Rush Enterprises, Inc. Reports Third Quarter 2026 Earnings Call - RUSH ENTERPRISES INC

Good day and thank you for standing by. Welcome to the Rush Enterprises Incorporated Reports Third Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rusty Rush, CEO, President, Chairman of the Board. Please go ahead. Well, good morning, and thank you for joining us for our third quarter of 2026. With me this morning are Steve Keller, our Chief Financial Officer, Jody Pollard, our Chief Operating Officer, Jay Hazelwood, our Vice President and Controller, and Michael Goldstone, our Senior Vice President, General Counsel, and Corporate Secretary. Before we get started, I'll turn it over to Steve for a few forward-looking statements. Certain statements we will make today are considered forward- looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risk and uncertainties, our actual results may differ materially from those expressed are implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in our annual report on Form 10-K for the year into December 31, 2025, and in our other filings with the Securities and Exchange Commission. Thanks, Steve. We had a strong third quarter. Revenue was approximately $2.1 billion, up 12.4% from a year ago, and net income was 78 million, 65 cents diluted share, and up 18.2% from a year ago. We also declared a quarterly cash dividend of 14 cents per share. The biggest drivers this quarter were higher new truck deliveries and improving aftermarket activity. Rate conditions have continued to get better following a prolonged downturn, and we're encouraged by what we're seeing as we move through the fourth quarter. The quarter also demonstrates the value of the diversified business we've built. We serve a broad range of customers across multiple parts of the commercial vehicle market, giving us different avenues for growth as conditions improve. During the quarter, we completed our 50% investment in MCT companies, giving as a meaningful entry into the refrigerated transportation space. MCT operates 17 full-service dealerships and three mobile service locations across six states. This is a great strategic fit and another step forward, providing customers with more of the products and services they need to operate their fleets. Parts and Service and Collision Center revenue was approximately $680 million, up 5.8%, and aftermarket operations generated nearly 63% of our total gross profit. Our purchasing ratio was 128.3%. Demand increased across our customer base, with particularly good growth in energy and wholesale. We also saw encouraging improvement among smaller local customers. We expect that momentum to continue, allowing for normal seasonality. Trucks we're delivering from our black holes should help create additional parts and service opportunities. At the same time, we're focused on operating efficiently and capturing more of our local customers' maintenance and repair business. Class 8 was particularly strong. We sold 3,880 new Class 8 trucks in the U.S. up 24.4%, compared with industry growth of just over 10%. That brought our Class 8 market share to 6.5%. Over-the-road customers drove much of that growth as improving freight rates and need to replace older equipment supported demand. Our backlog gives us a good visibility in the strong fourth quarter and first quarter of next year, although supply constraints could affect the timing of some deliveries. The bigger question right now is new order activity. Quoting and orders have slowed as customers wait for clarity around the EPA's 2027 emission rules and ultimately manufacturer's pricing. We view that largely as just a timing issue. Underlying demand remains healthy, and we expect ordering activity to improve once customers have the information they need to make replacement decisions. Medium-duty also performed well. We sold 3,265 flat 4-7 vehicles in the U.S., up 9.6%, while the overall market was essentially flat. Several large fleets that had deferred purchases earlier in the year took delivery during the quarter, and our ready-to-roll inventory helped us serve customers as manufactured capacity tightens. We remain positive about medium-duty demand going into early 2027. We added inventory to the corner to help manage possible production constraints, which should put us in a good position to respond to customers who need equipment quickly. Used truck demand was also healthy. We sold 1,913 used commercial vehicles, up 5.5% over the last year. We demand particularly strong among smaller fleets. Limited new truck availability and expected increases in new vehicle prices continue to make used equipment an attractive alternative for many customers. Our leasing and rental business also had a good quarter. Our revenue was $98.2 million, up 5.3%, driven by improved rental utilization, along with continued growth in full-service leasing contract maintenance. We expect rental demand to remain healthy next year, as some customers consider alternatives to buying higher-priced new vehicles. Overall, I'm pleased with how the business performed this quarter. We generated strong growth, gained share in both Class 8 and medium duty, saw continued improvement in aftermarket demand, and maintained a very strong financial position. During the quarter, we repurchased $10.3 million of our stock, paid $16.4 million in dividends, and ended September with $226 million in cash and cash flows. Going forward, our focus remains pretty straightforward. Serve our customers well, make it easier for them to do business in the rush, and continue investing where we see attractive opportunities. That's what our total solution strategy is about. We want to support customers across the life of the vehicle. from the initial purchase through parts and service, technology, leasing, rental, and other solutions. The more effectively we do that, the more valuable those relationships will come for both our customers and Rush. Finally, I want to thank our employees. Their hard work and commitment to our customers are what make these results possible, and I appreciate everything they do for Rush Enterprises. With that, I'll take your questions. Thank you. At this time, we will conduct the question and answer session as a reminder to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star 11 again please stand by while we compile the q a roster our first question comes from the line of Andrew open your line is now open good morning just rusty maybe you can just we talked about it rusty Steve maybe we can talk about just regulatory uncertainty and how impact your customer behavior going to 27 thank you sure Andrew well it's a great question Andrew I could probably ramble on for 20 minutes talking about it but there's no question that getting the regulatory answers from the epa uh is critical uh for manufacturers and customers alike right and most people you may realize remember i'm gonna try to make this as short as i can you know the epi came out and gave a draft back in july about what the changes they were making to the 2027 january one rule uh basically they said they were going to allow non-conformance penalties if you chose that, which means you could carry the old engine that we had and still sell it, but there would be a penalty. Heavy duty was around $6,700, medium around $4,400 plus FET on the heavy duty engine. Or you could bring on your new technology, which would be, you know, meet the 0.35 milligrams, whatever it is, NOx, if the law has been written for a while. in doing that you could also use credits to buy that down from 0.65 okay 2.35 okay so you really had different choices they got rid of the warranties they said because they're supposed to be a 10-year warranty on afterlife or after treatment excuse me and it was going to go back to the regular one-year standard warranty on after treatment not 10 years and also some other provisions inside uh that really weren't quite as expensive but some other provisions they had out there. Now, that's a graph, so it was up for review, a commentary period. All the comments came back. We kept hearing we're going to get the final decree in November. Now in the last couple weeks, I'm hearing that we're not going to get it in November, there's been some things that have gone on, I think, in the EPA that They're going to delay it and possibly, I don't know if it's for a fact, but possibly we're going to be told just to work off a draft. We'll get the final decree out in January, February, but it's got to go in the first of January. So it's kind of up in the air as to exactly, is that really going to stay the same? Are they going to make adjustments? Will they make NCPs up or down? We don't know, okay? But, you know, you're going to have to go off the assumptions that the draft will stay the same, I believe, unless they do come up with a final decree. That being said, all the manufacturers are taking different paths, and that's fluid also. I do know that PACCAR is all in on NCPs. I know that Cummins is in on the NCP through the end of September rolling in new technology. International is going to go with NCPs for probably four months and then roll into the new technologies through the summer. Freightliner is not going to do that. Freightlier is going with the new technology right out of the back, right out on the chute. Volvo, I'm not sure I know they've got new technology. I think they might have a mix. So my point to you would be that it's all different across the board. I've never seen a law. I'm pretty old, right? In fact, I'm really old. So I've never seen an EPA law or decree where it wasn't the same for everybody on one particular date. So it's sort of in some ways hunted the full implementation of the January 1, 27 EPA law to where it's spread out. Some will come in on January 1. Some may not do it until the following year. You don't know, NCPs, there's no close on the date on it, but it would probably go up a rather large amount in January 1 of 28. So I would imagine that it will allow, from a customer perspective, I don't believe we've had time to truly test these engines. That's my personal belief. So I do believe it gives customers a chance to not have to roll right into this new technology because everybody's after treatment's a little bit different, okay? I could talk forever, okay. All the manufacturers are going about it a little different. So I think from a customer perspective, I would be, you know, leaning towards wanting to pay some NCPs, that's my personal opinion, and roll in and test the new technology before I go all into the pool. You know, let's dive into the shallow end, not the deep end, right? Let's ease our way into it. If I'm a customer, that's how I'd approach it. But I'm not a customer. I'm just a dealer. But I've talked to many of them, obviously. I just came back from ATA, and that's definitely how a few of them talk. Now, I'm sure some will go in with the proper assurances, but, you know, the manufacturers we represent are going to ease into the pool. would be the best way for me to tell you, you know, as I just went through. So, but it's all over the board. And with still uncertainty driven by our great government that can't seem to write a final decree. But I know there's a lot of legal ramifications. They have to be very careful with the changes. They've tried to make it easier for customers. By allowing NCPs, most customers would prefer that. And then test. I don't believe customers have been given enough time. In fact, I know they haven't with anybody's technology on the after treatment to test it. Most folks want to run this stuff for over a year plus before they roll it into their fleet because we've seen throughout history that new technology is not always running just right, right out of the gate. There are adjustments that have to be made, and sometimes there can be major adjustments. I mean, I go back to something that's as simple as going to DEF, which we did in 2010, when we went to the blue, to the DEF like Europe, SCR technology. I'm going to tell you, there was clogged particulate filters all over this country, okay, traps and stuff. Our shops were full of these kinds of things. As we rolled into that, even something that had been running for years in Europe, we had issues with implementing here in the US. So, you know, people remember those scars. So they would, in my mind, prefer to roll into it. But I'm done. Like I said, I could talk forever about it. And, you've got my opinions on it. They may not be everybody's, but they're mine. And so that's, you know, in that delay of the land, which is different depending on who you're talking to, and we're waiting. Oh, it would be great if we could at least get a final decree because no one likes working off a draft. And then you get stuff on order and things happen and the decree comes out. It can get a little messy in my mind if we don't get a decree out. Thank you. Rusty, no, great. I appreciate your comprehensive answer. And maybe another question is, on any potential disruptions to OEM's ability to ship trucks to you, given potential supply chain constraints over the next couple of quarters. How that thinking has evolved, and what do you think, given that, both shipments and orders will look like over the last couple of months? Thank you. Sure. That's a good question. Anytime you ramp up like these manufacturers have, some of these folks have had six to eight increases or more throughout the year. Now, as they've ramped slowly up, I know. I mean, I knew both my manufacturers are running at full tilt, okay? Well, what happens is you put a big strain on the supply base, and it's not always just the number one supply base. It's not your tier one. It's your tier two and tier three suppliers that you're asking to add people, add all these resources, and ramp up for a big six-month period. But then you can't guarantee them because class A truck market is always what it is. It's a little volatile. And so you're asked to ramp up 80%. Well, then you Can't Guarantee and ramp down. And so then it's about hiring people, training people, getting going, and giving them. So it does put a strain. So what I'm saying is that really on that tier two, tier three, there are some cases of tier one, I'm not going to get specific, that have popped up here in the last couple weeks that are going to make some of these deliveries get stretched out. And it's not one OEM. It's all OEMs that are affected, okay? So don't let, I think, you know, some people make it, but it's no, it's the OEMS we represent. It's the ones we don't represent. So, what happens is you're trying to keep the lines running good, and what happens is you short what I call tier two, tier three, you know, you're short this gauge, you're sure this lens or something. Well, you are not going to just stop the truck and leave it on the line. You are going to take it off, make sure everything is fine, get it tested, and put it in the back lot until you get that piece. Then you are going go put it on there. So it's just, you got to touch the vehicle two or three times. And when that happens, it didn't happen. This is nothing unique. This happens every time you have this big surge in manufacturing and order activity. So it does crank the supply. It does slow down the deliveries. You know, I've got numbers of what my Q4 should be, but I'm not going to guarantee it because some of it could get delayed into Q1. So I think that's why we feel pretty good about Q4 and Q1. Now, I can't tell you much about Q2 because I don't think anybody, no OEM, has much backlog. We all got a little past, you know, with the new engine stuff. So, you Know, I feel, but I'm not, we're a dealer, so we're on the tail of the dog. So we're not manufacturing. We're delivering to customers, which typically takes 30 to 90 to 128 days, depending on if it's over the highway or goes into vocational businesses at the bodies and things like that. So that's why I can fairly confidently say I feel good about Q4 and Q1, Q2 to be known. But remember, we've had six months of backlog. and it's not in and so it's go by the way it's going down every every day because we're not organ or intake it's I'm going to be super strong but as it goes down and as we get clarity on emissions and we get Clary on pricing because you know there's inflationary pieces inside of this besides engine this all just engines so OEMs and customers or dealers of course including me but really they'll there we there will be a meeting of the minds on pricing but when i told you about all those different technologies right on the new stuff uh it it's really it's really interesting right now because everybody the different technologies i'm jumping out further than your question by the way the different have different cost factors to them and different oems are different positions coming out of tariffs and stuff it is really a pretty complex game out there right now i know it's going to get sorted out as backlogs decrease we'll get sorted out because there is demand out there i know there's demand for next year i've talked to customers it's just this you know fall we're in of clarity on emissions and clarity on future pricing right but it'll get sort of out here the next 60 days and we'll give back to normal there could be be a little bit there could be a small blip you know uh for my back half of q1 and something you do but it will get sorted out because the demand is there the age of the fleet is up okay so regardless about growth the replacement demand is still there going into you know next year which is why i think you see you know act's out there i don't know they're up like i don' t know it's 10% or something. I don't have it in front of me right now, but it is up 8-10%. Something can change, of course, but, you know, because we'll start the year off, in my mind, with a better Q1, because that's deliveries, than what we did last year. So, I know I'm going past your question, but yes, back to your question, it will get stretched out due to supply constraints. They will get built. In my mind I don' t see I mean, I don't see anything that's going to blow it all up. But you're also fighting the law, which basically means the engine has to get built prior to December 31 if you're using old technology. Or should I say, I think it goes down to you have to set the crank in the block. That's how it really reads. But you will build old engines into January, okay? You know, I guess there's a 5% piece of the government put in their decree. I know I'm getting too deep, but so we will build old engines into January. So if you look at it, there's still another, what, a little less than three months of building old engines, right? So, but the supply piece to your first question is going to be able to stretch it out a little bit, right, which I'm fine with. Let's just get it all delivered. I don't look for anybody to not take their equipment, okay? The demand is there. It's just a matter of getting it all built, which just stretches out that it's just a timing issue on that piece of it. Thank you very much for this comprehensive answer. I appreciate it. You betcha. Probably may be confusing, even if it's comprehensive. Thank you. Our next question comes from the line of Brady Lears of Stevens. Your line is now open. Great. Thanks. Good morning, Rusty. Thanks for taking our questions. You know, parts and service revenue growth was really strong this quarter. Can you just talk about some of the drivers of that growth? Was that mostly kind of your larger over-the-road accounts? Are you also seeing strength, you know, from your smaller unassigned accounts too? And then just any, you Know, how sustainable you think this growth is into 2027? Right. Well, first, I do believe it is sustainable. I don't look for it to be dramatic, but it's nice to be even gradual good growth. I would tell you national account growth was there, but also smaller accounts didn't decline as dramatically as they have been the last couple of years. They were starting to flatten out a little bit, which is nice to see. right that means you're starting to get to the bottom of that piece of your business because that is you know typically your more profitable piece but from a mixed perspective what growth we had was more in the national account piece and it maybe wasn't as strong as it had been but it was there right i could tell you at the end of the quarter the two we measure things you know and per days you know how much gross profit per day we produce in our shops and August and September, August being the best month of the year, and September being the second-best month of year from a per-day average. So that was, you know, that was encouraging, right? So we'll see. You know, remember, though, in Q4, we do have seasonality. We do have holidays. Q4 is always the toughest. That's in November and December as we roll into it, just because there's less working days. right yeah we have basically three less working days right and a working day to us is worth three plus million dollars a day in gross profits so we will be battling that uh in q4 we always do sub years it's two this year it's three uh the way we look at it you know we strip out the holidays so you know when you put the figures the holidays in so that will be a seasonality balance battle But that's every year. So, you know, what you're really hoping for is, like you said, underlying good, strong growth, understanding seasonality. That happens every year, right? But know that underlying growth is strong and solid. And for right now, it appears to be that way. Also, we're helped by the delivery of vehicles. Anytime we're delivering more new vehicles, some of the work, you know, there is work, especially in our vocational businesses, where we add equipment or, you know, get them prepared, you know, pre-deliver them, add stuff, sticker them, even on our over-the-road business, right? There's still a little bit that goes with it of, you know, upfitting that we do to get trucks ready to go to the end user. So that's always helpful, too. So, you know, it looks like we will still maintain that with a gradually improving customer base and, you know, more trucks to deliver, which will help create, you know, a more gross profit from that perspective for parts and service. That all makes sense. Thanks for all the detail there. Maybe just lastly on used truck sales, you know, they stepped up nicely in the third quarter. Yeah, how are you thinking about used truck sales, especially, you know, just going back to Andrew's question earlier about the regulatory uncertainty? Are you seeing any tailwinds to used truck cells from that or any thoughts into 27? Sure. Yeah. Without question, we're saying, you Know, used is solid, right? We're managing our inventory as well. We're actually, I think, because the used market's been a little better. Some customers are disposing of more of their cells, and we're not taking as large of fleet trade packages as we have in the past. Now, when it's bad, they always want you to take them, right? When it's good, they like to sell them themselves. Not all the time, but you see that trend inside of it. So we're going to maintain solid used truck results, I believe. You know, steady as it goes, should I say. Stable, no big, you know, sometimes used is the one thing in the world it'll bite you. But I don't see any bites on us coming in the future for the next few quarters. And I believe it'll still be solid next year. Just remember, with these new truck pricing going, what's fixing to happen? You're just increasing the spread. That helps used trucks maintain value when new truck prices go up. We're still not anywhere close to back to the percentages that we were three or four or five years ago, because new drug prices have shot up 30, 30, 40% in the last five or six years. And used drug values have it. So percentage-wise, we're still way under, if you go back historical, going to the last decade or other decades, we've percentage- wise still bigger gap than ever. So I don't see any big hit in used coming right now, my friend. I expect them to stay good and strong. I'm not going to sit here and say, I know I've read where some folks, big rental leasing companies, oh, they're going to be up 10% next year, you know, like for like. I'm não vou dizer isso, mas eu posso ver eles um pouco e fazer isso forte, você sabe, e bom e sólido na minha mente. Mas, você conhece, vamos ver, eu quero dizer, se algumas dessas tecnologias não funcionaram, também, e isso é um tratamento de abdômen, e há mais de um que apenas o tratamento abdómen, há algumas mudanças de hardware dentro de algumas dessas engenharias, mas elas vão sair. out if you had something like that happen you could see your truck value shoot up okay but i'm not here to predict that or say that so my point being they should hold it be good and we should have strong steadies it goes we've got any issue is getting used trucks right now okay you know we've Got buyers out there we're buying used trucks besides trading for used trucks too so if there's any issue right now like i said it's it's just getting you know having the right good enough inventory, but we're managing it well. There's been times in my life when you're in a different position, so I feel pretty good about where we're at. That's all very helpful. Thanks again for the time this morning, Rusty. You'll pass it along. Always. Thank you, sir. Thank you. Our next question comes from the line of Cole Cousins of Wolf Research. Your line is now open. Hey, guys. It sounds like outside of EPA uncertainty, you believe demand is still pretty strong. Coming out of ATA, what gives you the confidence that this order roll is temporary heading into 2027? What gave it to me? Because people still said they had demand. Now, remember, they're taking a lot of trucks okay I it's it's an interesting besides all the diversity and people's choices of technology which drives different pricing from the OEMs besides all that okay they're thinking a lot of trucks right now and they know that customers know I'm always wide open about everything customers know that they don't have a a backlog next year. So they're going to push back on pricing for a bit, but they're taking all these trucks in the back half of the year. We're building at an extremely high rate right now. We really are. Well, those trucks have to be in service, which means they have to out-service other trucks if they're replaced. So, they have take trucks out of service, put trucks in service. And that takes a little time for them, too. It's not like going to The race is jumping out of one truck, hard truck, and into the next one. There's a little more to it than that because you've got to get the other truck ready for disposal, which means you've Got to fix it up. The used truck, the new truck needs to be ready to go on the road. So it takes them a little time. I know that people said they have strong demand, but they're not going to be in a really big hurry. I don't see that. I'm not saying that's the deal. That's just not what I see. I talk to a lot of people. Right up front, I'm sure that as we get closer to that time frame, look, this industry at times, I've seen this industry have three or four weeks of real true backlog in it before. So in the just-in-time world we've created over the last decades, many few decades, people can ramp up and get ready and deliver pretty quick. So, I think as they roll all this in, they still have a lot to buy next year. I saw some CapEx budgets that were talked about. It just may not be smooth as you go because of these other issues. So, that's what gives me the confidence. Plus, I look at the age of the fleet, and it's up higher. I talk to people that their fleet, if they want it X, it's X. It's up almost a year higher than what they like, Which, what? That leads to higher maintenance in there that they're paying, right? And they want to get less, you know, not as reliable, less reliability, the older your fleet is. So it's there, you Know, and they're slowly, even though we, I really believe there's legs. Let's look at our, I'm talking about the over-the-road business. I look for vocational to be good next year, if not better than this year. It's been steady as it goes. But the over-the-road is still 70% of what's going on. And while, you know, we know what happened going back to last January, spot rates shot up 30, 35. At one time, they peaked at around 50 up year over year. And they've leveled back down in the 30s range year over years. But people are starting to roll in their contract rates. People that have more, you now, dedicated stuff, If it takes longer to roll it in, if you're not, you know, if we got more dedicated, it depends on who you're talking about. But we, I still believe, and it's the real, the real caused by a constraint of what drivers and things like that. It was supply side. It wasn't demand freight side. It was support. I do think the economy still seems to be, I can't believe how well the economy's weathered all this crap. Well, crap, the war I ran, the fuel prices and everything else, but the economy continues to show through somehow. So I do believe still we're eventually going to get some demand, you know, to help drive it. Right now it's been, if you remember a year ago, you knows, the government was cracking down on noncompliant drivers and this and that, all these supply side things. So all this has been driven by supply side. i still think there's gonna be some legs for some demand okay coming next year just by novice opinion so you know you add that in uh folks haven't been really able to grow a lot because there's a lot of driver cost you're you know because you're seeing some of the releases they're better than what they were but there's still a lot of cost right so they're still they're even though they're getting better freight rates they're spending a lot of just most people are up 10 in driver's pay right and plus the other cost of the equipment and things like that so i i just believe uh so it was keep pressure on the supply side but i believe demand's coming and people wanted vehicles it's just a matter we're taking a lot right now i need to get clarity on pricing and technology and i'm gonna buy a lot lot of trucks okay because i need to it's as simple as that even though i don't make it a simple answer no that's super helpful rusty uh and i guess maybe just a question on margins you guys had strong revenue growth in both commercial vehicle and aftermarket sales but margins are still down year over year uh i'm assuming there's some mixed headwinds in there but can you expand on what's what's driving that it's i would tell you look margins this quarter from a truck perspective, were one-tenth less than two of the last three-quarters. So, to me, they were kind of flat. So, I hear you. They were a hair higher. They were in the eights still, okay? It was eight. It was 8-1, and it was, you know, at one time it was 8.5 back a year ago or so. And really and truly, it's a mix. You know, we're getting more fleet business, okay, you know, a small guy comes in always a little later. I'm hoping and expecting to maybe start seeing some improvement. I think our mix is going to get a little better as I look at it going into Q4. I need to see. I've got to make sure what gets delivered on time and what doesn't, okay? I don't see margins getting any less, for sure. And I see, you know, there's some upside to truck margins in my mind in the next couple of quarters, okay. When it comes to aftermarket, our parts business grew better than our service business. And, you know, your service margins are well more than double what your parts margins are, right? So, we were only off one quarter over quarter. We were off one. We weren't as good as we were a year ago. That's for sure. we're you know a percent off but pretty similar to where we have been and it's mainly a mixed perspective uh with you know better growth and parts than we have in service so that would be my best answer and again also on that remember i'm doing what i said earlier i said my growth was in the national account fleet business well that's not as good a margin as a small person right So, you know, again, it's more of a mixed thing. And I for sure believe we can get it back. It's just been, but I'll take it. Like I told somebody the other day, I said, well, gosh, you know, why would you want to grow? Why would I want to go there? Because if the small guys were hurting worse, I got to get growth somewhere. But it might come in a little bit less margin, right? And that's really what it's about. It's a parts and service mix, and it's a customer mix kind of thing. But when the small guy comes back, you'll see those margins get back that's helpful just one quick follow-up on the supplier delays uh can you where is the actual bottleneck and is the expectation that that should start to abate as we enter 2027 or do you see this being like when does this end well that all depends on demand okay the bottleneck is across the board as i said in tier two and tier three that these oems have well more a thousand plus trucks they're all really built except for two little parts or something right and they're parked out back so that bottleneck it's across the border it's not one particular thing there's only one tier one thing that i've seen in the last few weeks and i think people are trying to work their way through it i'm not going to get specific about that um so those little things will get once unless we get some orders it'll be no problem come february i so but i do expect us to start getting you know but that's still a ways off because as i said i walk through my customers are not in a big hurry to take q1 trucks they're in they're inservicing all these trucks i know people Some people, their orders, 50% of what they bought this year are coming in Q4. Well, that means they're going to end service through Q1, and they'll buy and get trucks on delivery for Q2. That'll happen, but that still weighs off, okay? And with all the uncertainties I talked about, I got time, they'll tell themselves, because I know the OEMs don't have any big backlogs next year. Now, they better be careful. I would tell a customer that I do expect acceleration you know I can give you reasons why you shouldn't hold off but I can't you know it's not my money to spend this there's but you got to be careful because I do think when it hits it's going to hit hard fast and big right I think when orders pick back up they're gonna pick back quickly okay because you know some people aren't going to want to miss okay and have what happened the back half of this year where not everybody got everything they wanted the back after this year you know especially you know your smaller customers so it'll happen it just it's just a timing thing i have confidence it will happen the people's needs if someone asked me a minute ago was there a lot of orders given out at ata not that i'm aware of but i do know there was a lot to talk a lot about demand that's needed you know demand out there but you know there's there's time in their mind because they got so much coming here and this back at part of this year the in-service so you know i'll just it could be a slight little bubble uh in the in the uh corner when we which we transition to new technology but it's not going to be a big one and it won't last long i have confidence in that okay thanks rusty I'll turn it back. You bet. Thank you. Our next question comes from the line of Avi Jaroslawicz of UBS. Hey, thank you. Good morning. Good more. So just trying to think about what Q1 could look like, right? So it sounds like as long as the engine is produced, even for the most part, by december 31st that uh it's not going to get an ncp in 2027 um so it sounds like some of the supply bottlenecks are kind of downstream of engines so are you thinking that the oems are just going to stock up on as many engines as possible and kind of what do you think the spillover into q1 could look like well well if they could they would but there are regulations just to how they could do that. I can remember in the old days when they would have warehouses full. We're a little more sophisticated than 40 years ago, okay? It's a little harder to do in the world we live in now. Used to, manufacturers would stack them up big, right? But remember, they don't operate. First, let's go back. They don't cooperate that way. Everything's just in time. People don't operating like they used to. They don'T have warehouses and parts and stuff when the manufacturers don'T. So, but there is, I think, a 5% carry rule it's just a matter if they can get them built I'm not sure I don't want to speak for everybody where they are but I expect everybody to build into January I don' t know if that's 3 weeks, 2 weeks, 4 weeks probably 3 more weeks into January if they could get the engines and I'm not, I can't answer that question, as I said, the old rule and I think it still is, is cranks got to be laid in the engine by December 31 doesn't mean totally completely the cranks got to be in the block so uh you know i would imagine oems some for sure will want to carry as many as they can legally and that's what they'll do so you know that would tell you you know if you you're going to have some already online trucks And remember, just because a manufacturer builds 200 trucks a day, he's probably got 1,000 trucks going through there, right? They don't build it in one day or more. So you got all that going through. There's a week plus that's already in the factory. Then you got a 5% carry. So that gets you, you know, what's a month? 8% or something? You know, the 12, 8.5%. So that gets you close to about three to four weeks of building the J. And I would imagine that would be the goal of most of the, man, you have to ask them. That's their business, but that'd be my guess. So, you know, that gets to three or four weeks in January. And then we're going to go to whatever, we're either going to do the NCPs. And by the way, if you're a customer, all you're going to do is pay an NCP plus whatever for your model and inflation. And that's the part that's being negotiated out right now. Okay. So, you know what the NCP is. We know costs have risen. So, just finding that little piece. So that's why I don't see, especially for folks that are going to be using NCPs, I do not see a big, you know, stoppage or some big block in the road to get it done. There could be a little something, but it'll just, you Know, it'll come to a cost factor, but It's real simple to figure out because the NCP is what the NCC is. The only problem is we're working off a draft, okay, and you got to hope it stays the same, so it does get a little confusing there. So, again, I would, but remember, I am, we're on the tail of the dog, so I expect us to have a solid Q1, but I need to wait and see what gets built and delivered in the fourth quarter because of all this, you know, tier supply issues, right? So I don't have clarity as to exactly how everything falls out. I feel pretty good about both quarters, you know. But I'm just not sure. So I feel good about Q4. I feel decent good aboutQ1. Q2 I'll have to get to, but we got time. So as they sort out all these issues I keep repeating myself about and talking about, I think everybody should understand them right now. But that's, you Know, that's where we're at. That's truly where we're at. So I'm not going to try to quantify it because I don't know about shortages and things and stuff gets delayed, you know, a couple weeks here or there. And, you Know, where it goes, you knows, it's going to vocational. Does it go here? Does it Go there? It'll all be all right. Okay. I appreciate that. But, yeah, I mean, it sounds like if they can keep building, you know, another three to four weeks into January, then that could take, you know, retail sales into pretty much through February. Pretty much through March. That takes you pretty much to Q1, okay? Okay. And then there, I've got some uncertainty in Q2, but I've still got plenty of time, okay, because we've got to sort out pricing and technology here real quick. and we'll get that sorted out in the next 60 days, I'm confident, okay? Gotcha. On the pricing side. I'm telling you, there's going to be demand. I believe there will be demand, I don't look for demand to go away. It'll just got these uncertainties, man, and it'll get itself sorted out, it always does. All right, on this pricing dynamic, so if I'm understanding correctly, it sounds kind of like the OEMs kind of underlying, you know, core pricing to cover costs and whatnot. Is that somewhat dependent on what the final NCP is going to look like? You know, isn't there thinking of it as like a maximum price that can be absorbed for next year? And it's just a question of whether part of that goes to their margins or is just passed through or. Well, from what I hear, Look, we know that we've had some inflation, more than the feds want, right? Well, it happens in the truck business, truck world, too, manufacturers. They've been absorbing. You can see margins and stuff. It's not hard to go find them, even the Europeans have spot off their truck divisions. It's real easy to go and find what truck margins are. um so i expect you know manufacturers i think are not trying to be anything like gouging or anything they're trying to recover some costs plus ncp or if you're doing new technology who knows what it costs okay only you do so but if you'RE GOING DOWN THE NCP ROUTE TO BEGIN WITH WHICH BOTH OF MY MANUFACTURERS ARE YOU'RE GONNA JUST HAVE TO BET ON THE DRAFT AND THEN IT'S trying to recover the inflationary pressures you've had, right, and cover your increased costs. And that gets you to the number you're supposed to be at. And that's where we will get to, okay? It just takes a little time and, you know, validation of what those costs really are outside of NCPs. And if everybody gets comfortable, I'm not going to get into the numbers and stuff where they really don't want to. But at the same time, it's pretty simple. You got an NCP. It's NCP plus recovering what your increased costs are. I don't think people are looking for big margins going into the year to begin with. It's not like, you know, you're going to have demand, but you don't have it now, so you need to go build a backlog. Then you can work on it in the back half of the backlog. But right now, people didn't work on the back end of the back log this year, I can tell you. But that was back in June and July when they were building it, okay? That will eventually happen again when we get the demand back for the new technology and the new pricing and stuff up front. Manufacturers will be just trying to recover if they went down NCP, whatever the NCP is, plus their increased cost. I think that's what I'm seeing out there. It's just that, again, customers aren't in a big hurry. You try to get them in a bigger hurry, they're not. They're taking so many drugs. I've gone over and over this right now, and that's my take on it. Hell, I could be wrong, but I don't think I am. So I'm where we're at. We're just in this little space right now. I expect everything to sort itself out the next 60 days is all I can tell you. All right. And just want to circle back on the parts and service business. So we were hearing over the last couple of months that some of the spike in operating costs put some pressure on demand there. just with some strain on budgets. Doesn't look like that was something that showed up in your numbers in Q3. Do you think that was a factor in the quarter for your business? Or, you know, we could have seen a stronger improvement had the, you know, costs, the fuel and driver costs not spiked as they had? Or is this maybe a, you know, unrestrained kind of quarter? Yeah, I would tell you, we feel it. I said one of the things when I said, you know, margins are not as high as they were, say, a year ago. They're in line with where they were the last quarter or two, real close. Part of that was mixed, and part of it was competitive pressures to your comment, right? You know, there's, people were still really tight, especially the smaller guys that may not get all their fuel surcharges. They were having to spend more money on fuel, right, so they were having watch their, you You know, their maintenance and their repair budget is a lot tighter. Same thing we've been dealing with for three years in the freight recession. Then you get all this fuel spike, and it adds more pressure into it. It's not just one thing, but, yes, we know all the costs are up. You can see it inside the earnings releases, okay? So that's going to put pressure on all expenditures, right? And especially as you get to the end of the year and people spend out a lot of their budget, You start seeing it here in Q4 sometimes. But, you know, I'm proud of the team. We went out there, as I said. We continued to grow our national account business with a little less margin. Yeah, but it still, you now, helps support the overall of what we're trying to accomplish. As I said, this was the best, you known, month we had. When you look at it the way we do, like measuring by the hour, by the day, September was the second best month we've had. So those were encouraging signs. Right. So I think there's still underlying opportunity out there for us. Like I know there is. OK. All we did was sort of bottom out. We were really flat, really were flat over a few months. I mean, last year, end of this year, it was really flat. But we saw some increased, you know, demand in August and September. I'm not really going to put a number on October yet. We've got a big week here to get it all figured out. But I feel good that it will be gradually sustainable, right? And at the same time, you knows, we're going to continue to look for M&A. I'll tell you that right now. I'm on nothing big, but maybe you put a lot of singles together out there. But back to your real question, the mix was one thing. It's there. Cost pressures put pressure on margins, right? Because everybody's out there in the marketplace going after it. So it's a lot. It's a whole lot of things, right. But guess what? We performed. In my mind, we've performed as well as anybody in this environment that we were in, still on the parts and service side. I'm stripping the truck side all the way from the parts to the service side, so we've been performing and continuing to perform. We are looking to do that a little maybe next year, probably get some growth tailwinds in that. The last couple of years, it's been really difficult, but we are feeling good about the opportunity to grow our parts and service business sequentially better than we have the last couple years. I'm not talking about just straight-up growth. I'm talking about good, solid, gradual. We've got to find what gradual is. Hopefully, in the mid-singles, it would be nice is what we would like to see next year from a same-store perspective, and I'd be okay with that. in fact it's going like that that direction i'm not looking for double digit parts and service same story rope i am looking for you know mid singles maybe upper we'll have to see depend on the territory which area it is the country but overall i feel good about underlying demand across the board going into next year not where we're at now where we where we are at in parts and service feels decent truck may have a little bubble it's gonna be really good and be good in in Q4 and Q1, and we'll sort through these uncertainties, and I feel good about the whole year as a whole, but it won't be a straight line. It never is a straight line. All right. I appreciate the perspective. Thanks, Tim. You got it. Thank you. This concludes the question and answer session. I would now like to turn it back to Steve Rush for closing remarks. Well, folks, I appreciate your participation and your listening. This is the longest gap I have between calls because it will be middle of February before we talk again. So in closing, I'd like to wish everybody a happy Thanksgiving, a merry Christmas, a happy New Year, and just overall a very happy holidays this year. So enjoy your families, and we will look forward to talking to everybody in mid-February. Thank you very much. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.