you never know these guys surprise me all the time. So -- but anyhow good robust growth as we go forward.

Good to hear. I’ll leave it at that. Thanks for the time.

You bet. Thank you Justin.

Thank you. Our next question comes from Jamie Cook with Credit Suisse. You may proceed.

Hi, good morning. Nice quarter. So Rusty, I guess, my just first question in your prepared remarks, I think you said you see strong demand on the truck side, I think through 2026 just given pent-up demand and emissions requirements that are coming up. So just interested on that's a pretty bold statement. Just your thought process there and what your assumptions on the macro in that environment is as everyone is worried about a recession? And then just my second question when you were talking about Class 8 sales or new truck sales or -- and you said a flat year, I think you said flat was that relative to the first half or year-over-year? Thanks.

Well, I'll answer back in a reverse order. That's sequential Jamie.

Okay, okay. That’s what I thought.

So a little bold statement from me, you don't hear many of them do you? So I wouldn't -- look those comments are industry specific directed, okay? I do not control the general economy. What I can tell you is that given what we've dealt with since 2020, just step back a minute going last 2.5 years, right? We were shut down for 1.5 months in 2020, okay? We didn't even build trucks when COVID hit in April and into May, okay? So you lost that production. Then you get into 2021 you're starting about March or April. And all of a sudden we've got supply constraints. And we don't build the 220-something US retail last year. The demand was there for way more. And so -- and we get into this year where we going to be in the 250. Understanding this industry like I do if you go back in time, we historically have always built to max capacity. Manufacturers have never worried about anything, but producing everything they could. I've talked -- I do have some customer touch and a lot of large fleets, not the smaller people they're getting hurt right now, right? The spot rates are only going up but a lot of large fleets have not been able to keep track and replace at the rates they want to, okay? So you still got this pent-up demand. Look we have a big d-bar, of course, that's going to affect it all. I can't predict that and that's not my job to be that economist. But I can tell you that all -- everything in the industry aligns if you go back and look at what like 1.5 years or people projected 1.5 years ago for 2024, and understanding what's going on -- we went…

Okay. And then just one follow-up question on G&A. G&A has been trending higher. I know there's some acquisitions that are in there as well and you've done well at expense management. Just maybe Steve, how you're thinking about that in the back half of the year? Thanks.

G&A. So we did have salary increases that went effective July 1st and the numbers you see printed only have two months of Canada consolidated in the quarter. So that's -- when you get the third month and you take into account the salary increases that we put through the company in July that's probably going to add on a quarterly basis about $8 million to $10 million of G&A. And then the rest of the lift will be just coincided with the lift in back-end business aftermarket GP.

Okay. Thank you.

One thing Jamie, I think, when you look at that absorption rate remember that takes into account expenses at the dealership level right the biggest expenses. So we're managing to keep that grow the gross a whole lot more than we are on expenses, right? That really reflects the spread that you get.

Thank you.

You bet.

Thank you. [Operator Instructions] Our next question comes from Andrew Obin with Bank of America. You may proceed.

Hi, everybody. Hi. Good morning.

Thank you, Andrew. Good morning to you.

Just a question just a follow-up on Jamie's question. Parts and services clearly a big beneficiary of the environment, big beneficiary of the investments that you guys have made it seems pricing is strong. So first if we have disinflation how sticky are the prices? And part two you sort of outlined this regulatory environment for the next five years that I think is going to be fairly favorable. So what should we expect from your parts and services in terms of growth over the next several years? And how should we think about gross margins right because it's such a huge driver of your profitability. And you have outlined these big regulatory changes that's going to drive demand. But how should we think about demand for parts and services within that environment given how profitable they are.

Right. Well that's a good question Andrew, right? Because all of a sudden if you start taking the age of the fleet down you would naturally think that that would be a hit to parts and service. But I've got to tell you a lot of the -- we look at what we've been doing. Our growth -- we've been affected by inflation we all know that. But I do believe that the majority of our growth has been -- a slight majority of our growth has been through share gain, okay? Yes we benefited through ablation, but we've also taken share at the same time. And that's really what it's all about. This last acquisition and the last two acquisitions really continue to help fill out our map and understanding that we're after that large fleet business we're after all customer base. But our map is our differentiator. No one can talk about a map when it comes to service especially across the bottom two-thirds of the United States like us. And we're going to continue to try to take share. That's what we get paid to do around here. Competition is strong, but I have a belief that the historical track records that we've put up support and the continued growth in our map is going to support our abilities to grow our parts and service market right and take share. So I mean that's the best I can tell you will the fleet if they have all those truck market stays strong will the average age of the fleet come down? You better believe it will hitting some. But at the same time, it's more about adding technicians, putting more emphasis on where we believe -- and I don't want to get into all everything we do.…

And just to -- and then I'll segue into a question about macro but I think a lot of folks from Wall Street are concerned about a downturn. You brought it up. You know, given how you phase-in price increases and given the market share that you've gained year-to-date do you think you can grow parts and services business in a mild recession? Just top-line that you report to us.

I got you. It's a good question. We have historically had -- the last time I had an issue in growing it was I was really more heavily weighted in one particular industry and you would know what that is. And that would be oil and gas. You got it brother. And you know what the good thing about it right now is? We're not weighted that heavily in that business. So while it may slow our growth rate down and I'm not here to say guarantee 100% that if we had a pretty strong recession, I wouldn't have -- I wouldn't take a few hits because that's just natural in this business. They'll tighten up their belts a little bit. It would be nothing as significant as we might have seen in the past. And we would try to do our best to come back to that with share gain. So, I don't see -- even if we have a very strong recession, I see no way to take more than 5% -- if I were to take more than 5%, it would really bother me given the diversity. And I mean that the diversity of our customer base now. Our customer base is much more diverse than it has been historically. So, you'd be better equipped to weather any storm that might come our way not that you're not going to be affected by a storm. We'll be in a whole lot better shape given that diversity of customer base across many market segments not -- it's focused -- because you have to remember back in what 2017 or so, we figured that we were what 15% tied to sale or something right oil and gas [indiscernible]. So, I don't believe that we're quite as affected. We're going to get affected, but I believe we can maintain pretty close to flat. That would be my answer to you right now Andrew.

So, flat or better in a mild recession and maybe down mid-single-digits and something more severe.

Yes, mild flat or better. If you get a heavier recession to whatever, we'll keep it within 5% my friend. And then remember I got another lever to bolt on expenses at the same time. So, don't forget about the other side of the house.

And just to follow-up, I guess clearly part of the reason your services are doing so well is because of the systems you guys have and of course, these systems give you a lot of visibility in your end markets in terms of real-time. Can you just tell us what are you seeing in the economy, right? We're in towards the end of July people are talking about recession there seems to be a consensus that there's going to be a recession in the next six to 12 months. What are you seeing maybe go by geography? You did highlight key verticals. You did highlight that you were seeing things slowing. What are you seeing slowing? And I think last time you sort of talked about the fact that spot rate maybe was bottoming -- what's happening there? Just would greatly appreciate your insights. Thank you.

Sure. You bet. Well, I'm going to take it in reverse order. Spot rates, I think the spot rates peaked around $3 and they're around $2, $2.95 or $1.95 somewhere in there give or take a few percent. So, obviously, they've taken quite a bit out of them. I don't know I mean we are all talking to the truckload guys and it's the LTL guys about where those rates are and where they believe they're trending. They're going to be closer to it than me. I know where they've been. And I know how it's affected some of our stuff on the used side and that small customer and there's no question that it's had an effect and will have. I think there's -- I was talking to a finance company last night and they were seeing -- starting to see some delinquency and that more marginal customer out there. So, that's the effect of spot rates. Now, when we talk about across the country I'll be honest Andrew, we're not seeing a lot of softening in any certain area. And there's not one area as I just -- I got some folks around me here at the table when I looked around and everybody sort of shift their head nothing's going backwards specifically. Our antennas are up and we're looking for it. We always go through the same news headlines every day. We all read the same stuff. So, yes they are. But are we seeing it right now? No. And if our customers said look, it's solvent, but it's still pretty good okay. I mean is it solvent? Yes, I'm still doing extremely well and will be the first or second most profitable year they've ever had. Even if we have a slight arc next year which…

You bet. Thank you, sir.

Thank you [Operator Instructions] Our next question comes from Matthew Brooklier with Gamco. You may proceed

Hi. Thanks and good morning. So a question on the used truck side of things. It sounds like Class 8 over the road those used prices are sequentially down, but you had positive mix in the quarter. Are you able to maybe put some numbers or percentages around, how much the over-the-road trucks are down on a sequential basis? And then second part of the question would be, what are your expectations for the remainder of the year?

Got it. Good question. Huge peaks -- let's talk about peaks, and we'll take it down. Peak was the late fourth quarter, January something like that. And then we started volume -- started volume at the auction levels, further. They rolled into retail, probably by about parts and numbers 20% 25% depending on the tax specification. Not over the road, somewhere in that range where all it was trickling down about 5%, a month there instead of a typical number. You typically get about a 1.5% depreciation on our trucks. This is -- it could be a little more in different stages of its life, but just use 1.5%. Well we wrapped it up to about 5%. Then you run about five months in a row, and then we can do the math right, somewhere in that border. So you've got -- and that truck where you sold me a month ago, I said 20 now I might say 25. I do expect that to -- but it's still higher than we -- it got so high unlike I have never seen in my entire 40 years in this business okay, 40-plus years cash amount [ph] in this business, never seen it like it peak to that kind of, but there was such strong demand out there, but it got really high. It's still higher than it probably was, a little over a year ago or out a year ago. So it could come down further. And I would expect it to, but not at that same pace. I think you'll see that you're getting further down the hill, right? You get into the valley that starts to be decline. It was a big -- it was a real stack of mountain, real steep up top and it starts getting…

Okay. I appreciate the color, Rusty.

You bet.

Thank you [Operator Instructions] Our next question comes from Jim Misago with FactSet. You may proceed. If your line is on mute…

That’s a great question.

And I'm not showing any further questions, at this time. I would like to turn the call back over to Rusty Rush, for any further remarks.

Sure. Well, we appreciate everyone's time this morning and listening in. We look forward to talking to you again in October, with hopefully great results, again. So thank you very much. We appreciate your time and have a great next quarter.

This -- today's conference call. Thank you for participating. You may now disconnect.