Rush Enterprises(US:RUSHA)2025-05-09 20:22Revenue Performance - Total revenues decreased by $21.2 million, or 1.1%, in Q1 2025 compared to Q1 2024, primarily due to decreased Aftermarket Products and Services revenue[68] - Aftermarket Products and Services revenues totaled $619.1 million in Q1 2025, down 4.6% from Q1 2024, attributed to weak demand and fewer working days[69] - New and used commercial vehicle sales increased by $7.5 million, or 0.7%, in Q1 2025 compared to Q1 2024, driven by a favorable product mix[70] - New Class 8 truck sales were 3,222 units in Q1 2025, a 7.8% decrease from 3,494 units in Q1 2024, influenced by economic uncertainty and high interest rates[71] - New Class 4 through 7 medium-duty commercial vehicle sales were 3,329 units in Q1 2025, a slight decrease of 0.1% compared to Q1 2024[72] - Light-duty vehicle sales increased by 3.1% to 470 units in Q1 2025, compared to 456 units in Q1 2024[73] - Used commercial vehicle sales decreased by 2.7% to 1,769 units in Q1 2025, down from 1,818 units in Q1 2024[73] Profitability and Expenses - Gross profit decreased by $32.1 million, or 8.2%, in Q1 2025, with gross profit as a percentage of sales falling to 19.3% from 20.8%[76] - Gross profit from Aftermarket Products and Services dropped to $221.3 million in Q1 2025, down from $236.9 million in Q1 2024[77] - SG&A expenses decreased by $14.9 million, or 5.6%, in Q1 2025, with SG&A as a percentage of total revenues at 13.4%[83] - Net interest expense decreased by $5.1 million, or 28.4%, in Q1 2025 due to lower inventory levels and interest rates[84] - Income before income taxes fell by $14.2 million, or 15.4%, in Q1 2025 compared to Q1 2024[85] Cash Flow and Financing - Cash provided by operating activities was $154.2 million in Q1 2025, a significant recovery from a cash outflow of $155.1 million in Q1 2024[97] - In Q1 2025, net cash used in financing activities was $56.4 million, with inflows of $288.4 million from long-term debt borrowings and $6.2 million from equity compensation shares issuance, offset by outflows totaling $293.2 million for principal repayments and $29.6 million for common stock repurchases[102] Order Backlog and Market Outlook - As of March 31, 2025, the backlog of commercial vehicle orders was approximately $1,401.3 million, down from $2,047.1 million on March 31, 2024, indicating a significant decrease in confirmed orders[112] - The company expects to fill most of its backlog orders during 2025, assuming manufacturers can meet production schedules[112] - U.S. market share for new Class 8 truck sales is expected to range between 5.4% and 5.9% in 2025, translating to approximately 11,500 to 12,500 units sold[58] - New U.S. Class 4 through 7 retail commercial vehicle sales are forecasted to decrease by 8.5% in 2025 compared to 2024[59] - Lease and rental revenue is projected to increase by approximately 3.0% in 2025 compared to 2024[60] - Aftermarket Products and Services revenues are expected to be flat to down 2% in 2025 compared to 2024[61] Regulatory Environment and Market Risks - The EPA 2027 Low NOx rule will require commercial vehicle engines to emit significantly less NOx starting in model year 2027, increasing the useful life of vehicles and extending warranty terms[122] - The GHG-3 rule mandates an increasing percentage of "zero-emission" vehicles from 2027 to 2032, likely reducing the production of diesel internal combustion engines[122] - CARB's Advanced Clean Trucks rule requires a certain percentage of commercial vehicles sold in California to be "zero-emission," with a goal of 100% zero-emission vehicles by 2050 and 30% by 2030[123] - Multiple lawsuits are pending challenging CARB's rules and the GHG-3 rule, which may impact regulatory compliance and operational costs[122] - The company cannot predict the potential adverse impacts of new laws and regulations on its business, financial condition, and results of operations[123] Debt and Credit Agreements - As of March 31, 2025, the company had outstanding floor plan borrowings and lease and rental fleet borrowings totaling $1,329.0 million[125] - On March 31, 2025, approximately $142.4 million was outstanding under the WF Credit Agreement, which allows for up to $175.0 million in revolving credit loans for capital expenditures[104] - The PLC Agreement provides for up to $500.0 million in revolving credit loans, with $220.0 million required as a minimum balance, and $220.0 million was outstanding as of March 31, 2025[105] - The PFC Floor Plan Credit Agreement has an aggregate loan commitment of $800.0 million, with approximately $480.0 million outstanding as of March 31, 2025[108] - The BMO Floor Plan Credit Agreement was amended to reduce the loan commitment from $1.0 billion to $675.0 million, with approximately $368.1 million outstanding as of March 31, 2025[109] - The RTC Canada Revolving Credit Agreement allows for up to $120.0 million CAD in loans, with approximately $59.4 million CAD outstanding as of March 31, 2025[106] - The RTC Canada Floor Plan Credit Agreement has a credit limit of $116.7 million CAD, with approximately $85.0 million CAD outstanding as of March 31, 2025[111] - A 100 basis point change in the prime rate, SOFR, or CORRA could result in an annual interest expense change of approximately $13.3 million[125] Market Conditions and Economic Impact - The business is subject to cyclical variations based on economic conditions, with U.S. retail sales of new Class 8 commercial vehicles ranging from approximately 197,000 to 281,440 units over the last ten years[114] - Seventeen U.S. states and the District of Columbia have committed to advance the market for electric Class 3 through 8 commercial vehicles, aligning with CARB's emissions regulations[123] - The company is exposed to market risks related to interest rates from various credit agreements, including the PFC Floor Plan Credit Agreement and the BMO Floor Plan Credit Agreement[125] - CARB has agreed to align its HD Omnibus rule with the EPA 2027 Low NOx rule, modifying certain provisions of its existing regulations[123]