Rush Enterprises, Inc. (RUSHB) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Rush Enterprises Third Quarter 2019 Earnings Conference Call. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Mr. Rusty Rush, Chairman, CEO and President. Thank you. Please go ahead, sir.

Well, good morning, everyone. Welcome to our third quarter 2019 earnings release conference call. On the call today are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Derrek Weaver, Executive Vice President; 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, 2018, and in our other filings with the Securities and Exchange Commission.

As stated in our news release, we achieved quarterly revenues of $1.6 billion and net income of $39.1 million, or $1.05 per diluted share. We are pleased with our financial performance this quarter, which was positively impacted by the continued successful execution of our aftermarket initiatives by significantly outpacing the market on both Class 8 and Class 4 to 7 new truck sales. We are also proud to declare another quarterly cash dividend of $0.13 per common share. In the aftermarket, our parts, service and body shop revenues were $455 million or 6.5% over the third quarter of 2018. Our absorption ratio was strong 120%. Given the modest increase in aftermarket activity in the industry and the continued decline of energy sector activity, our aftermarket growth this quarter was a direct result of our strategic initiatives, which include our technology solutions, e-commerce parts ordering platform, expedited service and the addition of aftermarket sales representatives, and technicians to our dealership network. We expect industry parts and service activity to remain stable in the fourth quarter, factoring in normal seasonal declines through the winter months. With continued successful execution of our strategic initiatives, we expect our aftermarket revenues to outperform the market in the fourth quarter and through 2020. Turning to truck sales. We sold 4,318 new Class 8 trucks, up 30% year-over-year and accounting for 5.5% of the total U.S Class 8 market. Our healthy truck sales performance was driven primarily by over-the-road and vocational customers. ACT Research currently forecasts U.S Class 8 retail sales to be 277,300 units in 2019. We believe Class 8 retail sales have peaked in the third quarter. And as a result, we expect our Class 8 new truck sales to decline in the fourth quarter compared to the third quarter. We are confident that our overall 2019 sales results will exceed 2018. ACT Research forecasts Class 8 retail sales to be 204,000 units in 2020, down 26% from 2019. Historically, our Class 8 market share increases in non-peak truck markets, and we believe we are well positioned to outperform the market in 2020, and increase our market share. In medium duty, our Class 4 to 7 new truck sales reached 4,566 units and accounted for 6.5% of the U.S market. This was another record setting quarter for us, due to our nationwide inventory of ready-to-roll trucks and strong activity from construction and rental customers. ACT Research forecasts U.S Class 4 to 7 sales to be 266,000 units this year, up 3% from 2018. We expect some of our Class 4 to 7 truck sales -- we expect Class 4 to 7 truck sales will be down in the fourth quarter compared to this quarter or third quarter, due to the timing of some large fleet deliveries throughout earlier this year, but that we will outpace the industry for the year. ACT Research forecasts 4 to 7 retail sales with 257,000 in 2020, down 3%. We expect our results will be consistent with the industry. Our used truck sales were down 15% over the third quarter of 2018. While used truck values are depreciating faster than what was considered a normal rate, our used truck inventory is at its lowest level of the year. And we’ve confidence that it is positioned to appropriately to meet current market demands. As always, it is important for me to thank our employees for their continued hard work and dedication, which helped us achieve such positive results this quarter. With that, I will take your questions.

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

Thanks. Good morning.

Good morning, Justin.

So, maybe to start with parts and service, Rusty, could you talk about what the energy headwind was for parts and service revenue this quarter? Just curious if it was similar to what you saw in the prior quarter and you made the comment that your parts and service business should outgrow the industry going forward. So kind of ballpark, should we be thinking the industry grows low single digit s and you guys grow mid-single digits?

Well, taking them in reverse, you’re right on track. That's sort of what we -- how we look at 2020 right now as of this day. Everything is always, hit a ball. But, yes, we do expect to outpace the industry next year and we expect mostly folks are forecasting flat to book slightly up part sales, but we expect with all the initiatives that we’ve -- and service sales with all the initiatives we put in place, we will grow over the last three years and four years, that we're still waiting for action, right? We have not seen the fruition of everything yet. It's still coming. We believe we still got that on track, and that's inspiring. You asked about energy. Now energy continues to get worse. Now, Q3 was -- it was down like 35%. We said or so, 30% to 35% first quarter. And I think it was like 38% to 40% last quarter, if I remember right. And I'm going to tell you it's over 50% right now. I don't have an exact number. We are still compiling some of that, but well over 50% off. And it hasn't gotten any better here in October either. So, I don't see a lot of upside, at least in the foreseeable future in the energy sector. I think that's one of the most important things that, from my perspective, is the fact that the performance we showed was with huge energy headwinds. We do have, obviously, some exposure to energy. But unlike in 2016, we are seeing some tough energy comps. We've been able to weather, because the investments we've made in both systems and people over the last three or four years.

Okay. That's helpful. And then, secondly, I know you put the wheels in motion on G&A cost cuts going into next year. Any update on what the size of that opportunity could look like and how much of an impact should we see from that in the fourth quarter?

Well, it will be -- it will phase into the fourth quarter. Q4 historically is always -- it's typically a good G&A quarter for us anyway. But I would expect the impact will be fully in place by the first of the year. We've tried to do it very strategically and precise instead of just hitting the -- hit the button and say and just, we've spent the last couple three months going through the organization to make sure that we -- you don't want to take any meat off the bone, you just want to take try to take [indiscernible] and take some fat off the bone when you can. So we’ve -- from a dollar perspective, I really don't -- oh, next year, once we get fully loaded, I'm hoping a couple of million dollars or better a month as we go forward, try to help some -- offset some of the results obviously on the truck side. At the same time, growing our parts and service business, we hope in mid-single digits, right? So between the -- and medium-duty market maintaining strong, right? I guess one of the things sometimes, it gets overlooked in the organization that I realize everybody gets infatuated with Class 8, but I realize it takes couple of medium-duty trucks to make one heavy truck. At the same, we sell a lot of medium-duty trucks and the projections for that market to remain pretty stable and strong really through the next three or four years, with the changing dynamics of the industry from a last mile perspective and all the other stuff going on in the industry. So we feel good about that. I know I answered a little bit more than you asked, but you know me.

That’s what I want. I appreciate the responses. I will pass it on, and congrats on the quarter.

Thank you.

And our next question comes from Andrew Obin with Bank of America. You may proceed.

Good morning, Rusty.

Good morning, Mr. Obin.

Just a question on G&A. So just to clarify, you said that you can sort of take a couple of million per month through the end of 2020? Did I hear that correctly?

That's roughly the goal. And I’m …

And so -- so the [indiscernible] …

Just looking back on 2019, remember, not SG&A, G&A, S will naturally come down if truck sales go down. So [multiple speakers]

Right. So just -- sorry, yes.

[Technical difficulty] run rate, to the extent, we grow back ends mid single digits, there's some expense attached to that. So that's not taking …

Right.

… current leaving at a $2 million less a month for the entire year. We will spend money to generate that mid single back end growth that Rusty talked to you about. So …

Right. But just sort of, if I take what you said at face value, 15 months times 2 million, by the end of the year if things stay flat, you should be able to take $30 million.

No, I don't think. I didn't take 15 months. I since starting in January, Andrew. So that's 12. So let's start there. And to Steve's point, remember, when we create a gross profit dollar in parts and service, most of them spend 50% of it to create it, okay? So if we grow the same, I’m talking about we stay flat. If we stay flat from parts and service perspective, did not grow a bit, then, yes, that would be the number. But at the same time, if we grow parts and service, we do spend part of that, but the good part is we keep part of it. So you don't create it. And it's not -- total leverage without zero spend, right? So if we're up 5%, growth driver is up 5%, then we are probably going to spend at least 2.5% of that 5% to create the 5%. So that's on top. Well, if you just stay flat though, yes, you can take the $24 million out of it.

Okay. That makes sense. And then just in terms of profitability of parts and service sequentially, I think looking back, like usually parts and service sequentially is flat. And I know historically, you guys talked about structural changes to parts and service business model that would enable you to grow gross margin there. So can we talk about sort of drop-off in gross margin for parts and services in 3Q? And whether or not it means you can still grow its structure over the long-term? Thank you.

Well, I think if you take this year, first off, I'll explain, Q2 to Q3. We said in Q2 that there were some -- don't expect it to stay just there. We had some purchasing went on in there, some strong purchasing discounts and rebates and stuff that flowed into Q2. But if you take the year as a whole, I think it is better sometimes to look at it as a whole year. Sometimes everybody gets caught up in just these quarters. I realized that we're going to run about 38% for the year. And I don't think you can go back the last two or three years and find any 38% yearly margin in our parts and service business. I bet, I know you can't. So, we believe we've made progress, okay? And we believe there's still progress to be made, but it is not a just a direct jump, an automatic big step. It's a continual effort -- continuous effort. And I think you can see that in the -- in this year's performance. And I think you will continue to see it in this year's performance. But it's not going to immediately jump overall for a whole year from 38% to 39%. It's not going to happen in 2020, but it can creep up. So I think you will find by the end of the year when you look back, I think we're like 38.1% or so right now. So if we were to go a little bit under 38%, we would have been 38%. We grow in Q4 and therefore the year, which would be the best year, I think in the last three years or so. I don't have the number in front of me. But I know it was a whole lot better than what we were in '18 and '17.

And just if I could squeeze one more. People are asking if there were any one-time write-downs and used inventory in the quarter?

No, nothing outside of normal. I think our margin was 9% to 8%. If I remember right, it was actually up from Q2. So we've done a pretty good job. Do we take losses on trucks we sell? Yes, but we do that day in and day out. That's all blended into that 9%, 8%. So if you see us staying in the above 8%, then we're probably not taking any losses outside of our normal stuff, I mean, and that's it. I don't want to hear how to manage the business, you don't win on every truck, I promise you. Just like you don't win on every used car in the car business. You don't win them all. But that's always been blended into the number I gave you. So any -- any unusual? No, sir. We feel good about the 1,900 units we have in inventory and they're properly priced for the market.

Thank you very much.

You're welcome. Thank you, Andrew.

And our next question comes from Jamie Cook with Credit Suisse. You may proceed.

Hi. Good morning, Rusty and Steve. How are you?

We are good.

I guess two questions, Rusty. One on the industry and then one on Rush, in particular. Could you just comment what your customers are telling you in terms of when we should expect to see orders start to improve? There is a debate on whether it happens in the fourth quarter, or do we have to wait until next year. And then your view on the length of the downturn, whether or not this could extend into 2021? And then my second question, I guess is more specific to Rush. As you're growing your parts service business, I guess I'm just trying to understand? And I sort of asked you this last question like your comfort level with the Street's estimate for 2020 or any context you could give to us because, obviously, as the earnings hold up better, this should theoretically be a rewrite story for your stock. Thank you.

Well, that's -- I'm going to -- I will start with the truck market. That's probably easier for me then I will get back to [Technical Difficulty] I want to approach it. As you know, I don't give numbers out, okay? So I will build a model around -- you can build a model around the overall macro numbers and you guys get to do that. But I will get back to that in a second. As far as next year goes, it's still percolating out there in my mind. Obviously, you go back a year-ago in '18 -- '19 was already booked, everybody thought, right? So in my mind that -- the year still percolating, we're on business. I feel solid that our Q4 while being off in Q3 -- record Q3. I feel pretty good about Q1. I'm just not sure on some -- there's folks that are still debating what their purchasing is going to be like next year. Obviously, because if you look at what's going on, contract rates are getting big up really good out there. I mean, you guys are taking hits anywhere from 10%. And then the contracts are being -- tender rate acceptance, they are up 95%. There is an oversupply of new trucks in the marketplace right now. So that has to clean itself up and the big guys are going to be fine, getting through it. But as always in the last part of the cycle, you get the smaller mid-sized that's what came in earlier this year. That's why bankruptcies are up. That's why more repos, client growing right now. So we are in the middle of trying to -- that getting cleansed up. S0 -- but that has an effect on what people decide to do next year. They may wait a little longer. It may take some replacement trucks, but everyone remember this was the two biggest years since '05 and '06 ever in history. So there's a lot of trucks out there right now. Freight has been steady, but with an oversupply of trucks, the supply demand has driven rates down. And people are having to deal with that. And I think you will see that in some of the reports. But we are in that cleansing process. I know you ask me for when? I expect -- we got orders that are going to naturally -- will be a little better here in these next three months, okay? That's just natural. They're not going to be 10,000 units again. But do they only go to 20 or something like that? I don't know. Where they should be, which is up in the 35 range or something like that, not that crazy 50,000 that we were doing years or something ago. But you would look for -- to know that it is going to be real solid next year, you would look for order intake, coming in my mind, start creeping up in that 30,000 range. And I don't know if I see that just yet. But I’m not -- I don't represent all OEMs. I don't know what all the OEMs are doing and where that's at. We are taking -- I think there will be more business booked. Well, it -- I looked at ACT's number they put out a [indiscernible] I think for U.S retail. I will be honest. I don't see much upside to it, okay, if at all. If anything I see a slightly some downside in that number. But that's just Class 8 truck sales. I mean it's an election year. People sometimes don't enjoy not knowing what's going on, right, and the fleets pretty fresh out there right now. So we know that might wait a little bit longer before I order. And this is just my opinion, okay? In fact, I've seen it like -- happened like that before. I think I'm getting old now, I'm 61. So I have seen a few of these. So, Jamie, I can't pinpoint it. But I can tell you, I buy into the 204, at high-end for U.S retail deliveries next year coming off of 277 or whatever it should be this year, wherever it lands. Getting slight Q4, but it will get going down compared to Q3. So I mean Q4, there will be often deliveries compared to Q3. Not just me, the industry. So I know you're asking for when? I'm not giving you the exact, because I'm not sure either right now. I really I'm not. I know what will work in business and I don't work, we're pretty solid. But I have -- I still got a year to make. I feel pretty good, we're working still -- I'm still working the first quarter. I can get you a truck right now, if you want one in the first quarter. So it's back to that. We don't have these nine month lead times anymore. It's more back to this more 60-day stuff, right. So …

Yes.

And that's just where we are at.

You probably don't want to be on the road, if I'm driving a truck. But on 2020, I know you don't want to give an exact number. But is there any way you can help us with puts and takes? You talked about G&A. We can make our own assumption on sort of the industry. But like mix, you don't mean like, where you think parts, service will be, just so we can sort of better calibrate whether we're on track for 2020? Thank you.

Well, I am going to say -- I'm going to say mid single. You can take the middle of [indiscernible] I mean, I'm going drive better map, okay, we are going to. But I would taking a proper approach, take that. And then, remember, like I said -- I think I gave the answer a second ago about, if I’m cutting $24 million out of G&A, but you've got to add back 2.5% of the 5% to cost because that's what it costs when you get stuff sold and done. So you get a little bit of growth there, the G&A and then the truck side. Your hits are going to be on the truck side, right? You're going to take the market right now, they are saying 26% off. I guess -- I will say that to 30%, somewhere in there. I don't expect us to be up that much. My goal is to only be up 15% to 20%, 20% say 20%? I'm a bit more conservative or better. We typically do a little better. But I don't have any oil and gas business either. So I'm hedging a little bit, I'm a little nervous about it. But we've always come up with something in the past, history shows we do. So, yes, a pretty good group of folks around here. We will find something out. We will figure something out, whether it's in -- in lots of market segments. But it's about good as I can get you to help you model and I would -- I'm just not going to really give -- I know we are going to be way better than we've ever been in a dip like before. Why? Because of the focus of what we've done. And I'm confident in that. I'm confident on a lot of things. I just don't -- I've got a number in my mind, but I'm not going to start today after 23 years of giving a number, okay? I've got a wild eyed target in my head right now and it's a whole lot better than it's ever been in the past and I think it's very achievable.

Okay. All right. Thank you. I appreciate your color.

I know what you're looking for. I'm doing the best I can to color it up for you without having to start giving out estimates guidance. But -- by the way I look forward to seeing you at the conference in December.

I do, too, so does everyone else. Thank you, Rusty.

You bet.

And our next question comes from Neil Frohnapple with Buckingham Research. Please proceed.

Yes. Good morning, guys. Congrats on a great quarter.

Thanks.

Rusty, can you talk about parts and service revenue performance on the Navistar side of the house? I'm just curious if the negative impact from the years when the market share was really low as lots of a headwind, just given the share gains they've seen over the last couple of years. Again, is that behind at this point? And I guess as a follow-up, do you view that as an opportunity in 2020, or is it still going to take several more years for you guys to start seeing that benefit?

Well, it's only going one direction, okay. We've already troughed, and we're doing better this year than we have. We are seeing improvement in that division in '19. And I think we're going to continue to see it. It's not going to be in a rocket ship phase, but it's going to continue to improve, I think the performance overall. And it's not just because our sweet spot, let's get real. Our sweet spot is trucks that are like four to eight years old, okay, nine years old. That's where we -- that's our sweet spot from a parts and service perspective. And, obviously, we're just starting to get in. We've just got into -- when we put comments in there in 2013, '14, so really that 5, 6, 7-year old. So we're starting to build -- but we’ve little market share, right. So you're not seeing the effects of 14% market share. You are still running up to 10% as far as what we're looking at from a parts and service perspective. So it is a tailwind. There is no question. I've been saying that for a few years and it is helping, it helped to make things, it's helping to make things, it's getting better every year. And I can -- it's always been the hidden tailwind that's in there, that is they continue to perform better, we are going to do better, obviously, with all the locations. We have been the largest dealer. So I'm not really quantifying for you, but I would expect it to -- there's more trucks in operation, more international trucks in operation, all the max -- and I don’t say all. 90 plus -- 95% of 90% plus of the max [indiscernible] export stuffs cleaned out. And so -- but it was a low market share originally. So the last couple of three years -- couple of years of better market share. Really, they are still putting new trucks, right? So you're not really getting the parts and service from that. You are from when they were running in the 10% range. But -- this is -- I think I've already answered, it's going to get better. How about that? It's going to continue to get better. Medium duty share gains, all of thing that you’re seeing. We will flow into parts and services as we continue going forward.

Okay, got it. So that will be a nice positive tailwind over time.

It continue to be -- it should very much -- very much to continue. Obviously, we're not as mature in those locations from a personnel perspective. [Indiscernible] it wasn't just product, man, that was a beat down. That was a beat down from a personnel perspective too for those years, right. You had the choice to go to work somewhere down, you need somebody to show up. When -- all you had was broke [indiscernible] up max, going still into your shop, but that's changed. That's changed and we continue to, I think raise the level of performance. We do that all over the country, but we have a lot of opportunity on that -- in that part of -- in that side of the house to continue to raise the level of performance. And I feel really good about where we're going that way too. So …

Okay, great. That's helpful color. Can you provide an update on the Tallman Group JV, Rusty, just expansion into Canada or just any other M&A opportunities out there?

You bet. Well, first off, I'm not going to tell you about a lot of the M&A opportunities, because that would mean -- that would be committing to something. But I will talk about Tallman. We took that in February. Have been very pleased with it. We've grown $100 million. The owner of state, there is a 50% owner and everything is just as we expected it to be. And I think the opportunities might even be better than what we expected that was [technical difficulty] the ability later on to take on the whole thing and we saw that -- there is actually no reason we won't. But we're integrating some of our -- with our systems and some of our systems into them. And also, we're bringing some of our culture. And I think they're very accepting of it, too. Because we've got a lot of stuff that allows us to go to market and achieve the results we get. And so a great group of people, positive performances, nothing negative about anything. It's been positive to our earnings. And it's not -- we're not shifting the whole -- well there's a lot of opportunity there and they've got some M&A opportunity up there. And as a 50% owner, obviously, we're involved there. So we're excited about that. Well, that goes really over the next couple of years. Other perspectives on M&A around the country, well, things get tough, opportunity show up. So my phone -- I answer my phone every day. So when it rings -- but I will let you know when an announcement or stuff as we go forward. But I don't really see big slug of M&A, but I think you will see some strategic stuff, that I know you will. There is some strategic M&A stuff out there, but until we close that, I don't really like talking about it.

Okay, great. That's helpful. And then one final one for Steve. I think you guys gave the used gross margin performance of 9.8%. Just curious on heavy, medium and light, if you have that handy?

Heavy is 7.1%, medium is 5.4%, and light is 3.2%.

Okay, great. Thanks so much, guys. Appreciate it.

And our next question comes from Joel Tiss with BMO Capital Markets. You may proceed.

How's it going, guys?

Good morning, Joe. How are you doing, my friend?

Hanging in there. It's almost lunch time. I feel like I have been here so long.

No. No. You haven't been here that long.

Oh, yes. Can you frame for us kind of the longer-term opportunity on parts like what's your penetration of your installed base now roughly? And where can it be, like where is best in class maybe five and 10 years down the road, like what's the ambition to be able to get to?

Okay. I'm going to have to rub this for you. I know when we started this journey we got on, we were less than 4% on the parts market, okay?

Right.

When we said, we are running 6, on average, or better and heavy around 5.5. Where we are, I mean, because we just got the opportunity so to make it work too, right? So that was a huge focus and still is a huge focus of ours. That's why I think we continue to outpace the market in the last three years. And we will continue to do that. I have confidence in what we're doing. So our goal -- I don’t know was to get to the -- was to get close somewhere between 5.5% to 6% by 2022. I don't have where we're at right now, but I think it's around -- I'm roughly around 4.5%, 4.6%. So we made some progress, right. We were under 4%, like 3.8%, 3.9%. We were up to about 4.6%, okay, of the overall parts market. And our goal would be to get somewhere -- but our goal was to get to 6%, but I'm going to hedge it and say 5.5% to 6%, somewhere in that range because it's an evolving deal. I feel really good about the initiatives we got out there. I feel really good about some of the tools that we put out in the field. I feel really good about our people. I mean, I think they're all onboard with achieving that number over the next three years by 2022. So if we can get somewhere between 5.5% to 6% by 2022, I'm going to feel pretty good about it. And we continue to, obviously, tied with service growth at the same time. We feel that we have the opportunity with our facilities to continue to expand, whether it be through mobile or embedded technicians across the country, in every area, not just -- we see a lot of different things going, not just in our shops, but outside of our shops. And we do it in some areas that are better than others. We are working on getting all our areas up to the highest level when it comes to those initiatives on the service side. So, I hope that gives you a little flavor on the numbers.

Yes. That's awesome. And then any acquisitions you can make to accelerate that, or this was all sort of necessarily needs to be more homegrown?

Well, our goal, we've had very -- when we started, we have a little bit of M&A in there, but not a lot. You've got to remember…

More of a software and stuff like that, right, more capability.

Oh, you bet. You bet. So think about it like this. There was one out there that was not even in here. Remember, the Tallman numbers, they're not in by numbers, okay. That's an investment because it's a 50-50 deal. You don't even see 800 trucks they sell or above whatever. You don't even see those numbers and my numbers or other parts and service numbers, okay. That's not in there. So, one day that will be in my numbers automatically, okay? You are going to see half Canadian dollars to an investment coming to underlying. But really and truly, we will -- I have up to five years to win your why can't even handle between year one and year five, to bring them all in. And I'm not going to get into details to bring them all in under equal umbrella, so that's exciting there. That's already built in a deal, okay. But you're not going to see because it's just a small investment, but only half down there. So -- they’ve got to be able to use our tools and something in like 14, 15 locations. And not a lot of them [indiscernible] than what we have, but it is the Ontario. We got all of Ontario -- I don’t have all of Ontario, that’s why we've got some opportunities. But they have Ontario, Toronto area, and they've been able to do some small in there. Anyway, there is one that's already built in, that will get here sometime in the next year or two I hope.

That's great. Thank you so much.

You bet, Joe. Have a good day. Make sure you go very quickly. I don't want you to disappear.

Yes, sir.

And our next question comes from Shawn Kim with Gabelli Funds. You may proceed.

Good morning, gentlemen. Congrats on a solid quarter.

Well, good morning. I guess I will see you pretty soon, too.

Yes, yes. We look forward to seeing you and Steve out there in a couple of weeks. Just one follow-up question from me on the parts and service business. So, Rusty, how do you view your OEM partners expanding their respective parts and services business? So, for example, with Paccar expanding their TRP business, would that represent a potential headwind for your aftermarket business?

No way. I don't see that as any headwinds. This is -- it's a strategy of theirs. We have a strategy -- maybe not totally where we participate, buy and sell TRP parts, okay. Maybe not every piece of theirs products -- we are a participant with both OEMs and their strategies, okay. [Indiscernible] and Navistar for two and we work really hard -- our medium-duty trucks meaning the OEMs also. We participate all the way around. So that's not a headwind. That's a partnership on our part also. Even we're not a TRP store, we sell TRP parts and promote them, they will just as we sell parts for Navistar the same way.

Got it.

We got -- Navistar [indiscernible] maybe both have [indiscernible] private label stuff and we support both of it.

Got it. Okay. Very helpful. Thank you, guys.

You bet.

Ladies and gentlemen, this concludes our Q&A portion of today's call. I would now like to turn the call over to Mr. Rusty Rush for any closing remarks.

Well, thank you, guys for joining us on the call today. I know it will be February before I talk to anyone of you. So I wish everyone a very happy holidays and safe holidays coming forward. And we look forward to talking to you in February. Thank you.

Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.