Rush Enterprises, Inc. (RUSHB) Q2 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Rush Enterprises, Inc. reports Second Quarter 2021 Earnings Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Rusty Rush, Chairman, CEO and President. You may begin.

Good morning, and welcome to our second quarter 2021 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, 2020, and in our other filings with the Securities and Exchange Commission.

As indicated in our news release, in the second quarter, we achieved revenues of $1.3 billion and net income of $58 million, or $1 per diluted share. We are very proud to declare a cash dividend of $0.19 per common share, which is a 5.6% increase over the last quarter. Our results were primarily due to the country's continued economic recovery, healthy activity for most market segments we support, solid demand for new and used Class 8 truck sales and increased aftermarket activity, along with our continued adherence to managing expenses contributed to our strong quarter. As we look ahead, component supply chain issues are delaying the timing of some new truck deliveries into next year. And those constraints are beginning to negatively impact parts and service revenues as well. Despite supply issues, we will continue to add back key personnel to meet market demand, as we believe our financial results will continue to be strong throughout the remainder of the year. In the aftermarket, our parts, service and body shop revenues were $445.5 million and our absorption ratio was 129.1%. Our aftermarket revenues increased 18% compared to the second quarter of 2020, which is primarily a result of the nationwide economic recovery. Our part sales are back to pre-pandemic levels and we increased -- and we experienced increased healthy activity in most market segments, particularly in leasing, refuse, over-the-road customers and independent service centers. Service revenues are recovering at a little bit slower pace than parts, impacted not only by supply chain issues but continued service technician staffing as a common in the industry. Looking ahead, we expect supply constraints will continue to impact parts and service revenues throughout the industry for the remainder of the year. That said, to mitigate those impacts, we are actively hiring key parts personnel and service technicians and focusing on our preventive and contract maintenance service offerings. Further, we leveraged our parts management technologies to help us effectively adjust to market demand and grew our expensive dealership network to help mitigate part supply constraints. Finally, we are also piloting final mile route optimization to help us gain efficiency in our parts deliveries to better serve our customers. We do believe demand for aftermarket services will continue to increase through the remainder of the year as the overall economy remains healthy. Turning to truck sales. In the second quarter, we sold 2,954 new Class 8 trucks, accounting for 5% of the total Class 8 US market. Our truck sales were driven by a healthy economy and strong freight rates, which led to solid activity for most market segments we support, especially vocational, construction and over-the-road customers and healthy truck sales. While demand for new trucks remained strong in second quarter, truck sales were limited by supply constraints, which impacted manufacturers' production capabilities. ACT Research forecasts US Class 8 retail sales to be 259,000 units in 2021, up 32.4% from 2020. We believe this component supplier constraints will likely continue to impact Class 8 truck sales through the third quarter or longer, causing downside risk to the 259,000 units investment. Because of this, we believe our third quarter Class 8 performance will be flat compared to our second quarter results. We believe Class 8, heavy and our new truck sales may accelerate later this year as manufacturers are able to increase production when component parts are more readily available. Our Class 4 through 7 new truck sales reached 2,825 units in the second quarter, accounting for 4.5% of the US market. Our results increased significantly over the second quarter of 2020, largely due to increased activity from leasing and rental and food service customers. However, some of the manufacturers we represent continued to be faced with production shutdowns due to supply constraints, negatively impacting medium-duty truck availability, which will most likely continue through the third quarter. ACT Research forecasts US Class 4 through 7 retail sales to be 257,000 units in 2021, up 11% from 2020. Looking ahead, while we believe Class 4 through 7 production will not increase as quickly as Class 8, demand remains strong and we have the teams and strategies in place to take advantage of every sales opportunity possible. Our used truck sales reached 2,094 units in the second quarter, up 18.4% from the same time period in 2020. Used truck demand and values remain high, primarily due to production constraints of Class 8 new trucks. Though it is becoming more challenging to maintain a healthy used truck inventory, we believe our third quarter used truck sales will be consistent with our second quarter results. In June, we announced we've signed a letter of intent with Cummins Inc., for Cummins to acquire a 50% equity interest in Momentum Fuel Technologies. Cummins is a manufacturer of natural gas fuel systems. This letter of intent reflects our shared belief in the long-term viability of natural gas fuel systems and drew on our shared history as leaders of the natural gas market and our extensive service network capabilities throughout North America. The joint venture is expected to close later this year. As it is -- as always, it is important I thank our employees for their continued focus on growing our business and providing superior truck service to our customers. With that, I'll take your questions.

[Operator Instructions] Our first question comes from the line of Jamie Cook with Credit Suisse. Your line is open.

Hi, good morning and nice quarter. I guess my first question, Rusty, I just want to -- hope you could elaborate. You talked about your sales for truck being flat sequentially and that there's risk to the industry forecast out there. I'm just wondering, is this just a third quarter risk? Do we make up for it in the fourth quarter? Or do we get pushed to -- how much gets pushed to 2022? So if you could just give color on how much risk is to 2021? And then I guess my second question. Obviously, demand continues to be strong. We have heard from other OEs sort of reluctance to open their order book yet for 2022 because of pricing. And so if you could just provide a little color on how you see that unfolding?

Sure. I'll be happy to, Jamie. Well, if you had ask me 90 days ago, I would have told you we would probably been -- given my sources and what I saw out there, we would have been through the supply, component supply issue. But unfortunately, I wasn't -- it's extended out to where we are now. I'm hopeful and the communications I've had with all the manufacturers that this thing will smooth out by the end of the third quarter. I don't see it -- it might smooth out somewhat towards the back part of the third quarter. We're already, what, 10 days or a little away from the end of July. So -- but I still think we're going to see a lot of pressure for the next four weeks to six weeks, for sure, anyway. I wish I had a better gauge of it myself. But we all know about the chip issues, but the issues extend beyond that. There is a lot of issues with other parts and components supply coming out of Mexico and Asia. I think everybody is pretty aware of all that we're dealing with. I do believe that demand is still strong. So, I don't want anybody to get concerned about that the demand is there in the marketplace. And I don't see it going away. I see it may be getting pushed out, as you said, to the fourth and into the first quarter. Just because you can't deliver doesn't mean you don't build what you committed to, right, for people in this year because those were commitments made prior to all these issues. So, I see a lot of that actually moving into the first quarter of next year, too. I don't think it's all going to get picked up here in the back half of the year. As far as 2022 numbers, we are just getting started on some of them. We've done a few deals, not a lot. I understand that people are very -- manufacturers, that's what they got caught in with this year or are very -- they're a little bit hesitant on some stuff, but that's not to say that we're not working on deals currently. So, I expect them to start -- it's really July. When you think about it normally, we're really not working on the next year's deal still, ATA really. You really get started in September and October typically. It's just because the backlog is so large, people are worried about 2022. But I think the first half of 2022 maybe a lot of catch up for 2021, our first quarter. So that's -- I don't want to say first quarter. So, I mean, I look at our backlogs, okay? And if you look at our backlog at the end of Q1 versus the end of Q2, now I don't know if that's reflective of the industry, but I don't mind solid. We're up 25%. So, well, I need to get a little bit discouraged with the issues that we're dealing with. You are just going to ask make it less, spring it out a little bit longer because I don't see demand going away right now. I don't think taking away from that demand. And that's one of the reasons the last two quarters have been a record used truck orders because -- and this is hard to find, more difficult to find. But at the same time, our guys have done a great job of doing that. So, I just think everything gets pushed out a little further. And obviously, we -- so even we're not anywhere close to record unit numbers, I think the performance of a record earnings quarter for the company with those kind of deliveries speaks to the evolvement of the company over the last five years or six years when you look at it across the board. So, I hope I -- I just don't have the exact answers. I'm not the manufacturer and one that's going to be second-hand information. But I don't see it -- I see it stretching through the third quarter. And hopefully, in the fourth quarter, we get back to some semblance or back to what projected build rates were supposed to be because I think the numbers for production came out for June might have been a little lower than we anticipated for North America. And I don't know if that's going to change here in July or August.

Sorry. And just one follow-up, Rusty. Obviously, the margin performance was very strong in the quarter on parts, but also sort of new and used. And I'm just wondering on the truck side, how much of that is used? And just given low inventory used in pricing, why wouldn't your margins be comparable in the back half of the year for truck relative to what we saw in the first half?

Well, sometimes it's timing of certain transactions, whether it's more smaller transactions or larger transactions. I think margins -- used margins were just barely under what they were in Q1, but they were way above historical, okay. I'm not here to say they won't be close. But I think we sold a lot of inventory, and those are typically deals that we make really good margins on, okay. So, our inventory levels are pretty low, okay. You're balancing between taking care of long-term fleet customers and the other. That would be the only thing that might impact margins; that will still be good. I don't know that new margins will be where they're at because of mix of business, but we'll see. I don't expect it would be terrible. But across the board in every segment, I don't care if it was new, heavy or medium or used or parts and service. They were extremely strong for the quarter. We were pleased with that, but a lot of that is demand driven and supply side, demand side. But I don't see that changing, maybe slightly, but not -- it's not going to get super depressed or anything. I've not said. I said that somewhere, I don't think I did. I'm not saying that. But I'm also -- there could be a slight dip in uptick in some new margins just because of mix with more robust fleet customers, not as many small individual inventory sales.

Okay, thank you. Congrats on a nice quarter.

Thank you, ma'am.

Thank you. Our next question comes from the line of Justin Long with Stephens. Your line is open.

Good morning, gentlemen.

Good morning, sir.

Wanted to start with a question on parts and service. Rusty, can you give a little bit more color on how much growth you're expecting in parts and service in the back half of the year and maybe you can talk about how much this outlook has changed as a result of the prolonged supply chain issues?

Well, as I mentioned in there, we are back to pre-pandemic levels, okay, from the -- where we were, say, the prior five months or six months. We're not back to summer of '19 quite because the oilfield was still holding back then. But we are back to pre-pandemic levels in parts and service in the second quarter and gradually increasing. I think that while if they're solid numbers, as you can tell, we might be able to do it even a little bit better if we didn't have some supply constraints. We've probably got more open work orders in the shops percentage wise waiting on parts by far than we typically do. So yes, it sort of slows it down, but it's not bad, okay. So it's not like it's bad or anything. It's just -- you're always striving to do more, even though you have record numbers like we've had, that's the way we put together around here. So, I do believe that we will probably continue to see gradual and I'm not talking about 2% jumps on a daily basis every month, but continue to see gradual increases in parts and services, especially as we're able to continue to staff up a little back to pre-pandemic level as well. It's put a lot of stress on the organization, but we all know what the employment markets look like. And so for trying to hire -- inside some of those skill sets that you're looking for has been very difficult, but the organization has done an outstanding job to get back to where we were doing more with less, which we continue. We believe we will continue to do, by the way, but we want to do more, bring some people in and still do more than what we're doing now. And we do believe we're capable of doing that but there are supply constraints. But don't mistake the fact that the demand is there. So, we'll continue, I think, to do like the performance you saw here and continue to try to strive to make that better. Again, I go back to those -- we could never have gotten those kind of unit deliveries prior and perform with the -- and it's across the board, whether it's expense management, its production of the back-ends and back to those levels and performance even though the volume wasn't there on the sales side due to constraints, but performance from a margin perspective on the sales that we did truck-wise.

And on the point of returning to pre-pandemic levels, I was under the impression that parts had recovered to pre-pandemic levels, but services had not fully recovered. Maybe you could just clarify that. And if that's true, how much room do we have to go in services to get to that full recovery?

Great, great question. I was looking at it as a whole. So the mix is a little different. You are correct, okay. Service hasn't recovered quite as much as parts. Together, the combined total is there from the margin monthly, daily margin perspective, but it shifted a little bit more to parts. So the upside of that, we believe -- because we believe our technologies and some of the things we're doing are allowing us to take more -- get larger parts of market share. Once we're able to hire more technicians, qualified technicians and get them into our workforce, we do believe that work will be there. Or just, again, it goes back to that employment. I'm not the only person in the world. I talk to a lot of people. And everybody's read all the articles. It's just been difficult between stimulus and unemployment paychecks in the last year and I half, certain job sets have been hard to fill. It's just facts. I mean, I can walk you through double the time to replace people. We have all the stats and numbers. So it just blows up the amount of people because you are going to have replacements, you're going to have recruitment. That's part of business. And so it's been more difficult to increase that technician count. Now, we are increasing it. And I like the fact actually that we are increasing it at a gradual rate. We -- one time back in our history, just a few years ago, we increased, I think, at too faster rate. And so our efficiencies and proficiencies weren't where they needed to be. So I feel good about that. They are much better, just not quite to the overall volume that we want it to be, but we're doing a whole lot better job, I think hours build per tech, all the different stats I'm not going to get into on this call. But we feel good about that. It's just been a -- we'd like to go a little faster than we are and bring in people back. But again, it's tough labor market out there in certain jobs sets.

Understood. And maybe one last question for Steve. Any clarity on expectations for SG&A as we get into the third and fourth quarter relative to what we saw here in the second?

Yes. I mean, as we continue to add back and grow parts and service hopefully in Q3, that SG&A will grow as a percentage of that. Like we said, I think we grew about -- the G&A piece grew about 50% sequentially compared to the increase in back end gross profit in Q2 versus Q1. We'd expect that same to continue.

Yes. And S was up. With the higher margins, even though with volume trucks were down, with high margins across the board, truck sales S was up in Q2 also. So -- and I would expect that if we can maintain where we're at to be similar on the S side where we are at, it will just correlate with truck margins and truck gross profit.

Understood. I appreciate the time. And congrats on the quarter.

Thank you very much, Justin. You noticed how well Steve's voice is? It sort of sounds like mine today, doesn't it.

It does. I like it.

Thank you. Our next question comes from the line of Andrew Obin with Bank of America. Your line is open.

Yes. Hey. Good morning, gentlemen.

Well, good morning, Mr. Obin.

Can you just talk -- I think during COVID, I think the part of the story that is being -- maybe starting to be appreciated by the market, but it's just the structural change in how you guys are managing your costs. And it does seem that the recovery could be -- there is more going on in the recovery than anticipated, the supply chain constraint, right, labor shortage. Can you just talk to us about how your sort of cost management and your approach to managing costs in the cycle? Can you remind us what the thinking is and what adjustments do you need to make near term to manage this very volatile environment that you guys are facing? Rusty or Steve, whoever wants to answer. Thank you.

Sure. Well, from a cost perspective, Andrew, you learn a lot. I think I've told you all that a few calls back. You learn a lot during the COVID year versus last year. And while we know the business we're in requires people to do it, I'm not just loading money to someone. I'm turning wrenches. I'm selling parts, I've delivered parts, [indiscernible] part warehousing stuff, doing -- that's what we do. But what we did learn is that we can do a better job, as the market comes back, spending a certain percentage or a less percentage maybe than we historically have. Because of some of the technologies and things we're adding also, we believe that's going to allow us, and it's showing out, like Steve said a minute ago, we spent a little more than maybe 150% [ph] of the gross profit increase sequentially from Q1 to Q2. At the same time, if I can manage close to that going forward, I would feel pretty good about that. And I think we expect that to be the case in Q3. It's just the diligence we've put in some other -- I'm not going to answer -- some other -- all everything we do. Some of that is proprietary to us, I think. We put in some other measurements that historically we didn't use. And we've taken that through training. We're taking that down to different levels of our organization, so that whether it's a mid-level macro, general manager, regional manager, but these people understand that we can do things differently, just like he's talking about, I'd like to mention there, we haven't rolled out the optimization of our delivery service. We've rolled out projects like that the last two years or three years. We've rolled out all the revenue-producing projects. And I think some of these projects were allowing us to manage a little bit differently on the cost side. And with that, as I said, some of it is, I would call proprietary is probably not that big a deal, but I don't want to get into it on this call. But I guess I'd just say trust in the numbers and trust in the performance. And we look and we plan on continuing to perform like we -- we realize that this market demand has been strong. But at the same time, market demand does not turn to net dollars without management on both sides of the coin. And I believe that that's the case with the performance you're seeing and the performance you're going to see from the company regardless of where truck manufacturers are and getting us product. We got, as I told this earlier, on the sales side, we had 25% more backlog than we're going to add into Q1; so demand is there. That will get straightened out. And -- but for now, it's something we are going to have to do but still in the near future because that -- the parts problems, the supply problems we're having. But we learned a lot last year and we're going to continue to try to utilize that learning as we go forward into these growth years.

But the thinking is that sort of the amount of cost deployed to get this extra dollar of sales is structurally lower this cycle still, right?

Yes, we structurally -- we believe that we don't need to spend. I've always told you, we've got to spend x. But when you really looked at it over the cycle, you start one place, you get some place. As the cycle hits, when the cycle starts flattening out, sometimes your costs don't flatten that out. We think we put the tools in place to manage through the cycle better from a cost perspective to stay with the revenue fees, right, because we've seen these before. It goes up, up, up, and then it starts going the other way. Well, sometimes you're not as good when it does flatten out on you because it's hard to keep that pitch of growth. Like you see -- just like it was hard to lose that pitch of growth when COVID hit. It's just as hard as you go back up. It makes it a more gradual now than it was earlier in the year or late last year from a gross profit perspective growth. So, we believe that, yes, we will manage the cost side much better than we historically have, which will continue to lead to better returns at the end of the day, okay.

Got you. And you've been very useful in the past giving us color about your key end markets. Maybe you can just sort of take us around the country, key end markets like construction, oil and gas, what are we doing? Thank you.

You bet. Well, I would tell you, construction is already very good, and we're seeing signs of it even getting better. It's been a bigger mixer market, even that's not a huge market. We're a big part of it, a big part of it for us this year. Refuse remains -- continues to remain strong. We feel real good about where we're at with that and where we are in that environment and our relationships with many municipalities but, of course, the major players on the private side -- but the public companies have not been on the private, not municipal. The over-the-road business, my goodness, that's the biggest driver, as we all know, and it's extremely strong right now. Again, we're just getting trucks to everybody that wants them, and that's why it's going to be stretched out, in my mind, into next year because we're not going to meet commitments that we've made on for demand to customers earlier this year. So we will -- that will carry on. I'm telling you, Andrew, it's across the board really. I mean, I don't see any one sector that's super soft. Oil and gas, yes, we talked about O&G. Everybody always -- go back seven years, eight years, everybody thought we were an oil and gas company. Well, one thing we do, we're doing better now than when we had the oil and gas business. Our parts and service business in the quarter was slightly up from a year before. But you got to remember, last April, they were paying you to take a barrel of oil. So it was totally depressed. You're seeing some pickup in it. I don't rule out the part that it could, but I realize is how they open up the spigot again. It's going to be really volatile and really spacey. I don't think we'll ever see it like it was in the past. Of course, that's one of the things I'm most proud of the organization, is that we shifted from so much reliance on that. But if it does come back in some way, we're going to be right in the middle of it and it's strong. I don't ever expect it to look like it did there in the fracking years or whatever. But I do expect somewhere down the line, even though I realize we're going to be a non-carbon-based country or world eventually, it's not a light switch. So, you're still -- that's not going away in this decade. So, I do think we might get some play back somewhere down the line on O&G, and that will just be a tailwind. It's not something we relied upon anymore, even though we're still heavily involved in -- especially, on the mobile tech side and those types of things. So, I think that covers most sectors. I mean it's just -- it's pretty robust around. Medium-duty demand remains strong. It's one of the things you'll say, well, gosh, you are in the 4.5% of the market. Well, if I could -- OEMs that build both heavy and medium-duty trucks are going to slide toward building more heavy because they make better margin on it, okay. And we have one medium-duty manufacturer that has been sort of out of the market for almost a year who will be getting right back into it here later this year. So, those are all good things in my mind that I'm talking about. So -- but to answer the question succinctly, I'm telling you, construction probably and over-the-road is probably higher than what they were, say, six months ago or nine months ago anticipated while some are still staying strong like refuse and areas like that.

And you know, what, I usually don't do but I will ask you one more question. I'm talking about carbon-free future. You do seem to be doing quite a bit more than people realize. Can you just talk about what have your interaction been with these emerging players, autonomous driving, electric vehicles? What kind of dialogue do you have and are there any potential opportunities longer term for you to work with these new emerging players and new emerging technologies? Thank you.

Right. Well, first off, I think we're going to have the biggest opportunities with our own OEMs, okay. And they're emerging and they're investing into it. I've always said the majority of the win is going to come from the guys -- the folks that have had their feet in the ground, planting the routes down but that doesn't mean other people won't win. And I think that's one of the strongest things we have is our distribution network and our service capabilities, which are larger than anyone else's. But we don't cover the whole country, but if you -- and the one things these startups don't have are that -- are those capabilities, right. They aren't best in technology in trying to produce a product and no distribution network, et cetera. I would tell you that those opportunities continue to pass by or I would say pass, continues to show up on the doorstep and we will listen whether it's -- whether in any of these types of new technologies that are coming on board. I mean, we work with other people. And we have that ability and our capabilities inside, not just our dealerships, but inside of our up-fit centers and stuff like that. We have a few of those around the country. So that's a hidden -- to me, that's one of the hidden nuggets of the future for growth for us. And I still believe that -- I still believe one of the biggest tailwinds we'll have one day is market share gain by Navistar, one. They're still not where they need to be on what they were historically were before. MaxxForce, and I expect them to get back around then or somewhere down the road. Now, with the acquisition with Traton closed in July, I think the balance sheet changed for that organization. So, I think the goals will change for that organization. And I do believe that Peterbilt will still be able to gain market share with PACCAR's technologies and their products. There's no -- their products have always been stellar. So that -- but we will have the opportunity. We did the -- the JV, we did with Cummins, let me express this for a second. That was -- I think that's going to be -- I'm not saying that's something we were turning to a lot here in the first year or two. But I do believe given regulations that are being driven by government that I don't believe all these emerging technologies can take care of at a level that the politicians want. I do believe there's going to be some room for natural gas growth. And I do believe it's not going to go away long term. I don't -- I just don't believe that, just like I don't believe diesel is going away for a long term, okay, especially on the truckload side. Batteries aren't going to work on the truckload side. They're going to be doing great. I think [indiscernible] is going to work great inside of certain segments, medium-duty 6, 7, this and that, got it, but it's still going to be a 10-year run to get everything there. But that's why that JV we did with Cummins. I think we've established ourselves, we are the number two player in the fuel system business. And I do think the RNG with its negative carbon footprint, combined with some CNG growth, I think is going to allow it to grow some mid-decade as -- especially, I don't have to tell everybody of all the environmental stuff that's going on, the pressures that are going to be put by outside organizations, not truck companies, by other organizations for us to go and transition. I love transition; as we transition from 120 years of internal combustion engines to all these technologies. I know I'm talking a lot, but it won't be long enough to know I do that. I think that transition for these other technologies, yes, to your question, are going to provide quite a few opportunities for Rush to delve into other areas. Some of them, unbeknownst to me at this moment, but I know they're out there and we are actively paying attention. I could tell you that. And because of our involvement in natural gas for the last six years, seven years, regardless of how maybe was a little bit colored red, I feel really good about the base that it gives us as an organization to evolve into this next decade with all the new technologies coming out. I'll leave it at that because I can talk forever, as you know.

That was a great answer. Thanks so much.

You bet.

Thank you. [Operator Instructions] Our next question comes from the line of Joel Tiss with BMO. Your line is open.

Hey, guys. How's it going?

Very good, Joel. How are you today?

All right. Well, definitely, great expense management. I think you got to ease up on cutting Steve's pay so he can get his voice back.

Well, he's a little jealous of me. That's all.

Thanks, Joel.

I see.

I think I could let him do the rest of the call and you wouldn't know any difference.

I'm going to get a little philosophical today. I just wonder if you can talk a little bit about the implications of trading Navistar on your parts business. Are there going to be more global opportunities? Or are there going to be like Latin American opportunities with Scania or MAN? Or -- just any, any idea that you're starting to get that could have some impact in kind of like the five-year timeframe.

Well, I mean, honestly, Joel, those types of questions is a little bit early in the ballgame for me to truly understand. The deal just closed about three weeks ago or two weeks ago. And I really don't know about those folks yet, okay. But I'm sure I will get to know them and research and understand what other opportunities might be out there for us, okay. I do believe the biggest and easiest one is to get market share back here in North America where it belongs. When you got margin share that drives parts and service down the stream, not that we don't work on every day, but she will typically work more in your shops and the OEM you represent. So that would be my number one thing. I don't know, I have not -- as I said, it's a little early in the game for me to understand those opportunities. I haven't even personally been able to get -- they were arm's length during this till we are getting the transaction closed. Remember, wasn't just huge integration of people coming over and stuff like that until the transaction close. So, I think we're in the beginning stages of understanding what if any those opportunities might be for us from a larger-scale perspective and obviously given our -- given who we are, we're always listening and looking for other growth opportunities. And just like I talked about a minute ago with Andrew and obviously, emerging technology, we feel good about our place in the marketplace differentiating ourselves from others to take advantage of these things. So I don't have an answer for you. It's too new and the guys -- it's too new. I don't know everybody. I don't really understand what those opportunities would be because I haven't had any conversations with those folks yet.

Okay. And on another little philosophical direction, too. Can you talk about how you're thinking about how the dealership model is going to change as we go forward this 2024 California CARB, you're going to need to partner with charging stations or any other kind of ideas that are floating around about how the business might look in five years to 10 years.

Sure. I mean, it will integrated into the needs of whatever these technologies are, okay. Yes, California, we just had a meeting and approved. We spent the last year deciding how we were going to handle California being our first grounds to really do what we need to do. So, we're prepared to meet the demands as manufacturers. Remember, people are building thousands of units yet, so you don't want to get kart before the horse. So -- but yes, we just approved getting all our California stores prepared for 2024 CARB, right, and what our customers will need. We had to really -- we really do want to understand because you don't want to go out when you're this new in something and do a bunch of work and find out a year and a half later, where you didn't do enough or you didn't do this right, but we think we've got our arms around it. And just a couple of weeks ago, approved a plan, that we will roll it all out at the end of next year, with all the charging necessities along with all the stuff [indiscernible] from solar, a lot -- a big -- a whole plan, not just go stick a charger someplace. So, we feel good about that. And now we're exploring. We'll start working on talking about and thinking about what we do in other areas. But California, of course, would be what they always are, the leader in this space. And so yes, we're going forward with that around that, and we will continue to look at other areas where attainment of certain regulations is ahead of what maybe the EPA might be. There's 15 states that are typically tied to car. I don't believe they will come out at the same time because they haven't gone through all the proper legislative stuff. But I'm told this is just -- I sound like I know what I'm talking about here, but I'm not sure I do. But I'm told the fact that they will come out, but they might be a year behind it here or there or the other 15 states, which do make up about a total of about 30% of the marketplace. I just don't know at what pace those others will. And obviously, the EPA is coming out in 27 -- gosh, it will be 2022 in five months, right? So it's right around the corner, so that all these demands will be put on. That's why when I talk about the JV I did with Cummins, I feel real good about it because I don't think we're going to have enough electric -- I just don't think we're not going to be ready for it, whether it's the grid or it's not. Unfortunately, some people outside of this industry. I think it's like cars, you just going to plug it in like a hair dryer. I mean they've been having Brownhouse in California already, and it's can be 2%, 3%, 4% electric cars. So, I mean there is a lot of work to do. It's going to get there, but there's going to be this transition. And we are, as I always like to say, I want to be on the leading edge, not the bleeding edge. So, you can be rest assured that we will be on the leading edge as we transform our dealerships -- I wouldn't say, transform -- transition. It's not a transformation. It's -- diesel is not going away right now, but transition our dealerships and adapt our dealerships to be able to handle whatever technologies went out in whatever market spaces or market segments. I hope that was somewhat informative.

Yes. You remind me, my wife only plugs in the hair dryer when I'm in the bathtub. I wonder -- just a last quick one. You're growing a little bit slower than the overall industry. Is that supply constraints? Is that your regional positioning? Like any color into what's going on there? And then, I'm done.

Well, when you say that, I'm guessing you're talking about volumes. A lot of that I would tell you, I think that our backlogs probably ramped up a little bit slower than others. But as I told you, my backlog is really up now maybe go back, back a few quarters. It's rather large at the moment. So maybe some of our customers transition. We transitioned a little later on the deals that we did book. So -- and now we're calling the supply constraint issue that we're dealing with. So -- but I feel good about the demand. It's not going away, okay. I'm talking to customers, they're still blowing and going. So, we -- and then also, as I mentioned, on the Class 4 sale, we've had one kind of OEM that I typically sold about 2,500 units that has sort of been out of the marketplace. And we get back into it starting in October, so that's quite a few units. And they've been out of the marketplace for about nine months now. So, they'll be back and doing stronger than ever. I'm confident in that. So that's kind of hampered some of my 4 -- Class 4 to 7. I mean, you might sell -- flip some of them to something else, but you don't flip them all. So that's what I would have to say. We expect to be -- hopefully, I think the market share will stay flat because I don't think retail deliveries are going up in Q3 across the board, my friend. I really don't. Because retail deliveries always lag production. And if production doesn't meet what it should, then you'll see the retail deliveries follow because there's no inventories. Everybody sold their inventory, right? We were able to support a lot of things through inventory, but inventories are extremely low right now. So it's just some of the headwinds. But again, I go back -- I hear you. We lost a little share. We plan on getting it back. It's just a matter of timing here. I've got the backlog to do it.

All right. Thank you very much.

You're welcome, sir.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Rusty for closing remarks.

I'd just like to make one quick comment. Most people don't realize this, but this last quarter, on June 7 was 25 years since my father and I and our team of people went public when we were the first car company to ever to go public. It's been an amazing 25 years, and it couldn't have been done without the support of all the personnel and people that have contributed to Rush Enterprises across the country. So with that, I want to thank them one more time from the bottom of my heart for their efforts and their future efforts, too, as we continue to move forward. But it was -- I still reflect I could get -- I had a little bit sentimental on June 7 thinking about it. And talking to some of the people I know in the industry, but we're still the only public truck dealer. But all the car guys started coming out in the fall, but it was -- it's been a good ride, and I've enjoyed it all and I'm planning on riding it for quite a while longer. I'm getting Steve's voice and tuned up now, as you can hear. So anyway, I'm sure it will be even more closer to mine by Q3. I don't know Steve [indiscernible] we report Q3 results. But thank you, everybody, very much. I appreciate your time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.