PACCAR INC — Call Transcript 2026

Good morning, welcome to PACCAR's first quarter 2026 earnings conference call. All lines will be in a listen-only mode until the question-and-answer session. Today's call is being recorded. If anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead. Good morning and welcome everyone. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Kevin Baney, President, and Brice Poplawski, Senior Vice President and Chief Financial Officer. As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the investor relations page of PACCAR. I would now like to introduce Preston Feight. Hey, thanks Ken. Good morning everyone. In the first quarter, PACCAR's outstanding employees did an excellent job providing our customers with the highest quality trucks and transportation solutions in the industry. I really appreciate their hard work, their high performance and dedication as we increase build rates in our factories all around the world. PACCAR achieved revenues of $6.8 billion and net income of $605 million in the first quarter. These results were generated by strong PACCAR Parts and Financial Services results, as well as solid growth in the truck businesses. PACCAR Parts achieved quarterly revenues of $1.7 billion and quarterly pre-tax income of $402 million. PACCAR Financial had a strong quarter, achieving pre-tax income of $116 million. Looking at this year's U.S. and Canadian truck market, we estimate it to be in a range of 230,000-270,000 units. The market is strengthening as driver and fleet capacity becomes limited and customers begin to realize higher freight rates. This is somewhat moderated by fuel and other operating cost volatility. In the first quarter, Kenworth launched a new C580 heavy-duty vocational truck. This large multi-axle model was introduced at the CONEXPO trade show and is a unique super heavy-duty truck used in severe service applications around the world. We project the 2026 European above 16 ton market size to be in a range of 280,000-320,000. DAF's premium aerodynamic trucks provide customers with the latest technology and best operating efficiency. As mentioned on the January earnings call, the DAF XF and XD electric vehicles won the International Truck of the Year 2026 honor. In the first quarter, DAF extended its EV leadership by introducing new flagship XG and XG+ Electric vehicles. In addition, the XF Electric earned another award, the 2026 Eco-Friendly Truck of the Year in Spain. This year's South American above 16 ton market, where DAF trucks are desired by customers for their durability and advanced technology, is expected to be in a range of 100,000-110,000 vehicles. In the first quarter, PACCAR delivered 33,100 trucks, and in the second quarter will deliver an estimated 37,000-38,000 vehicles. PACCAR's truck, parts and other gross margins increased from 12%-13.1% in the first quarter due to improved truck segment performance. Second quarter margins are forecast to expand to around 13.5% as global production volumes increase. We anticipate continued performance improvements in the second half of the year as our customers benefit from our local for local manufacturing strategy, experience better operating conditions and purchase trucks in front of the coming 2027's emissions change. PACCAR's exceptional range of trucks, compelling parts business, industry-leading financial services and advanced technology strategy position the company well for an excellent future. Kevin will now provide an update on PACCAR Parts, financial services and other business highlights. Kevin? Thanks, Preston. PACCAR Parts achieved first quarter revenues of $1.7 billion and profits of $402 million. Gross margins were 29.6%. We estimate parts sales to grow by about 3% in the second quarter and be in the range of 3%-6% for the full year. PACCAR Parts has 21 parts distribution centers worldwide and has plans to expand its global distribution network in TRP stores. As mentioned in our recent Analyst Day, we continue to see great opportunities for broad-based parts growth and look forward to realizing that opportunity in partnership with our outstanding dealer network. PACCAR Financial Services pre-tax income was a robust $116 million. The continued strong performance is a result of solid asset growth, improving margins and a used truck market that is beginning to strengthen. This year, we're planning capital investments in the range of $725 million-$775 million and R&D expenses in the range of $450 million-$500 million as we continue to invest in key technology and innovation projects. These include advanced flexible manufacturing technologies, next generation powertrains, PACCAR's autonomous vehicle platform, and integrated connected vehicle services. We are excited for the growth PACCAR will experience in the coming quarters and years. We are now pleased to answer your questions. We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Feniger of Bank of America. Your line is open. Please go ahead. Thanks, everyone. Just on the parts guidance, maybe you guys can just unpack what did you see in the quarter? It feels like a slower start. I'd love if we could just start there of what you're seeing in the parts side, how we're looking so far through Q2, and how we should think about that in the back half with orders starting to pick up and be better than expected. Yeah, Michael, this is Kevin. I'll start with the parts side. With fleet consolidations and the higher fuel prices that's impacted, let's say, operating cost volatility, that's resulted in the parts market remaining soft. As customers start to get healthy, we'll talk a little bit more about the truck market side. As customers start to get healthy, we'll see the parts market get healthier with that as well. Just for the full year guidance for the 3%-6%, we see that accelerating through the rest of the year. Just on my last question, just on the gross margin, 13.5%, the pickup versus 13.1% in Q1, should we still think that gross margins sequentially walk up through the year as build rates recover? Is there a pricing expectation that that could also get better as well, given your comments that the used markets continue to strengthen? Just kind of curious how we should think about as you build through the year and what number we might be exiting the year as we're starting to see some strength in freight rates, even excluding fuel right now. Thank you. Hey, Michael. Thanks for the question. This is Preston. It's good to talk to you. You know, I think you talked about a few things in there that we're seeing, is we do see the increasing volumes. I'm really pleased with how the factories have been able to, again, create this local for local manufacturing capability in America. We see the volumes increasing, as we said, to 37,000-38,000 in the second quarter. That's on the basis of build rates that we've already put in place. Teams have done a really good job of that, and we see some of that margin growth coming from that volume. You know, partially offset a little bit by the price of energy, steel, aluminum, other raw material pricing in there, so there is that. I'm not quite sure customers have seen the full effect of tariffs yet. We feel really good about the cadence throughout the year as the market and our customers get healthy, and we see accelerating sequentially. Okay, Miriam, let's go to the next question. Your next question comes from the line of Jerry Revich of Wells Fargo. Your line is open. Please go ahead. Yes. Hi, good morning, everyone. Hey, Jerry. I'm wondering if we could. Hey, Jerry. Hi. I'm wondering if we could just talk about the really strong profit per truck that you folks delivered in the quarter. With lower parts contribution, you folks still exceeded the guidance ranges. It looks like, you know, your profit per truck was up to about $5,300 from $2,900 last quarter. Can we just unpack that, how much of that was better cost execution versus makes and any other moving pieces as we think about the profile heading into the rest of the year? Jerry, thanks for the comments. I appreciate them. They're nice and well stated. We did have price cost advantage in the quarter sequentially. We saw ourselves up, you know, over 1% in price cost, which is good. I think the teams are doing a really good job of focusing on the market we're in, so being price careful to see if we can make sure that we get our percentage of the market. In fact, we saw that in terms of our percentage of market build. In the first quarter, we built 31.8% of the market, which is very favorable and a good position to be in. We're balancing that growth with price cost favorability. Super. As we look at the backlog, how much more favorable is price cost based on what's in backlog versus what we saw in the first quarter? We think we'll have favorability, as we look forward into the second quarter. We're looking at our volumes going up appreciably. We're really full through the second quarter, and we have good visibility into the third and the fourth quarter. Okay. Super. Just one last one just to calibrate expectations around orders over the balance of the year. We're hearing that there's just limited number of build slots available that might hamper orders over the next couple of quarters versus underlying demand. Is that the case for your business? You know, what proportion of your slots are already spoken for for the next three quarters? Yeah, like I said, we're full on Q2. We're majority full in Q3, Q4. Not sure I recognize the commentary about people not having slots. That sounds more like a marketing scheme. Fair enough. Thank you. Your next question comes from the line of Tami Zakaria of JPMorgan. Your line is open. Please go ahead. Hey. Good morning. Thank you so much. My first question is on the simplified metal tariffs that went into effect in early April. Does that change your view on what would be the tariff impact, especially for aftermarket parts, versus the last time you spoke, or is it basically does it not change the tariff headwind that you expected? Hey, Tami. It's good to hear from you. It doesn't really have a lot of impact for us because of the truck-specific Section 232 has specific offsets, and it applies mostly to those materials. There's some moderate impact, but not significant. Same on the parts side, Tami. Understood. Understood. That's helpful. Just following up on what Jerry was asking, maybe I wanted to ask it in a different way. Based on third-party data, orders have been very strong year to date. You kept your U.S.-Canada outlook unchanged. Does this outlook include the year to date strength in orders? Meaning do you expect orders to moderate as we go through the year and as we get close to the NOx timeline, or is your view shaped by supply chain rather than demand? I think our view is shaped by the fact that the first quarter really didn't have a high cadence to it. If the first quarter ran at something around or a little under 200,000, then in order for it to come to the midpoint at 250,000, there's gonna have to be already a rapid acceleration. We have a great supply base, but they also need to be able to spin up their operations. The rate of increase quarter-over-quarter is where it probably informs the total market size. Understood. Thank you. You're welcome. Have a good day. Your next question comes from the line of Rob Wertheimer of Melius. Your line is open. Please go ahead. Thanks. Is there any visible impact of the war in the Middle East on confidence or demand or orders in Europe? You know, what we've seen is I think those are really good words you used, confidence and demand, Rob. I would say that confidence, yeah, I think people are paying attention to and trying to discern what it might mean in the general economy, of course. I would say from a demand standpoint, we've seen less impact. We've seen continued good order intake throughout the last couple of months, so less of a show there. Perfect. Thank you. If I could just ask, I mean, I think we chatted about this once, but the rise of electric trucks in China has been very sharp and maybe for geopolitical reasons. Could you talk about your own experience, and do you see strong demand from customers? Is there a crossover on total cost of ownership yet on some, you know, size classes, models, whatever, and, you know, how do you see that shape at present? Thank you. I'll stop there. Yeah. Well, Kevin, why don't you share some thoughts? Rob, you mentioned Europe, you know, the geopolitical has had an impact on the fuel prices and the cost of diesel is a bigger percent of the operating cost for customers in Europe. There's been a lot more discussion about battery electric trucks in Europe, and as we said, you know, DAF just won International Truck of the Year with the DAF XF and XD Electric. They just expanded their product range, in a really good position to address, you know, the growing customer questions and demand about battery electric trucks in Europe, and we're well-positioned against the competition. We've had a lot of competitors over time, I think we're really well-positioned with a great product line. I would say, Kevin and I had a chance to drive that XD Truck of the Year. It's amazing. It's just a really wonderful truck to be in. It's gonna be great for our customers, and it just launched in the recent months. If you look at the U.S. market, it might inform a little bit differently. I think without subsidies, then doing widespread adoption is probably less likely. There can be markets where it makes sense. Certainly in urban environments, there could be places where EVs make sense. We just launched a couple new medium-duty models for Kenworth and Peterbilt. We have those regional delivery EVs, which is where the market makes the most sense in America. Thank you. You bet. Your next question comes from the line of David Raso of Evercore ISI. Your line is open. Please go ahead. Hi. Thank you. The question relates to trying to understand your operating leverage in the truck business particularly. It looks like you can back into the gross margin for truck. Must have been around, you know, 6.9%, something like that in the first quarter. Sequentially, the truck revenues went up $11 million, but your gross profit went up $73 million. I am just making sure we understand, was there anything in the first quarter about, you know, reversal of old tariffs that you could take the benefit with IEEPA gone? I know we already had Section 232 already in, just making sure that's a clean. You know, that kind of strength in gross profit growth on only $11 million of revenue. I mean, I appreciate U.S.-Canada as a percentage of the shipments was a lot bigger this quarter than last quarter, so maybe that's part of it. Can you walk us through that gross margin improvement in truck on really no revenue increase? Yeah. David, you always do such a good job with your numbers, and you continue to do that, is you kind of get it right, is that we had somewhere above 7% for our truck margin. That came largely because the teams did a really good job selling these best-in-class products. The leverage we got off of the volume helped us as well. The price-cost advantages contributed to that. Brice, anything you'd add to that? Yeah. We also had, I'll call it favorable product mix, selling more of the Kenworth and Peterbilt brand at the year-end. They're more in lower because of the holiday shutdown season. Of course, DAF at the end of the year usually has a few units that they're getting done on their fleets that they hold in inventory. A little bit of a favorable mix effect on where we're selling the trucks as well helped us. We didn't record any increase for IEEPA, related to IEEPA. Summary of all that, David, to you, is very clean quarter. Nothing to put or take out of it. Yeah. That then begs the question for the next quarter where your truck revenue could be up, you know, call it $600 million. You know, rough numbers. You would think then the gross margin impact would be a little more significant than going up only 40 basis points at the company level. I apologize, I think maybe earlier you mentioned parts gross margins for 2Q. I don't think you called that anything particularly negative for, but maybe I didn't hear it correctly. Again, I'm just trying to understand that impressive performance 4Q to 1Q, but then 1Q to 2Q seems a lot more muted despite this is the quarter you get a bigger revenue move. Let's see what the quarter is. We kind of gave you the 13.5% as our midpoint guidance for our margin look. We do see the volume being a good thing. I did mention earlier in the call, right, that our build percentage has increased in the market in North America, so we're at 31.8% of a build percentage. I also see that pricing remains competitive as our customers are just beginning to experience acceleration in their end markets. There's a competitive price point out there in the market that's contributing also. Those are kind of the key factors that inform the second quarter. Yeah. David, one other comment probably worth making. We guided 3% growth in parts. Obviously, the truck volume would be much greater than 3% going up by 7,000 trucks, 6,000-7,000 trucks. You have a negative, if you wanna call it, price mix effect that also dampens the total margin percent. No, I appreciate that. Okay, thank you so much. Yep. Have a great day, David. Your next question comes from the line of Chad Dillard of Bernstein. Your line is open. Please go ahead. Hey, good morning, guys. Good morning. As you think about the pre-buy, likely to hit later this year, what are your plans for the number of shifts or build slots? Maybe you can compare it to, like, where you are today or on a year-on-year basis. I guess, like, what I'm trying to get at is, like, how quickly could you ramp that up versus where you are today if you got a little bit more visibility into, you know, the durability of demand? You know, we have great operations teams. I think they've demonstrated that not just in the past year, but over the decades, and they continue to be able to move up quickly. I think it's more about what the supply base and order board and how quick they have visibility to it. It's about a hiring cadence across the industry that will probably inform how quick it can go up. I feel very confident in our team's ability to add the people and the capacity we need to support the market in any market size. Got it. Can you talk about how industry pricing behavior has changed versus the start of the year? Are some of the non-domestic producers starting to price for tariffs? Well, I think you'd have to ask them the question of how they're thinking about their pricing scheme. They're better informed on that than we are. We do see a competitive market out there right now. We do see the fact that our customers, as I said, are just starting to see improvement. Raw material pricing is high, so there is still those things that are putting into it. I think we're at the beginning of what feels like an acceleration, considering that the first quarter build was just a 200,000, just under 200,000, and last year was low. If you think about the average market being 267,000 units, there's gonna be some replacement demand and there's gonna be some strengthening financial performance, and those are both gonna be good for us in the near and midterm for the business. Great. Thanks for passing it on. You bet. Your next question comes from the line of Steve Volkmann of Jefferies. Your line is open. Please go ahead. Steve, we are not able to hear you. I wonder if you're on mute. Yes, I was. I'm just figuring out this phone thing after a few decades of use. Sorry about that. I'll start again. You guys are good at managing supply chains, probably the best at that. We have a big ramp, I guess, in the second half this year. We're starting to hear some early signs that there might be some constraints in things like memory chips and sometimes some people are even worried about aluminum supply. I'm just curious if there's anything on your radar that you're watching that could actually constrain us in this kind of second half build that we're all expecting. Yeah, great question, Steve. Thanks for jumping back in and taking the time with it. I think that the thing that informs right now in supply chain is really how much energy-related exposure people have to the supply of materials and what that might do to their cost is one factor. The second, as I said previously, is the hiring cadence of people and getting them trained up to speed in a sustainable manner for our suppliers to be ready for the ramp up and build. Got it. Okay, so nothing specific yet, standing out. Maybe, can you just comment, Preston, about the mix that you're seeing relative to vocational versus over the road, I guess maybe in terms of how the second half is gonna ramp up? You know, it's been pretty uniform. We've seen over the road companies getting their recovery now with spot rates up double-digit, maybe even up to 20%. We've seen contract rates improving, that's helping our truckload carriers. The vocational market continues to be solid as well as the LTL. We're seeing orders coming in from kind of all sides as people want to make sure that they have their fleet in the right spot for the year and next year. Great. Thank you. You bet. Have a great day. Your next question comes from the line of Kyle Menges of Citigroup. Your line is open. Please go ahead. Thank you. I just wanted to go back to some of the comments you made on gross margin and it sounds like you're expecting improvement really quarter-over-quarter as we move throughout the rest of the year. Just I understand volume's a big piece of that, but how are you thinking about pricing momentum, you know, and what are you seeing as we get to the second quarter and into the second half? How are you thinking about price cost as well for the rest of the year? Yeah. Well, I think the year is a long way, is what we typically think about for this discussion is really the next quarter, and I would say that we expect to have a price cost favorability in the quarter. I think how that gets informed is, again, based upon what the market asks for and how raw material pricing finishes up for us. We'll see. We'll watch carefully how that raw material pricing moves through the year. Obviously, there's some volatility in the market in general, and that'll have a consequence, but we do expect to see favorability throughout the year. Helpful. We are getting pretty close now to the new EPA mandate. Just curious how the new engine's performing out in the market and if you guys think that it'll be ready in time. Thank you. Yeah, Kyle, thanks for that question. I think, you know, PACCAR's team does a great job of having the right engines for our customers, and we are really pleased with the engine development programs that are ongoing right now, both for us, and we're watching how it's going with Cummins. Obviously, he was a great partner for us. We look forward to seeing how the implementation rolls through for everyone. I feel great confidence in our teams and what we'll deliver. Thank you. You bet. Your next question comes from the line of Jamie Cook of Truist Securities. Your line is open. Please go ahead. Hi. Good morning. Congratulations on a nice quarter. I guess my first question, you know, Preston, if you could talk to as we think, you know, through the second half of the year and I guess throughout the cycle, what the setup for PACCAR is in terms of incremental margins. I mean, last cycle you delivered above average incremental margins with a lot of the new product launches that came into the market. This cycle we have, you know, the Section 232 benefit, you know, market share opportunity. I'm just wondering how you'll balance the two. Should we think of the normalized incremental margins of like 15%-20% or above that? I guess my second question, can you just talk to sort of, you know, channel inventory where PACCAR is sitting versus its peers and whether its peers have made, you know, any progress on destocking some of the, you know, inflated inventory in the channel? Thank you. Let's start with your inventory question, Jamie. I think if you look at our inventory, we feel like it's in very good shape. It's kind of around just under three months, two point eight months, and that compares to two point two months back in December. We've been able to get at least a little bit of inventory back into the market, which feels healthy. I think the industry overall has a higher percentage of inventory, I think over four months, that's kind of the lay of the land from an inventory standpoint. PACCAR feels like we're in really good shape there. Dealers have been able to get a few trucks on the lot and get ready to go. Obviously, inventory for us is affected by our higher percent vocational share, people getting bodies put on trucks as an influencing factor there. If you just think back to your first question was on margin and how we see that developing. We see margin being favorable, and we see that our build percentage at 31.8% in the first quarter is good for our performance and good for our customers to be able to get trucks for us. Being full in the second quarter means that we feel good about the position we're in. Thank you. You bet. Your next question comes from the line of Steven Fisher of UBS. Your line is open. Please go ahead. Thanks. Good morning. I just wanted to clarify your answer on the parts acceleration that you expect in the second half. You mentioned about clients just starting to get healthier, but I think you also mentioned about fuel having an impact in Q1. I was hoping you could just give us a little more color on what you're expecting that's going to drive the acceleration. Do you still need to see freight rates continue to rise? Do you need to see fuel costs falling? Is it just more about getting more trucks on the road? Do you need freight shipments to be picking up? Just curious kind of what will drive that acceleration. Yeah, you said a lot there, it's a little bit of all of that, right? As, you know, we see the increase of the truck orders, as more trucks are on the road and we see our customers' business improve, we see that on the parts side. I mentioned earlier the increased fuel and the operating cost volatility because customers still focus on required maintenance. They have delayed their optional parts purchases. We see, you know, both the volume as well as the mix improving, that leads to the acceleration through the year. We see as the truck market improves, we see the parts market follow that. Okay. That's very helpful. Then I guess to what extent have you had any discussions with your customers about the first part of 2027 planning? Really just trying to make sure I understand how you're characterizing the expected pickup in the second half of this year, whether it's really a, kind of a pre-buy or just a buy. Yeah, I know it's maybe a little bit early to talk about 2027, but I guess a pre-buy implies a pull forward. I guess, and it seems like it could be a relevant part of the discussion right now. Just curious how you would frame that. I like the way you frame it, Steve. I think that pre-buy versus buy, I think there's a little bit of both going on, honestly. I think that there's some buy going on because of the demand that the customers are getting healthy and want their fleet age to come back to where they want it. That's a bit of the buy side. I think on the pre-buy side, obviously, there's a cost impact to a 35 milligram engine, and I think they're sensitive to that. I think there's some of the people that are looking at putting orders in front of it. Both of those are influencing the year. Looking into 2027, I think we'll see how the year fills out and what the full year retail looks like and build looks like, and that'll probably give some information about what 2027 will look like. Yeah, just to add is, you know, the combo of the buy versus pre-buy is the second half of the year is pretty well balanced in terms of the fill between the third and fourth quarter. If it was more weighted to a pre-buy, we'd see that demand towards the higher in the end of the year. We see a really nice balance in both third and fourth quarter. That's really helpful. Thank you. Your next question comes from the line of Angel Castillo of Morgan Stanley. Your line is open. Please go ahead. Hi, good morning, and thanks for taking my question. Maybe I've missed this, wanted to go back to the EPA dynamic, I guess. Has EPA actually formalized the low-NOx emissions rule that it communicated, I guess, back at the end of last year? Does that have any bearing on the ability of the industry to ultimately launch and move forward with these engines that meet the kind of latest low-NOx standard? Likewise, I guess, any implications on the customer's ability, I guess, to move forward with any, you know, orders or potential pre-buy? Just curious if that's where we're at on that, and if we don't have any formalized kind of releases there. I guess if you have any insights as to when we might be able to get that. I think the formalized release that they've made, Angel, is that it will be a 35 milligram standard come 2027. That's the law, and there's not any kind of modification expected to that in terms of it being a 35 milligram standard for new engines in 2027. The parameters around that, I think, are things that they will have to contemplate or are contemplating based on customer and market feedback. Got it. I wanted to go back to maybe the margin discussion. Could you, I guess, just give us the shipments number that you or deliveries guidance you provided for 2Q? Could you give that by region, specifically how much you expect U.S. and Canada versus Europe? If we could kind of revisit the 13.5% gross profit margins. I get you mentioned, I think, a little bit more uplift from trucks maybe is a little bit of a mix drag on the overall and why you don't see that kind of incremental step change in 2Q versus 1Q. I guess it wasn't entirely clear to me if there's any other drags beyond that keep it from being more of a material step change, quarter-over-quarter just given the seasonality. Yeah. Just take the question in saying that we expect in Q2 volumes are up around the world, pretty much in every market. We've had build rate increases everywhere, that's what's driving the total increase in volume. I think we've kind of spent quite a bit of time already describing that 13.5% being volume-based improvement as well as slight price cost with still pressure on pricing in the market as tariffs maybe haven't been fully rolled through. Yet also PACCAR performing really well in terms of getting share of build up. Understood. Thank you. You bet. Your next question comes from the line of Lewis Merrick of BNP Paribas. Your line is open. Please go ahead. Good morning, everyone. Thank you for taking my questions. We've heard about customers potentially pushing back their delivery dates for trucks. I'm just wondering, are you seeing any evidence of this occurring? No, I don't recognize that in our backlog. We have not seen any of that. Okay. No. Crystal clear. Just quickly on the tariffs topic, could we get your latest understanding on when we could expect the previously announced 3.75% in SRP credit to be applied? Well, it's fairly well-defined for the truck side of the Section 232, and so now it's about when we can apply for them and get them back, and we would expect that to be in the not distant future. All right. Thank you very much. I'll turn it over. You bet. Have a great day. Your next question comes from the line of Scott Group of Wolfe Research. Your line is open. Please, go ahead. Hey, thanks. Good morning. On that pre-buy versus buy sort of discussion from earlier, do you have a sense on the buy sort of part of it, how much of that is sort of growth, fleet plans, fleet growth plans, or just sort of pent-up replacement? To the extent that there's just more replacement, do you think as we start replacing more after aging the fleets, does that naturally pressure some of the parts growth? I think that what's going on is that, you kind of said the words. In the buy side of it there's been a tough little run for some of our customers, now they have the opportunity, hopefully, where they'll be, we'll see better financial performance, which is enabling them to allocate capital to trucks. You know, keeping their fleet at a reasonable age is good for them, it's also good for them from an operating cost standpoint. When they're buying the Kenworth, Peterbilt, or DAF trucks, they're getting a highly efficient truck into the fleet, they're taking out something that has lower fuel economy from past now is the best fuel economy possible for them, it's a good operating performance benefit. It's kind of a tie of their financial performance and then the truck replacement cycle that they're trying to keep up with. Okay. Maybe just lastly, you know, orders have doubled year to date versus what they were doing a year ago, and you're still talking about a competitive pricing environment. Why do you think we're not seeing a bigger, faster improvement in pricing? I think that the orders are sometimes around multi-year things, and there's some projections on orders, and I think orders isn't the cleanest thing to measure. I think it's probably a more clean measure to look at what's happening in the industry through build. If you look at build, that gives you a clean indicator of where things are. The cleanest way to look at is build and retail. If you build it, you'll retail it. Orders don't necessarily, for everyone, come through the same way. With our 31.8% of build in Q1, we feel good about the position, and we do still think that there are some orders left in the second half to be had. That makes sense. Thank you, guys. Great. Have a good day. Your next question comes from the line of Steve Volkmann of Jefferies. Your line is open. Please, go ahead. Thank you. I figured it out this time. Just a quick follow-up. I was gonna say, someone beat him, Steve. You beat cousin Steve. I wanted to head that off. Just a quick follow-up. I know you guys give sort of average prices in the 10-Q. I'm just curious if you might have those available for truck and parts. If not, I'll wait for the 10-Q. For the first quarter compared to the first quarter last year, you'll see price up 2%, and you'll see our cost unfortunately is up higher than that, so that made our margins down on the truck segment. Price on the parts side was up 6%. I think if you look at sequentially, you'd see price was roughly flat. Cost was down sequentially for truck more than 1%, and sequentially for parts, price was up 2% and cost was only up 1%. Super. Thank you so much. Sure. Your next question comes from the line of Tim Thein of Raymond James. Your line is open. Please, go ahead. Great. Thank you. Thank you. I'll just start. The first question is just on the customer mix within the backlog and how that may or may not be influencing the truck margins. I'm just thinking, Preston, on the on-highway side, at least in North America, you know, you've always skewed more towards the small and midsize fleets. You know, perhaps not as much today as you once did, you know, years ago. You know, that, presumably that some of the whips, and, or the fluctuations we've seen in diesel costs, can sometimes hit those smaller carriers a bit harder. I'm just curious if that's not the only factor, but, essentially the punchline is, you know, is there a mix here within how you're filling the backlog between some of the, those large, you know, mega fleets versus your historical kind of bread and butter small fleet? Hey, Tim. I think it's an interesting concept. It gives me a little thought, but I don't really think that it's significant in terms of that. I think we've kind of got a broad mix of customers that are buying trucks right now. I agree with your. Yeah Your thought that the fuel surcharges are maybe more cash impactful to the smaller customers. While they affect everyone, they may be more sensitive to it. I don't think it's really informing what's going on. I think it's just that we're seeing the beginning of a market recovery. We're seeing things starting to improve for most all of our customers. They're starting to get better rates. They're starting to buy more trucks. I think it positions PACCAR well for the next coming period of time, right. For the next quarter and beyond, for the year and beyond, for a strengthening market and a strengthening performance. Okay. Thanks, Preston. Maybe another one, relevant for, you know, this deep in the queue, but it relates to the lease and rental customers. You know, sometimes we think about them being, they can be a bit of like the canary in the coal mine when truckload markets inflect, you start to see a pull on lease and rental fleets. You know, I'm just looking at the PacLease fleet, I guess similar to what you would see in some of the big publicly traded lease rental guys, has been declining quite a bit over the past few years. I'm just curious if you're starting to maybe see any change in terms of utilization or, you know, aspirations to maybe reverse that and start expanding the PacLease fleet. Just, anyways, just kind of what, if any, clues you're picking up from that cohort of your customer base? Yeah. Good. You know, we're seeing a little bit of increase in the utilization. Also another indicator would be the used truck market, and we're seeing price utilization and volume demand starting to strengthen as well. I think between the beginnings of the increase on both of those factors is just another indication that we're starting to see the market improve. All right. Good stuff. Thank you. There are no other questions in the queue at this time. Are there any additional remarks from the company? We'd like to thank everyone for joining the call, and thank you, Miriam. Ladies and gentlemen, this concludes PACCAR's earnings call. Thank you for participating. You may now disconnect.

Speaker 12: Good morning, welcome to PACCAR's first quarter 2026 earnings conference call. All lines will be in a listen-only mode until the question-and-answer session. Today's call is being recorded. If anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead. Good morning, welcome to PACCAR's first quarter 2026 earnings conference call. good morning welcome to paccar's first quarter 2026 earnings conference call All lines will be in a listen-only mode until the question- and- answer session. all lines will be in a listen-only mode until the question- and- answer session Today's call is being recorded. today's call is being recorded If anyone has an objection, they should disconnect at this time. if anyone has an objection they should disconnect at this time I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. i would now like to introduce mr ken hastings paccar's director of investor relations Mr. Hastings, please go ahead. mr hastings please go ahead

Speaker 7: Good morning and welcome everyone. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Kevin Baney, President, and Brice Poplawski, Senior Vice President and Chief Financial Officer. As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the investor relations page of PACCAR. I would now like to introduce Preston Feight. Good morning and welcome everyone. good morning and welcome everyone My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Kevin Baney, President, and Brice Poplawski, Senior Vice President and Chief Financial Officer. my name is ken hastings paccar's director of investor relations and joining me this morning are preston feight chief executive officer kevin baney president and brice poplawski senior vice president and chief financial officer As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode. as with prior conference calls we ask that any members of the media on the line participate in a listen only mode Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results For additional information, please see our SEC filings at the investor relations page of PACCAR. for additional information please see our sec filings at the investor relations page of paccar I would now like to introduce Preston Feight. i would now like to introduce preston feight

Speaker 13: Hey, thanks Ken. Good morning everyone. In the first quarter, PACCAR's outstanding employees did an excellent job providing our customers with the highest quality trucks and transportation solutions in the industry. I really appreciate their hard work, their high performance and dedication as we increase build rates in our factories all around the world. PACCAR achieved revenues of $6.8 billion and net income of $605 million in the first quarter. These results were generated by strong PACCAR Parts and Financial Services results, as well as solid growth in the truck businesses. PACCAR Parts achieved quarterly revenues of $1.7 billion and quarterly pre-tax income of $402 million. PACCAR Financial had a strong quarter, achieving pre-tax income of $116 million. Hey, thanks Ken. hey thanks ken Good morning everyone. good morning everyone In the first quarter, PACCAR's outstanding employees did an excellent job providing our customers with the highest quality trucks and transportation solutions in the industry. in the first quarter paccar's outstanding employees did an excellent job providing our customers with the highest quality trucks and transportation solutions in the industry I really appreciate their hard work, their high performance and dedication as we increase build rates in our factories all around the world. i really appreciate their hard work their high performance and dedication as we increase build rates in our factories all around the world PACCAR achieved revenues of $6.8 billion and net income of $605 million in the first quarter. paccar achieved revenues of $6.8 billion and net income of $605 million in the first quarter These results were generated by strong PACCAR Parts and Financial Services results, as well as solid growth in the truck businesses. these results were generated by strong paccar parts and financial services results as well as solid growth in the truck businesses PACCAR Parts achieved quarterly revenues of $1.7 billion and quarterly pre-tax income of $402 million. paccar parts achieved quarterly revenues of $1.7 billion and quarterly pre-tax income of $402 million PACCAR Financial had a strong quarter, achieving pre-tax income of $116 million. paccar financial had a strong quarter achieving pre-tax income of $116 million Looking at this year's U.S. and Canadian truck market, we estimate it to be in a range of 230,000-270,000 units. The market is strengthening as driver and fleet capacity becomes limited and customers begin to realize higher freight rates. This is somewhat moderated by fuel and other operating cost volatility. In the first quarter, Kenworth launched a new C580 heavy-duty vocational truck. This large multi-axle model was introduced at the CONEXPO trade show and is a unique super heavy-duty truck used in severe service applications around the world. We project the 2026 European above 16 ton market size to be in a range of 280,000-320,000. DAF's premium aerodynamic trucks provide customers with the latest technology and best operating efficiency. Looking at this year's U.S. and Canadian truck market, we estimate it to be in a range of 230,000-270,000 units. looking at this year's u.s and canadian truck market we estimate it to be in a range of 230,000-270,000 units The market is strengthening as driver and fleet capacity becomes limited and customers begin to realize higher freight rates. the market is strengthening as driver and fleet capacity becomes limited and customers begin to realize higher freight rates This is somewhat moderated by fuel and other operating cost volatility. this is somewhat moderated by fuel and other operating cost volatility In the first quarter, Kenworth launched a new C580 heavy-duty vocational truck. in the first quarter kenworth launched a new c580 heavy-duty vocational truck This large multi-axle model was introduced at the CONEXPO trade show and is a unique super heavy-duty truck used in severe service applications around the world. this large multi-axle model was introduced at the conexpo trade show and is a unique super heavy-duty truck used in severe service applications around the world We project the 2026 European above 16 ton market size to be in a range of 280,000-320,000. we project the 2026 european above 16 ton market size to be in a range of 280,000-320,000 DAF's premium aerodynamic trucks provide customers with the latest technology and best operating efficiency. daf's premium aerodynamic trucks provide customers with the latest technology and best operating efficiency As mentioned on the January earnings call, the DAF XF and XD electric vehicles won the International Truck of the Year 2026 honor. In the first quarter, DAF extended its EV leadership by introducing new flagship XG and XG+ Electric vehicles. In addition, the XF Electric earned another award, the 2026 Eco-Friendly Truck of the Year in Spain. This year's South American above 16 ton market, where DAF trucks are desired by customers for their durability and advanced technology, is expected to be in a range of 100,000-110,000 vehicles. In the first quarter, PACCAR delivered 33,100 trucks, and in the second quarter will deliver an estimated 37,000-38,000 vehicles. PACCAR's truck, parts and other gross margins increased from 12%-13.1% in the first quarter due to improved truck segment performance. As mentioned on the January earnings call, the DAF XF and XD electric vehicles won the International Truck of the Year 2026 honor. as mentioned on the january earnings call the daf xf and xd electric vehicles won the international truck of the year 2026 honor In the first quarter, DAF extended its EV leadership by introducing new flagship XG and XG+ Electric vehicles. in the first quarter daf extended its ev leadership by introducing new flagship xg and xg+ electric vehicles In addition, the XF Electric earned another award, the 2026 Eco-Friendly Truck of the Year in Spain. in addition the xf electric earned another award the 2026 eco-friendly truck of the year in spain This year's South American above 16 ton market, where DAF trucks are desired by customers for their durability and advanced technology, is expected to be in a range of 100,000-110,000 vehicles. this year's south american above 16 ton market where daf trucks are desired by customers for their durability and advanced technology is expected to be in a range of 100,000-110,000 vehicles In the first quarter, PACCAR delivered 33,100 trucks, and in the second quarter will deliver an estimated 37,000-38,000 vehicles. in the first quarter paccar delivered 33,100 trucks and in the second quarter will deliver an estimated 37,000-38,000 vehicles PACCAR's truck, parts and other gross margins increased from 12%-13.1% in the first quarter due to improved truck segment performance. paccar's truck parts and other gross margins increased from 12%-13.1% in the first quarter due to improved truck segment performance Second quarter margins are forecast to expand to around 13.5% as global production volumes increase. We anticipate continued performance improvements in the second half of the year as our customers benefit from our local for local manufacturing strategy, experience better operating conditions and purchase trucks in front of the coming 2027's emissions change. PACCAR's exceptional range of trucks, compelling parts business, industry-leading financial services and advanced technology strategy position the company well for an excellent future. Kevin will now provide an update on PACCAR Parts, financial services and other business highlights. Kevin? Second quarter margins are forecast to expand to around 13.5% as global production volumes increase. second quarter margins are forecast to expand to around 13.5% as global production volumes increase We anticipate continued performance improvements in the second half of the year as our customers benefit from our local for local manufacturing strategy, experience better operating conditions and purchase trucks in front of the coming 2027's emissions change. we anticipate continued performance improvements in the second half of the year as our customers benefit from our local for local manufacturing strategy experience better operating conditions and purchase trucks in front of the coming 2027's emissions change PACCAR's exceptional range of trucks, compelling parts business, industry-leading financial services and advanced technology strategy position the company well for an excellent future. paccar's exceptional range of trucks compelling parts business industry-leading financial services and advanced technology strategy position the company well for an excellent future Kevin will now provide an update on PACCAR Parts, financial services and other business highlights. kevin will now provide an update on paccar parts financial services and other business highlights Kevin? kevin

Speaker 8: Thanks, Preston. PACCAR Parts achieved first quarter revenues of $1.7 billion and profits of $402 million. Gross margins were 29.6%. We estimate parts sales to grow by about 3% in the second quarter and be in the range of 3%-6% for the full year. PACCAR Parts has 21 parts distribution centers worldwide and has plans to expand its global distribution network in TRP stores. As mentioned in our recent Analyst Day, we continue to see great opportunities for broad-based parts growth and look forward to realizing that opportunity in partnership with our outstanding dealer network. PACCAR Financial Services pre-tax income was a robust $116 million. The continued strong performance is a result of solid asset growth, improving margins and a used truck market that is beginning to strengthen. Thanks, Preston. thanks preston PACCAR Parts achieved first quarter revenues of $1.7 billion and profits of $402 million. paccar parts achieved first quarter revenues of $1.7 billion and profits of $402 million Gross margins were 29.6%. gross margins were 29.6% We estimate parts sales to grow by about 3% in the second quarter and be in the range of 3%-6% for the full year. we estimate parts sales to grow by about 3% in the second quarter and be in the range of 3%-6% for the full year PACCAR Parts has 21 parts distribution centers worldwide and has plans to expand its global distribution network in TRP stores. paccar parts has 21 parts distribution centers worldwide and has plans to expand its global distribution network in trp stores As mentioned in our recent Analyst Day, we continue to see great opportunities for broad-based parts growth and look forward to realizing that opportunity in partnership with our outstanding dealer network. as mentioned in our recent analyst day we continue to see great opportunities for broad-based parts growth and look forward to realizing that opportunity in partnership with our outstanding dealer network PACCAR Financial Services pre-tax income was a robust $116 million. paccar financial services pre-tax income was a robust $116 million The continued strong performance is a result of solid asset growth, improving margins and a used truck market that is beginning to strengthen. the continued strong performance is a result of solid asset growth improving margins and a used truck market that is beginning to strengthen This year, we're planning capital investments in the range of $725 million-$775 million and R&D expenses in the range of $450 million-$500 million as we continue to invest in key technology and innovation projects. These include advanced flexible manufacturing technologies, next generation powertrains, PACCAR's autonomous vehicle platform, and integrated connected vehicle services. We are excited for the growth PACCAR will experience in the coming quarters and years. We are now pleased to answer your questions. This year, we're planning capital investments in the range of $725 million-$775 million and R&D expenses in the range of $450 million-$500 million as we continue to invest in key technology and innovation projects. this year we're planning capital investments in the range of $725 million-$775 million and r&d expenses in the range of $450 million-$500 million as we continue to invest in key technology and innovation projects These include advanced flexible manufacturing technologies, next generation powertrains, PACCAR's autonomous vehicle platform, and integrated connected vehicle services. these include advanced flexible manufacturing technologies next generation powertrains paccar's autonomous vehicle platform and integrated connected vehicle services We are excited for the growth PACCAR will experience in the coming quarters and years. we are excited for the growth paccar will experience in the coming quarters and years We are now pleased to answer your questions. we are now pleased to answer your questions

Speaker 12: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Feniger of Bank of America. Your line is open. Please go ahead. We will now begin the question- and- answer session. we will now begin the question- and- answer session If you would like to ask a question, please press star one to raise your hand. if you would like to ask a question please press star one to raise your hand To withdraw your question, press star one again. to withdraw your question press star one again We ask that you pick up your handset when asking a question to allow for optimum sound quality. we ask that you pick up your handset when asking a question to allow for optimum sound quality If you are muted locally, please remember to unmute your device. if you are muted locally please remember to unmute your device Please stand by while we compile the Q&A roster. please stand by while we compile the q&a roster Your first question comes from the line of Michael Feniger of Bank of America. your first question comes from the line of michael feniger of bank of america Your line is open. your line is open Please go ahead. please go ahead

Speaker 11: Thanks, everyone. Just on the parts guidance, maybe you guys can just unpack what did you see in the quarter? It feels like a slower start. I'd love if we could just start there of what you're seeing in the parts side, how we're looking so far through Q2, and how we should think about that in the back half with orders starting to pick up and be better than expected. Thanks, everyone. thanks everyone Just on the parts guidance, maybe you guys can just unpack what did you see in the quarter? just on the parts guidance maybe you guys can just unpack what did you see in the quarter It feels like a slower start. it feels like a slower start I'd love if we could just start there of what you're seeing in the parts side, how we're looking so far through Q2, and how we should think about that in the back half with orders starting to pick up and be better than expected. i'd love if we could just start there of what you're seeing in the parts side how we're looking so far through q2 and how we should think about that in the back half with orders starting to pick up and be better than expected

Speaker 8: Yeah, Michael, this is Kevin. I'll start with the parts side. With fleet consolidations and the higher fuel prices that's impacted, let's say, operating cost volatility, that's resulted in the parts market remaining soft. As customers start to get healthy, we'll talk a little bit more about the truck market side. As customers start to get healthy, we'll see the parts market get healthier with that as well. Just for the full year guidance for the 3%-6%, we see that accelerating through the rest of the year. Yeah, Michael, this is Kevin. yeah michael this is kevin I'll start with the parts side. i'll start with the parts side With fleet consolidations and the higher fuel prices that's impacted, let's say, operating cost volatility, that's resulted in the parts market remaining soft. with fleet consolidations and the higher fuel prices that's impacted let's say operating cost volatility that's resulted in the parts market remaining soft As customers start to get healthy, we'll talk a little bit more about the truck market side. as customers start to get healthy we'll talk a little bit more about the truck market side As customers start to get healthy, we'll see the parts market get healthier with that as well. as customers start to get healthy we'll see the parts market get healthier with that as well Just for the full year guidance for the 3%-6%, we see that accelerating through the rest of the year. just for the full year guidance for the 3%-6% we see that accelerating through the rest of the year

Speaker 11: Just on my last question, just on the gross margin, 13.5%, the pickup versus 13.1% in Q1, should we still think that gross margins sequentially walk up through the year as build rates recover? Is there a pricing expectation that that could also get better as well, given your comments that the used markets continue to strengthen? Just kind of curious how we should think about as you build through the year and what number we might be exiting the year as we're starting to see some strength in freight rates, even excluding fuel right now. Thank you. Just on my last question, just on the gross margin, 13.5%, the pickup versus 13.1% in Q1, should we still think that gross margins sequentially walk up through the year as build rates recover? just on my last question just on the gross margin 13.5% the pickup versus 13.1% in q1 should we still think that gross margins sequentially walk up through the year as build rates recover Is there a pricing expectation that that could also get better as well, given your comments that the used markets continue to strengthen? is there a pricing expectation that that could also get better as well given your comments that the used markets continue to strengthen Just kind of curious how we should think about as you build through the year and what number we might be exiting the year as we're starting to see some strength in freight rates, even excluding fuel right now. just kind of curious how we should think about as you build through the year and what number we might be exiting the year as we're starting to see some strength in freight rates even excluding fuel right now Thank you. thank you

Speaker 13: Hey, Michael. Thanks for the question. This is Preston. It's good to talk to you. You know, I think you talked about a few things in there that we're seeing, is we do see the increasing volumes. I'm really pleased with how the factories have been able to, again, create this local for local manufacturing capability in America. We see the volumes increasing, as we said, to 37,000-38,000 in the second quarter. That's on the basis of build rates that we've already put in place. Teams have done a really good job of that, and we see some of that margin growth coming from that volume. You know, partially offset a little bit by the price of energy, steel, aluminum, other raw material pricing in there, so there is that. I'm not quite sure customers have seen the full effect of tariffs yet. Hey, Michael. hey michael Thanks for the question. thanks for the question This is Preston. this is preston It's good to talk to you. it's good to talk to you You know, I think you talked about a few things in there that we're seeing, is we do see the increasing volumes. you know i think you talked about a few things in there that we're seeing is we do see the increasing volumes I'm really pleased with how the factories have been able to, again, create this local for local manufacturing capability in America. i'm really pleased with how the factories have been able to again create this local for local manufacturing capability in america We see the volumes increasing, as we said, to 37,000-38,000 in the second quarter. we see the volumes increasing as we said to 37,000-38,000 in the second quarter That's on the basis of build rates that we've already put in place. that's on the basis of build rates that we've already put in place Teams have done a really good job of that, and we see some of that margin growth coming from that volume. teams have done a really good job of that and we see some of that margin growth coming from that volume You know, partially offset a little bit by the price of energy, steel, aluminum, other raw material pricing in there, so there is that. you know partially offset a little bit by the price of energy steel aluminum other raw material pricing in there so there is that I'm not quite sure customers have seen the full effect of tariffs yet. i'm not quite sure customers have seen the full effect of tariffs yet We feel really good about the cadence throughout the year as the market and our customers get healthy, and we see accelerating sequentially. We feel really good about the cadence throughout the year as the market and our customers get healthy, and we see accelerating sequentially. we feel really good about the cadence throughout the year as the market and our customers get healthy and we see accelerating sequentially

Speaker 7: Okay, Miriam, let's go to the next question. Okay, Miriam, let's go to the next question. okay miriam let's go to the next question

Speaker 12: Your next question comes from the line of Jerry Revich of Wells Fargo. Your line is open. Please go ahead. Your next question comes from the line of Jerry Revich of Wells Fargo. your next question comes from the line of jerry revich of wells fargo Your line is open. your line is open Please go ahead. please go ahead

Speaker 6: Yes. Hi, good morning, everyone. Yes. yes Hi, good morning, everyone. hi good morning everyone

Speaker 13: Hey, Jerry. Hey, Jerry. hey jerry

Speaker 6: I'm wondering if we could. I'm wondering if we could. i'm wondering if we could

Speaker 8: Hey, Jerry. Hey, Jerry. hey jerry

Speaker 6: Hi. I'm wondering if we could just talk about the really strong profit per truck that you folks delivered in the quarter. With lower parts contribution, you folks still exceeded the guidance ranges. It looks like, you know, your profit per truck was up to about $5,300 from $2,900 last quarter. Can we just unpack that, how much of that was better cost execution versus makes and any other moving pieces as we think about the profile heading into the rest of the year? Hi. hi I'm wondering if we could just talk about the really strong profit per truck that you folks delivered in the quarter. i'm wondering if we could just talk about the really strong profit per truck that you folks delivered in the quarter With lower parts contribution, you folks still exceeded the guidance ranges. with lower parts contribution you folks still exceeded the guidance ranges It looks like, you know, your profit per truck was up to about $5,300 from $2,900 last quarter. it looks like you know your profit per truck was up to about $5,300 from $2,900 last quarter Can we just unpack that, how much of that was better cost execution versus makes and any other moving pieces as we think about the profile heading into the rest of the year? can we just unpack that how much of that was better cost execution versus makes and any other moving pieces as we think about the profile heading into the rest of the year

Speaker 13: Jerry, thanks for the comments. I appreciate them. They're nice and well stated. We did have price cost advantage in the quarter sequentially. We saw ourselves up, you know, over 1% in price cost, which is good. I think the teams are doing a really good job of focusing on the market we're in, so being price careful to see if we can make sure that we get our percentage of the market. In fact, we saw that in terms of our percentage of market build. In the first quarter, we built 31.8% of the market, which is very favorable and a good position to be in. We're balancing that growth with price cost favorability. Jerry, thanks for the comments. jerry thanks for the comments I appreciate them. i appreciate them They're nice and well stated. they're nice and well stated We did have price cost advantage in the quarter sequentially. we did have price cost advantage in the quarter sequentially We saw ourselves up, you know, over 1% in price cost, which is good. we saw ourselves up you know over 1% in price cost which is good I think the teams are doing a really good job of focusing on the market we're in, so being price careful to see if we can make sure that we get our percentage of the market. i think the teams are doing a really good job of focusing on the market we're in so being price careful to see if we can make sure that we get our percentage of the market In fact, we saw that in terms of our percentage of market build. in fact we saw that in terms of our percentage of market build In the first quarter, we built 31.8% of the market, which is very favorable and a good position to be in. in the first quarter we built 31.8% of the market which is very favorable and a good position to be in We're balancing that growth with price cost favorability. we're balancing that growth with price cost favorability

Speaker 6: Super. As we look at the backlog, how much more favorable is price cost based on what's in backlog versus what we saw in the first quarter? Super. super As we look at the backlog, how much more favorable is price cost based on what's in backlog versus what we saw in the first quarter? as we look at the backlog how much more favorable is price cost based on what's in backlog versus what we saw in the first quarter

Speaker 13: We think we'll have favorability, as we look forward into the second quarter. We're looking at our volumes going up appreciably. We're really full through the second quarter, and we have good visibility into the third and the fourth quarter. We think we'll have favorability, as we look forward into the second quarter. we think we'll have favorability as we look forward into the second quarter We're looking at our volumes going up appreciably. we're looking at our volumes going up appreciably We're really full through the second quarter, and we have good visibility into the third and the fourth quarter. we're really full through the second quarter and we have good visibility into the third and the fourth quarter

Speaker 6: Okay. Super. Just one last one just to calibrate expectations around orders over the balance of the year. We're hearing that there's just limited number of build slots available that might hamper orders over the next couple of quarters versus underlying demand. Is that the case for your business? You know, what proportion of your slots are already spoken for for the next three quarters? Okay. okay Super. super Just one last one just to calibrate expectations around orders over the balance of the year. just one last one just to calibrate expectations around orders over the balance of the year We're hearing that there's just limited number of build slots available that might hamper orders over the next couple of quarters versus underlying demand. we're hearing that there's just limited number of build slots available that might hamper orders over the next couple of quarters versus underlying demand Is that the case for your business? is that the case for your business You know, what proportion of your slots are already spoken for for the next three quarters? you know what proportion of your slots are already spoken for for the next three quarters

Speaker 13: Yeah, like I said, we're full on Q2. We're majority full in Q3, Q4. Not sure I recognize the commentary about people not having slots. That sounds more like a marketing scheme. Yeah, like I said, we're full on Q2. yeah like i said we're full on q2 We're majority full in Q3, Q4. we're majority full in q3 q4 Not sure I recognize the commentary about people not having slots. not sure i recognize the commentary about people not having slots That sounds more like a marketing scheme. that sounds more like a marketing scheme

Speaker 6: Fair enough. Thank you. Fair enough. fair enough Thank you. thank you

Speaker 12: Your next question comes from the line of Tami Zakaria of JPMorgan. Your line is open. Please go ahead. Your next question comes from the line of Tami Zakaria of JP Morgan. your next question comes from the line of tami zakaria of jp morgan Your line is open. your line is open Please go ahead. please go ahead

Speaker 18: Hey. Good morning. Thank you so much. My first question is on the simplified metal tariffs that went into effect in early April. Does that change your view on what would be the tariff impact, especially for aftermarket parts, versus the last time you spoke, or is it basically does it not change the tariff headwind that you expected? Hey. hey Good morning. good morning Thank you so much. thank you so much My first question is on the simplified metal tariffs that went into effect in early April. my first question is on the simplified metal tariffs that went into effect in early april Does that change your view on what would be the tariff impact, especially for aftermarket parts, versus the last time you spoke, or is it basically does it not change the tariff headwind that you expected? does that change your view on what would be the tariff impact especially for aftermarket parts versus the last time you spoke or is it basically does it not change the tariff headwind that you expected

Speaker 13: Hey, Tami. It's good to hear from you. It doesn't really have a lot of impact for us because of the truck-specific Section 232 has specific offsets, and it applies mostly to those materials. There's some moderate impact, but not significant. Hey, Tami. hey tami It's good to hear from you. it's good to hear from you It doesn't really have a lot of impact for us because of the truck-specific Section 232 has specific offsets, and it applies mostly to those materials. it doesn't really have a lot of impact for us because of the truck-specific section 232 has specific offsets and it applies mostly to those materials There's some moderate impact, but not significant. there's some moderate impact but not significant

Speaker 8: Same on the parts side, Tami. Same on the parts side, Tami. same on the parts side tami

Speaker 18: Understood. Understood. That's helpful. Just following up on what Jerry was asking, maybe I wanted to ask it in a different way. Based on third-party data, orders have been very strong year to date. You kept your U.S.-Canada outlook unchanged. Does this outlook include the year to date strength in orders? Meaning do you expect orders to moderate as we go through the year and as we get close to the NOx timeline, or is your view shaped by supply chain rather than demand? Understood. understood Understood. understood That's helpful. that's helpful Just following up on what Jerry was asking, maybe I wanted to ask it in a different way. just following up on what jerry was asking maybe i wanted to ask it in a different way Based on third-party data, orders have been very strong year to date. based on third-party data orders have been very strong year to date You kept your U.S.-Canada outlook unchanged. you kept your u.s.-canada outlook unchanged Does this outlook include the year to date strength in orders? does this outlook include the year to date strength in orders Meaning do you expect orders to moderate as we go through the year and as we get close to the NOx timeline, or is your view shaped by supply chain rather than demand? meaning do you expect orders to moderate as we go through the year and as we get close to the nox timeline or is your view shaped by supply chain rather than demand

Speaker 13: I think our view is shaped by the fact that the first quarter really didn't have a high cadence to it. If the first quarter ran at something around or a little under 200,000, then in order for it to come to the midpoint at 250,000, there's gonna have to be already a rapid acceleration. We have a great supply base, but they also need to be able to spin up their operations. The rate of increase quarter-over-quarter is where it probably informs the total market size. I think our view is shaped by the fact that the first quarter really didn't have a high cadence to it. i think our view is shaped by the fact that the first quarter really didn't have a high cadence to it If the first quarter ran at something around or a little under 200,000, then in order for it to come to the midpoint at 250,000, there's gonna have to be already a rapid acceleration. if the first quarter ran at something around or a little under 200,000 then in order for it to come to the midpoint at 250,000 there's gonna have to be already a rapid acceleration We have a great supply base, but they also need to be able to spin up their operations. we have a great supply base but they also need to be able to spin up their operations The rate of increase quarter-over-quarter is where it probably informs the total market size. the rate of increase quarter-over-quarter is where it probably informs the total market size

Speaker 18: Understood. Thank you. Understood. understood Thank you. thank you

Speaker 13: You're welcome. Have a good day. You're welcome. you're welcome Have a good day. have a good day

Speaker 12: Your next question comes from the line of Rob Wertheimer of Melius. Your line is open. Please go ahead. Your next question comes from the line of Rob Wertheimer of Melius. your next question comes from the line of rob wertheimer of melius Your line is open. your line is open Please go ahead. please go ahead

Speaker 14: Thanks. Is there any visible impact of the war in the Middle East on confidence or demand or orders in Europe? Thanks. thanks Is there any visible impact of the war in the Middle East on confidence or demand or orders in Europe? is there any visible impact of the war in the middle east on confidence or demand or orders in europe

Speaker 13: You know, what we've seen is I think those are really good words you used, confidence and demand, Rob. I would say that confidence, yeah, I think people are paying attention to and trying to discern what it might mean in the general economy, of course. I would say from a demand standpoint, we've seen less impact. We've seen continued good order intake throughout the last couple of months, so less of a show there. You know, what we've seen is I think those are really good words you used, confidence and demand, Rob. you know what we've seen is i think those are really good words you used confidence and demand rob I would say that confidence, yeah, I think people are paying attention to and trying to discern what it might mean in the general economy, of course. i would say that confidence yeah i think people are paying attention to and trying to discern what it might mean in the general economy of course I would say from a demand standpoint, we've seen less impact. i would say from a demand standpoint we've seen less impact We've seen continued good order intake throughout the last couple of months, so less of a show there. we've seen continued good order intake throughout the last couple of months so less of a show there

Speaker 14: Perfect. Thank you. If I could just ask, I mean, I think we chatted about this once, but the rise of electric trucks in China has been very sharp and maybe for geopolitical reasons. Could you talk about your own experience, and do you see strong demand from customers? Is there a crossover on total cost of ownership yet on some, you know, size classes, models, whatever, and, you know, how do you see that shape at present? Thank you. I'll stop there. Perfect. perfect Thank you. thank you If I could just ask, I mean, I think we chatted about this once, but the rise of electric trucks in China has been very sharp and maybe for geopolitical reasons. if i could just ask i mean i think we chatted about this once but the rise of electric trucks in china has been very sharp and maybe for geopolitical reasons Could you talk about your own experience, and do you see strong demand from customers? could you talk about your own experience and do you see strong demand from customers Is there a crossover on total cost of ownership yet on some, you know, size classes, models, whatever, and, you know, how do you see that shape at present? is there a crossover on total cost of ownership yet on some you know size classes models whatever and you know how do you see that shape at present Thank you. thank you I'll stop there. i'll stop there

Speaker 13: Yeah. Well, Kevin, why don't you share some thoughts? Yeah. yeah Well, Kevin, why don't you share some thoughts? well kevin why don't you share some thoughts

Speaker 8: Rob, you mentioned Europe, you know, the geopolitical has had an impact on the fuel prices and the cost of diesel is a bigger percent of the operating cost for customers in Europe. There's been a lot more discussion about battery electric trucks in Europe, and as we said, you know, DAF just won International Truck of the Year with the DAF XF and XD Electric. They just expanded their product range, in a really good position to address, you know, the growing customer questions and demand about battery electric trucks in Europe, and we're well-positioned against the competition. We've had a lot of competitors over time, I think we're really well-positioned with a great product line. Rob, you mentioned Europe, you know, the geopolitical has had an impact on the fuel prices and the cost of diesel is a bigger percent of the operating cost for customers in Europe. rob you mentioned europe you know the geopolitical has had an impact on the fuel prices and the cost of diesel is a bigger percent of the operating cost for customers in europe There's been a lot more discussion about battery electric trucks in Europe, and as we said, you know, DAF just won International Truck of the Year with the DAF XF and XD Electric. there's been a lot more discussion about battery electric trucks in europe and as we said you know daf just won international truck of the year with the daf xf and xd electric They just expanded their product range, in a really good position to address, you know, the growing customer questions and demand about battery electric trucks in Europe, and we're well-positioned against the competition. they just expanded their product range in a really good position to address you know the growing customer questions and demand about battery electric trucks in europe and we're well-positioned against the competition We've had a lot of competitors over time, I think we're really well-positioned with a great product line. we've had a lot of competitors over time i think we're really well-positioned with a great product line

Speaker 13: I would say, Kevin and I had a chance to drive that XD Truck of the Year. It's amazing. It's just a really wonderful truck to be in. It's gonna be great for our customers, and it just launched in the recent months. If you look at the U.S. market, it might inform a little bit differently. I think without subsidies, then doing widespread adoption is probably less likely. There can be markets where it makes sense. Certainly in urban environments, there could be places where EVs make sense. We just launched a couple new medium-duty models for Kenworth and Peterbilt. We have those regional delivery EVs, which is where the market makes the most sense in America. I would say, Kevin and I had a chance to drive that XD Truck of the Year. i would say kevin and i had a chance to drive that xd truck of the year It's amazing. it's amazing It's just a really wonderful truck to be in. it's just a really wonderful truck to be in It's gonna be great for our customers, and it just launched in the recent months. it's gonna be great for our customers and it just launched in the recent months If you look at the U.S. market, it might inform a little bit differently. if you look at the u.s market it might inform a little bit differently I think without subsidies, then doing widespread adoption is probably less likely. i think without subsidies then doing widespread adoption is probably less likely There can be markets where it makes sense. there can be markets where it makes sense Certainly in urban environments, there could be places where EVs make sense. certainly in urban environments there could be places where evs make sense We just launched a couple new medium-duty models for Kenworth and Peterbilt. we just launched a couple new medium-duty models for kenworth and peterbilt We have those regional delivery EVs, which is where the market makes the most sense in America. we have those regional delivery evs which is where the market makes the most sense in america

Speaker 14: Thank you. Thank you. thank you

Speaker 13: You bet. You bet. you bet

Speaker 12: Your next question comes from the line of David Raso of Evercore ISI. Your line is open. Please go ahead. Your next question comes from the line of David Raso of Evercore ISI. your next question comes from the line of david raso of evercore isi Your line is open. your line is open Please go ahead. please go ahead

Speaker 4: Hi. Thank you. The question relates to trying to understand your operating leverage in the truck business particularly. It looks like you can back into the gross margin for truck. Must have been around, you know, 6.9%, something like that in the first quarter. Sequentially, the truck revenues went up $11 million, but your gross profit went up $73 million. I am just making sure we understand, was there anything in the first quarter about, you know, reversal of old tariffs that you could take the benefit with IEEPA gone? I know we already had Section 232 already in, just making sure that's a clean. You know, that kind of strength in gross profit growth on only $11 million of revenue. Hi. hi Thank you. thank you The question relates to trying to understand your operating leverage in the truck business particularly. the question relates to trying to understand your operating leverage in the truck business particularly It looks like you can back into the gross margin for truck. it looks like you can back into the gross margin for truck Must have been around, you know, 6.9%, something like that in the first quarter. must have been around you know 6.9% something like that in the first quarter Sequentially, the truck revenues went up $11 million, but your gross profit went up $73 million. sequentially the truck revenues went up $11 million but your gross profit went up $73 million I am just making sure we understand, was there anything in the first quarter about, you know, reversal of old tariffs that you could take the benefit with IEEPA gone? i am just making sure we understand was there anything in the first quarter about you know reversal of old tariffs that you could take the benefit with ieepa gone I know we already had Section 232 already in, just making sure that's a clean. i know we already had section 232 already in just making sure that's a clean You know, that kind of strength in gross profit growth on only $11 million of revenue. you know that kind of strength in gross profit growth on only $11 million of revenue I mean, I appreciate U.S.-Canada as a percentage of the shipments was a lot bigger this quarter than last quarter, so maybe that's part of it. Can you walk us through that gross margin improvement in truck on really no revenue increase? I mean, I appreciate U.S.-Canada as a percentage of the shipments was a lot bigger this quarter than last quarter, so maybe that's part of it. i mean i appreciate u.s.-canada as a percentage of the shipments was a lot bigger this quarter than last quarter so maybe that's part of it Can you walk us through that gross margin improvement in truck on really no revenue increase? can you walk us through that gross margin improvement in truck on really no revenue increase

Speaker 13: Yeah. David, you always do such a good job with your numbers, and you continue to do that, is you kind of get it right, is that we had somewhere above 7% for our truck margin. That came largely because the teams did a really good job selling these best-in-class products. The leverage we got off of the volume helped us as well. The price-cost advantages contributed to that. Brice, anything you'd add to that? Yeah. yeah David, you always do such a good job with your numbers, and you continue to do that, is you kind of get it right, is that we had somewhere above 7% for our truck margin. david you always do such a good job with your numbers and you continue to do that is you kind of get it right is that we had somewhere above 7% for our truck margin That came largely because the teams did a really good job selling these best-in-class products. that came largely because the teams did a really good job selling these best-in-class products The leverage we got off of the volume helped us as well. the leverage we got off of the volume helped us as well The price-cost advantages contributed to that. the price-cost advantages contributed to that Brice, anything you'd add to that? brice anything you'd add to that

Speaker 2: Yeah. We also had, I'll call it favorable product mix, selling more of the Kenworth and Peterbilt brand at the year-end. They're more in lower because of the holiday shutdown season. Of course, DAF at the end of the year usually has a few units that they're getting done on their fleets that they hold in inventory. A little bit of a favorable mix effect on where we're selling the trucks as well helped us. Yeah. yeah We also had, I'll call it favorable product mix, selling more of the Kenworth and Peterbilt brand at the year-end. we also had i'll call it favorable product mix selling more of the kenworth and peterbilt brand at the year-end They're more in lower because of the holiday shutdown season. they're more in lower because of the holiday shutdown season Of course, DAF at the end of the year usually has a few units that they're getting done on their fleets that they hold in inventory. of course daf at the end of the year usually has a few units that they're getting done on their fleets that they hold in inventory A little bit of a favorable mix effect on where we're selling the trucks as well helped us. a little bit of a favorable mix effect on where we're selling the trucks as well helped us

Speaker 13: We didn't record any increase for IEEPA, related to IEEPA. Summary of all that, David, to you, is very clean quarter. Nothing to put or take out of it. We didn't record any increase for IEEPA, related to IEEPA. we didn't record any increase for ieepa related to ieepa Summary of all that, David, to you, is very clean quarter. summary of all that david to you is very clean quarter Nothing to put or take out of it. nothing to put or take out of it

Speaker 4: Yeah. That then begs the question for the next quarter where your truck revenue could be up, you know, call it $600 million. You know, rough numbers. You would think then the gross margin impact would be a little more significant than going up only 40 basis points at the company level. I apologize, I think maybe earlier you mentioned parts gross margins for 2Q. I don't think you called that anything particularly negative for, but maybe I didn't hear it correctly. Again, I'm just trying to understand that impressive performance 4Q to 1Q, but then 1Q to 2Q seems a lot more muted despite this is the quarter you get a bigger revenue move. Yeah. yeah That then begs the question for the next quarter where your truck revenue could be up, you know, call it $600 million. that then begs the question for the next quarter where your truck revenue could be up you know call it $600 million You know, rough numbers. you know rough numbers You would think then the gross margin impact would be a little more significant than going up only 40 basis points at the company level. you would think then the gross margin impact would be a little more significant than going up only 40 basis points at the company level I apologize, I think maybe earlier you mentioned parts gross margins for 2Q. i apologize i think maybe earlier you mentioned parts gross margins for 2q I don't think you called that anything particularly negative for, but maybe I didn't hear it correctly. i don't think you called that anything particularly negative for but maybe i didn't hear it correctly Again, I'm just trying to understand that impressive performance 4 Q to 1Q, but then 1Q to 2Q seems a lot more muted despite this is the quarter you get a bigger revenue move. again i'm just trying to understand that impressive performance 4 q to 1q but then 1q to 2q seems a lot more muted despite this is the quarter you get a bigger revenue move

Speaker 13: Let's see what the quarter is. We kind of gave you the 13.5% as our midpoint guidance for our margin look. We do see the volume being a good thing. I did mention earlier in the call, right, that our build percentage has increased in the market in North America, so we're at 31.8% of a build percentage. I also see that pricing remains competitive as our customers are just beginning to experience acceleration in their end markets. There's a competitive price point out there in the market that's contributing also. Those are kind of the key factors that inform the second quarter. Let's see what the quarter is. let's see what the quarter is We kind of gave you the 13.5% as our midpoint guidance for our margin look. we kind of gave you the 13.5% as our midpoint guidance for our margin look We do see the volume being a good thing. we do see the volume being a good thing I did mention earlier in the call, right, that our build percentage has increased in the market in North America, so we're at 31.8% of a build percentage. i did mention earlier in the call right that our build percentage has increased in the market in north america so we're at 31.8% of a build percentage I also see that pricing remains competitive as our customers are just beginning to experience acceleration in their end markets. i also see that pricing remains competitive as our customers are just beginning to experience acceleration in their end markets There's a competitive price point out there in the market that's contributing also. there's a competitive price point out there in the market that's contributing also Those are kind of the key factors that inform the second quarter. those are kind of the key factors that inform the second quarter

Speaker 2: Yeah. David, one other comment probably worth making. We guided 3% growth in parts. Obviously, the truck volume would be much greater than 3% going up by 7,000 trucks, 6,000-7,000 trucks. You have a negative, if you wanna call it, price mix effect that also dampens the total margin percent. Yeah. yeah David, one other comment probably worth making. david one other comment probably worth making We guided 3% growth in parts. we guided 3% growth in parts Obviously, the truck volume would be much greater than 3% going up by 7,000 trucks, 6,000-7,000 trucks. obviously the truck volume would be much greater than 3% going up by 7,000 trucks 6,000-7,000 trucks You have a negative, if you wanna call it, price mix effect that also dampens the total margin percent. you have a negative if you wanna call it price mix effect that also dampens the total margin percent

Speaker 4: No, I appreciate that. Okay, thank you so much. No, I appreciate that. no i appreciate that Okay, thank you so much. okay thank you so much

Speaker 13: Yep. Have a great day, David. Yep. yep Have a great day, David. have a great day david

Speaker 12: Your next question comes from the line of Chad Dillard of Bernstein. Your line is open. Please go ahead. Your next question comes from the line of Chad Dillard of Bernstein. your next question comes from the line of chad dillard of bernstein Your line is open. your line is open Please go ahead. please go ahead

Speaker 3: Hey, good morning, guys. Hey, good morning, guys. hey good morning guys

Speaker 13: Good morning. Good morning. good morning

Speaker 3: As you think about the pre-buy, likely to hit later this year, what are your plans for the number of shifts or build slots? Maybe you can compare it to, like, where you are today or on a year-on-year basis. I guess, like, what I'm trying to get at is, like, how quickly could you ramp that up versus where you are today if you got a little bit more visibility into, you know, the durability of demand? As you think about the pre-buy, likely to hit later this year, what are your plans for the number of shifts or build slots? as you think about the pre-buy likely to hit later this year what are your plans for the number of shifts or build slots Maybe you can compare it to, like, where you are today or on a year-on-year basis. maybe you can compare it to like where you are today or on a year-on-year basis I guess, like, what I'm trying to get at is, like, how quickly could you ramp that up versus where you are today if you got a little bit more visibility into, you know, the durability of demand? i guess like what i'm trying to get at is like how quickly could you ramp that up versus where you are today if you got a little bit more visibility into you know the durability of demand

Speaker 13: You know, we have great operations teams. I think they've demonstrated that not just in the past year, but over the decades, and they continue to be able to move up quickly. I think it's more about what the supply base and order board and how quick they have visibility to it. It's about a hiring cadence across the industry that will probably inform how quick it can go up. I feel very confident in our team's ability to add the people and the capacity we need to support the market in any market size. You know, we have great operations teams. you know we have great operations teams I think they've demonstrated that not just in the past year, but over the decades, and they continue to be able to move up quickly. i think they've demonstrated that not just in the past year but over the decades and they continue to be able to move up quickly I think it's more about what the supply base and order board and how quick they have visibility to it. i think it's more about what the supply base and order board and how quick they have visibility to it It's about a hiring cadence across the industry that will probably inform how quick it can go up. it's about a hiring cadence across the industry that will probably inform how quick it can go up I feel very confident in our team's ability to add the people and the capacity we need to support the market in any market size. i feel very confident in our team's ability to add the people and the capacity we need to support the market in any market size

Speaker 3: Got it. Can you talk about how industry pricing behavior has changed versus the start of the year? Are some of the non-domestic producers starting to price for tariffs? Got it. got it Can you talk about how industry pricing behavior has changed versus the start of the year? can you talk about how industry pricing behavior has changed versus the start of the year Are some of the non-domestic producers starting to price for tariffs? are some of the non-domestic producers starting to price for tariffs

Speaker 13: Well, I think you'd have to ask them the question of how they're thinking about their pricing scheme. They're better informed on that than we are. We do see a competitive market out there right now. We do see the fact that our customers, as I said, are just starting to see improvement. Raw material pricing is high, so there is still those things that are putting into it. I think we're at the beginning of what feels like an acceleration, considering that the first quarter build was just a 200,000, just under 200,000, and last year was low. If you think about the average market being 267,000 units, there's gonna be some replacement demand and there's gonna be some strengthening financial performance, and those are both gonna be good for us in the near and midterm for the business. Well, I think you'd have to ask them the question of how they're thinking about their pricing scheme. well i think you'd have to ask them the question of how they're thinking about their pricing scheme They're better informed on that than we are. they're better informed on that than we are We do see a competitive market out there right now. we do see a competitive market out there right now We do see the fact that our customers, as I said, are just starting to see improvement. we do see the fact that our customers as i said are just starting to see improvement Raw material pricing is high, so there is still those things that are putting into it. raw material pricing is high so there is still those things that are putting into it I think we're at the beginning of what feels like an acceleration, considering that the first quarter build was just a 200,000, just under 200,000, and last year was low. i think we're at the beginning of what feels like an acceleration considering that the first quarter build was just a 200,000 just under 200,000 and last year was low If you think about the average market being 267,000 units, there's gonna be some replacement demand and there's gonna be some strengthening financial performance, and those are both gonna be good for us in the near and midterm for the business. if you think about the average market being 267,000 units there's gonna be some replacement demand and there's gonna be some strengthening financial performance and those are both gonna be good for us in the near and midterm for the business

Speaker 3: Great. Thanks for passing it on. Great. great Thanks for passing it on. thanks for passing it on

Speaker 13: You bet. You bet. you bet

Speaker 12: Your next question comes from the line of Steve Volkmann of Jefferies. Your line is open. Please go ahead. Your next question comes from the line of Steve Volkmann of Jefferies. your next question comes from the line of steve volkmann of jefferies Your line is open. your line is open Please go ahead. please go ahead

Speaker 13: Steve, we are not able to hear you. I wonder if you're on mute. Steve, we are not able to hear you. steve we are not able to hear you I wonder if you're on mute. i wonder if you're on mute

Speaker 16: Yes, I was. I'm just figuring out this phone thing after a few decades of use. Sorry about that. I'll start again. You guys are good at managing supply chains, probably the best at that. We have a big ramp, I guess, in the second half this year. We're starting to hear some early signs that there might be some constraints in things like memory chips and sometimes some people are even worried about aluminum supply. I'm just curious if there's anything on your radar that you're watching that could actually constrain us in this kind of second half build that we're all expecting. Yes, I was. yes i was I'm just figuring out this phone thing after a few decades of use. i'm just figuring out this phone thing after a few decades of use Sorry about that. sorry about that I'll start again. i'll start again You guys are good at managing supply chains, probably the best at that. you guys are good at managing supply chains probably the best at that We have a big ramp, I guess, in the second half this year. we have a big ramp i guess in the second half this year We're starting to hear some early signs that there might be some constraints in things like memory chips and sometimes some people are even worried about aluminum supply. we're starting to hear some early signs that there might be some constraints in things like memory chips and sometimes some people are even worried about aluminum supply I'm just curious if there's anything on your radar that you're watching that could actually constrain us in this kind of second half build that we're all expecting. i'm just curious if there's anything on your radar that you're watching that could actually constrain us in this kind of second half build that we're all expecting

Speaker 13: Yeah, great question, Steve. Thanks for jumping back in and taking the time with it. I think that the thing that informs right now in supply chain is really how much energy-related exposure people have to the supply of materials and what that might do to their cost is one factor. The second, as I said previously, is the hiring cadence of people and getting them trained up to speed in a sustainable manner for our suppliers to be ready for the ramp up and build. Yeah, great question, Steve. yeah great question steve Thanks for jumping back in and taking the time with it. thanks for jumping back in and taking the time with it I think that the thing that informs right now in supply chain is really how much energy-related exposure people have to the supply of materials and what that might do to their cost is one factor. i think that the thing that informs right now in supply chain is really how much energy-related exposure people have to the supply of materials and what that might do to their cost is one factor The second, as I said previously, is the hiring cadence of people and getting them trained up to speed in a sustainable manner for our suppliers to be ready for the ramp up and build. the second as i said previously is the hiring cadence of people and getting them trained up to speed in a sustainable manner for our suppliers to be ready for the ramp up and build

Speaker 16: Got it. Okay, so nothing specific yet, standing out. Maybe, can you just comment, Preston, about the mix that you're seeing relative to vocational versus over the road, I guess maybe in terms of how the second half is gonna ramp up? Got it. got it Okay, so nothing specific yet, standing out. okay so nothing specific yet standing out Maybe, can you just comment, Preston, about the mix that you're seeing relative to vocational versus over the road, I guess maybe in terms of how the second half is gonna ramp up? maybe can you just comment preston about the mix that you're seeing relative to vocational versus over the road i guess maybe in terms of how the second half is gonna ramp up

Speaker 13: You know, it's been pretty uniform. We've seen over the road companies getting their recovery now with spot rates up double-digit, maybe even up to 20%. We've seen contract rates improving, that's helping our truckload carriers. The vocational market continues to be solid as well as the LTL. We're seeing orders coming in from kind of all sides as people want to make sure that they have their fleet in the right spot for the year and next year. You know, it's been pretty uniform. you know it's been pretty uniform We've seen over the road companies getting their recovery now with spot rates up double-digit, maybe even up to 20%. we've seen over the road companies getting their recovery now with spot rates up double-digit maybe even up to 20% We've seen contract rates improving, that's helping our truckload carriers. we've seen contract rates improving that's helping our truckload carriers The vocational market continues to be solid as well as the LTL. the vocational market continues to be solid as well as the ltl We're seeing orders coming in from kind of all sides as people want to make sure that they have their fleet in the right spot for the year and next year. we're seeing orders coming in from kind of all sides as people want to make sure that they have their fleet in the right spot for the year and next year

Speaker 16: Great. Thank you. Great. great Thank you. thank you

Speaker 13: You bet. Have a great day. You bet. you bet Have a great day. have a great day

Speaker 12: Your next question comes from the line of Kyle Menges of Citigroup. Your line is open. Please go ahead. Your next question comes from the line of Kyle Menges of Citigroup. your next question comes from the line of kyle menges of citigroup Your line is open. your line is open Please go ahead. please go ahead

Speaker 9: Thank you. I just wanted to go back to some of the comments you made on gross margin and it sounds like you're expecting improvement really quarter-over-quarter as we move throughout the rest of the year. Just I understand volume's a big piece of that, but how are you thinking about pricing momentum, you know, and what are you seeing as we get to the second quarter and into the second half? How are you thinking about price cost as well for the rest of the year? Thank you. thank you I just wanted to go back to some of the comments you made on gross margin and it sounds like you're expecting improvement really quarter-over-quarter as we move throughout the rest of the year. i just wanted to go back to some of the comments you made on gross margin and it sounds like you're expecting improvement really quarter-over-quarter as we move throughout the rest of the year Just I understand volume's a big piece of that, but how are you thinking about pricing momentum, you know, and what are you seeing as we get to the second quarter and into the second half? just i understand volume's a big piece of that but how are you thinking about pricing momentum you know and what are you seeing as we get to the second quarter and into the second half How are you thinking about price cost as well for the rest of the year? how are you thinking about price cost as well for the rest of the year

Speaker 13: Yeah. Well, I think the year is a long way, is what we typically think about for this discussion is really the next quarter, and I would say that we expect to have a price cost favorability in the quarter. I think how that gets informed is, again, based upon what the market asks for and how raw material pricing finishes up for us. We'll see. We'll watch carefully how that raw material pricing moves through the year. Obviously, there's some volatility in the market in general, and that'll have a consequence, but we do expect to see favorability throughout the year. Yeah. yeah Well, I think the year is a long way, is what we typically think about for this discussion is really the next quarter, and I would say that we expect to have a price cost favorability in the quarter. well i think the year is a long way is what we typically think about for this discussion is really the next quarter and i would say that we expect to have a price cost favorability in the quarter I think how that gets informed is, again, based upon what the market asks for and how raw material pricing finishes up for us. i think how that gets informed is again based upon what the market asks for and how raw material pricing finishes up for us We'll see. we'll see We'll watch carefully how that raw material pricing moves through the year. we'll watch carefully how that raw material pricing moves through the year Obviously, there's some volatility in the market in general, and that'll have a consequence, but we do expect to see favorability throughout the year. obviously there's some volatility in the market in general and that'll have a consequence but we do expect to see favorability throughout the year

Speaker 9: Helpful. We are getting pretty close now to the new EPA mandate. Just curious how the new engine's performing out in the market and if you guys think that it'll be ready in time. Thank you. Helpful. helpful We are getting pretty close now to the new EPA mandate. we are getting pretty close now to the new epa mandate Just curious how the new engine's performing out in the market and if you guys think that it'll be ready in time. just curious how the new engine's performing out in the market and if you guys think that it'll be ready in time Thank you. thank you

Speaker 13: Yeah, Kyle, thanks for that question. I think, you know, PACCAR's team does a great job of having the right engines for our customers, and we are really pleased with the engine development programs that are ongoing right now, both for us, and we're watching how it's going with Cummins. Obviously, he was a great partner for us. We look forward to seeing how the implementation rolls through for everyone. I feel great confidence in our teams and what we'll deliver. Yeah, Kyle, thanks for that question. yeah kyle thanks for that question I think, you know, PACCAR's team does a great job of having the right engines for our customers, and we are really pleased with the engine development programs that are ongoing right now, both for us, and we're watching how it's going with Cummins. i think you know paccar's team does a great job of having the right engines for our customers and we are really pleased with the engine development programs that are ongoing right now both for us and we're watching how it's going with cummins Obviously, he was a great partner for us. obviously he was a great partner for us We look forward to seeing how the implementation rolls through for everyone. we look forward to seeing how the implementation rolls through for everyone I feel great confidence in our teams and what we'll deliver. i feel great confidence in our teams and what we'll deliver

Speaker 9: Thank you. Thank you. thank you

Speaker 13: You bet. You bet. you bet

Speaker 12: Your next question comes from the line of Jamie Cook of Truist Securities. Your line is open. Please go ahead. Your next question comes from the line of Jamie Cook of Truist Securities. your next question comes from the line of jamie cook of truist securities Your line is open. your line is open Please go ahead. please go ahead

Speaker 5: Hi. Good morning. Congratulations on a nice quarter. I guess my first question, you know, Preston, if you could talk to as we think, you know, through the second half of the year and I guess throughout the cycle, what the setup for PACCAR is in terms of incremental margins. I mean, last cycle you delivered above average incremental margins with a lot of the new product launches that came into the market. This cycle we have, you know, the Section 232 benefit, you know, market share opportunity. I'm just wondering how you'll balance the two. Should we think of the normalized incremental margins of like 15%-20% or above that? Hi. hi Good morning. good morning Congratulations on a nice quarter. congratulations on a nice quarter I guess my first question, you know, Preston, if you could talk to as we think, you know, through the second half of the year and I guess throughout the cycle, what the setup for PACCAR is in terms of incremental margins. i guess my first question you know preston if you could talk to as we think you know through the second half of the year and i guess throughout the cycle what the setup for paccar is in terms of incremental margins I mean, last cycle you delivered above average incremental margins with a lot of the new product launches that came into the market. i mean last cycle you delivered above average incremental margins with a lot of the new product launches that came into the market This cycle we have, you know, the Section 232 benefit, you know, market share opportunity. this cycle we have you know the section 232 benefit you know market share opportunity I'm just wondering how you'll balance the two. i'm just wondering how you'll balance the two Should we think of the normalized incremental margins of like 15%-20% or above that? should we think of the normalized incremental margins of like 15%-20% or above that I guess my second question, can you just talk to sort of, you know, channel inventory where PACCAR is sitting versus its peers and whether its peers have made, you know, any progress on destocking some of the, you know, inflated inventory in the channel? Thank you. I guess my second question, can you just talk to sort of, you know, channel inventory where PACCAR is sitting versus its peers and whether its peers have made, you know, any progress on destocking some of the, you know, inflated inventory in the channel? i guess my second question can you just talk to sort of you know channel inventory where paccar is sitting versus its peers and whether its peers have made you know any progress on destocking some of the you know inflated inventory in the channel Thank you. thank you

Speaker 13: Let's start with your inventory question, Jamie. I think if you look at our inventory, we feel like it's in very good shape. It's kind of around just under three months, two point eight months, and that compares to two point two months back in December. We've been able to get at least a little bit of inventory back into the market, which feels healthy. I think the industry overall has a higher percentage of inventory, I think over four months, that's kind of the lay of the land from an inventory standpoint. PACCAR feels like we're in really good shape there. Dealers have been able to get a few trucks on the lot and get ready to go. Obviously, inventory for us is affected by our higher percent vocational share, people getting bodies put on trucks as an influencing factor there. Let's start with your inventory question, Jamie. let's start with your inventory question jamie I think if you look at our inventory, we feel like it's in very good shape. i think if you look at our inventory we feel like it's in very good shape It's kind of around just under three months, two point eight months, and that compares to two point two months back in December. it's kind of around just under three months two point eight months and that compares to two point two months back in december We've been able to get at least a little bit of inventory back into the market, which feels healthy. we've been able to get at least a little bit of inventory back into the market which feels healthy I think the industry overall has a higher percentage of inventory, I think over four months, that's kind of the lay of the land from an inventory standpoint. i think the industry overall has a higher percentage of inventory i think over four months that's kind of the lay of the land from an inventory standpoint PACCAR feels like we're in really good shape there. paccar feels like we're in really good shape there Dealers have been able to get a few trucks on the lot and get ready to go. dealers have been able to get a few trucks on the lot and get ready to go Obviously, inventory for us is affected by our higher percent vocational share, people getting bodies put on trucks as an influencing factor there. obviously inventory for us is affected by our higher percent vocational share people getting bodies put on trucks as an influencing factor there If you just think back to your first question was on margin and how we see that developing. We see margin being favorable, and we see that our build percentage at 31.8% in the first quarter is good for our performance and good for our customers to be able to get trucks for us. Being full in the second quarter means that we feel good about the position we're in. If you just think back to your first question was on margin and how we see that developing. if you just think back to your first question was on margin and how we see that developing We see margin being favorable, and we see that our build percentage at 31.8% in the first quarter is good for our performance and good for our customers to be able to get trucks for us. we see margin being favorable and we see that our build percentage at 31.8% in the first quarter is good for our performance and good for our customers to be able to get trucks for us Being full in the second quarter means that we feel good about the position we're in. being full in the second quarter means that we feel good about the position we're in

Speaker 5: Thank you. Thank you. thank you

Speaker 13: You bet. You bet. you bet

Speaker 12: Your next question comes from the line of Steven Fisher of UBS. Your line is open. Please go ahead. Your next question comes from the line of Steven Fisher of UBS. your next question comes from the line of steven fisher of ubs Your line is open. your line is open Please go ahead. please go ahead

Speaker 17: Thanks. Good morning. I just wanted to clarify your answer on the parts acceleration that you expect in the second half. You mentioned about clients just starting to get healthier, but I think you also mentioned about fuel having an impact in Q1. I was hoping you could just give us a little more color on what you're expecting that's going to drive the acceleration. Do you still need to see freight rates continue to rise? Do you need to see fuel costs falling? Is it just more about getting more trucks on the road? Do you need freight shipments to be picking up? Just curious kind of what will drive that acceleration. Thanks. thanks Good morning. good morning I just wanted to clarify your answer on the parts acceleration that you expect in the second half. i just wanted to clarify your answer on the parts acceleration that you expect in the second half You mentioned about clients just starting to get healthier, but I think you also mentioned about fuel having an impact in Q1. you mentioned about clients just starting to get healthier but i think you also mentioned about fuel having an impact in q1 I was hoping you could just give us a little more color on what you're expecting that's going to drive the acceleration. i was hoping you could just give us a little more color on what you're expecting that's going to drive the acceleration Do you still need to see freight rates continue to rise? do you still need to see freight rates continue to rise Do you need to see fuel costs falling? do you need to see fuel costs falling Is it just more about getting more trucks on the road? is it just more about getting more trucks on the road Do you need freight shipments to be picking up? do you need freight shipments to be picking up Just curious kind of what will drive that acceleration. just curious kind of what will drive that acceleration

Speaker 8: Yeah, you said a lot there, it's a little bit of all of that, right? As, you know, we see the increase of the truck orders, as more trucks are on the road and we see our customers' business improve, we see that on the parts side. I mentioned earlier the increased fuel and the operating cost volatility because customers still focus on required maintenance. They have delayed their optional parts purchases. We see, you know, both the volume as well as the mix improving, that leads to the acceleration through the year. We see as the truck market improves, we see the parts market follow that. Yeah, you said a lot there, it's a little bit of all of that, right? yeah you said a lot there it's a little bit of all of that right As, you know, we see the increase of the truck orders, as more trucks are on the road and we see our customers' business improve, we see that on the parts side. as you know we see the increase of the truck orders as more trucks are on the road and we see our customers' business improve we see that on the parts side I mentioned earlier the increased fuel and the operating cost volatility because customers still focus on required maintenance. i mentioned earlier the increased fuel and the operating cost volatility because customers still focus on required maintenance They have delayed their optional parts purchases. they have delayed their optional parts purchases We see, you know, both the volume as well as the mix improving, that leads to the acceleration through the year. we see you know both the volume as well as the mix improving that leads to the acceleration through the year We see as the truck market improves, we see the parts market follow that. we see as the truck market improves we see the parts market follow that

Speaker 17: Okay. That's very helpful. Then I guess to what extent have you had any discussions with your customers about the first part of 2027 planning? Really just trying to make sure I understand how you're characterizing the expected pickup in the second half of this year, whether it's really a, kind of a pre-buy or just a buy. Yeah, I know it's maybe a little bit early to talk about 2027, but I guess a pre-buy implies a pull forward. I guess, and it seems like it could be a relevant part of the discussion right now. Just curious how you would frame that. Okay. okay That's very helpful. that's very helpful Then I guess to what extent have you had any discussions with your customers about the first part of 2027 planning? then i guess to what extent have you had any discussions with your customers about the first part of 2027 planning Really just trying to make sure I understand how you're characterizing the expected pickup in the second half of this year, whether it's really a, kind of a pre-buy or just a buy. really just trying to make sure i understand how you're characterizing the expected pickup in the second half of this year whether it's really a kind of a pre-buy or just a buy Yeah, I know it's maybe a little bit early to talk about 2027, but I guess a pre-buy implies a pull forward. yeah i know it's maybe a little bit early to talk about 2027 but i guess a pre-buy implies a pull forward I guess, and it seems like it could be a relevant part of the discussion right now. i guess and it seems like it could be a relevant part of the discussion right now Just curious how you would frame that. just curious how you would frame that

Speaker 13: I like the way you frame it, Steve. I think that pre-buy versus buy, I think there's a little bit of both going on, honestly. I think that there's some buy going on because of the demand that the customers are getting healthy and want their fleet age to come back to where they want it. That's a bit of the buy side. I think on the pre-buy side, obviously, there's a cost impact to a 35 milligram engine, and I think they're sensitive to that. I think there's some of the people that are looking at putting orders in front of it. Both of those are influencing the year. Looking into 2027, I think we'll see how the year fills out and what the full year retail looks like and build looks like, and that'll probably give some information about what 2027 will look like. I like the way you frame it, Steve. i like the way you frame it steve I think that pre-buy versus buy, I think there's a little bit of both going on, honestly. i think that pre-buy versus buy i think there's a little bit of both going on honestly I think that there's some buy going on because of the demand that the customers are getting healthy and want their fleet age to come back to where they want it. i think that there's some buy going on because of the demand that the customers are getting healthy and want their fleet age to come back to where they want it That's a bit of the buy side. that's a bit of the buy side I think on the pre-buy side, obviously, there's a cost impact to a 35 milligram engine, and I think they're sensitive to that. i think on the pre-buy side obviously there's a cost impact to a 35 milligram engine and i think they're sensitive to that I think there's some of the people that are looking at putting orders in front of it. i think there's some of the people that are looking at putting orders in front of it Both of those are influencing the year. both of those are influencing the year Looking into 2027, I think we'll see how the year fills out and what the full year retail looks like and build looks like, and that'll probably give some information about what 2027 will look like. looking into 2027 i think we'll see how the year fills out and what the full year retail looks like and build looks like and that'll probably give some information about what 2027 will look like

Speaker 8: Yeah, just to add is, you know, the combo of the buy versus pre-buy is the second half of the year is pretty well balanced in terms of the fill between the third and fourth quarter. If it was more weighted to a pre-buy, we'd see that demand towards the higher in the end of the year. We see a really nice balance in both third and fourth quarter. Yeah, just to add is, you know, the combo of the buy versus pre-buy is the second half of the year is pretty well balanced in terms of the fill between the third and fourth quarter. yeah just to add is you know the combo of the buy versus pre-buy is the second half of the year is pretty well balanced in terms of the fill between the third and fourth quarter If it was more weighted to a pre-buy, we'd see that demand towards the higher in the end of the year. if it was more weighted to a pre-buy we'd see that demand towards the higher in the end of the year We see a really nice balance in both third and fourth quarter. we see a really nice balance in both third and fourth quarter

Speaker 17: That's really helpful. Thank you. That's really helpful. that's really helpful Thank you. thank you

Speaker 12: Your next question comes from the line of Angel Castillo of Morgan Stanley. Your line is open. Please go ahead. Your next question comes from the line of Angel Castillo of Morgan Stanley. your next question comes from the line of angel castillo of morgan stanley Your line is open. your line is open Please go ahead. please go ahead

Speaker 1: Hi, good morning, and thanks for taking my question. Maybe I've missed this, wanted to go back to the EPA dynamic, I guess. Has EPA actually formalized the low-NOx emissions rule that it communicated, I guess, back at the end of last year? Does that have any bearing on the ability of the industry to ultimately launch and move forward with these engines that meet the kind of latest low-NOx standard? Likewise, I guess, any implications on the customer's ability, I guess, to move forward with any, you know, orders or potential pre-buy? Just curious if that's where we're at on that, and if we don't have any formalized kind of releases there. I guess if you have any insights as to when we might be able to get that. Hi, good morning, and thanks for taking my question. hi good morning and thanks for taking my question Maybe I've missed this, wanted to go back to the EPA dynamic, I guess. maybe i've missed this wanted to go back to the epa dynamic i guess Has EPA actually formalized the low-NOx emissions rule that it communicated, I guess, back at the end of last year? has epa actually formalized the low-nox emissions rule that it communicated i guess back at the end of last year Does that have any bearing on the ability of the industry to ultimately launch and move forward with these engines that meet the kind of latest low-NOx standard? does that have any bearing on the ability of the industry to ultimately launch and move forward with these engines that meet the kind of latest low-nox standard Likewise, I guess, any implications on the customer's ability, I guess, to move forward with any, you know, orders or potential pre-buy? likewise i guess any implications on the customer's ability i guess to move forward with any you know orders or potential pre-buy Just curious if that's where we're at on that, and if we don't have any formalized kind of releases there. just curious if that's where we're at on that and if we don't have any formalized kind of releases there I guess if you have any insights as to when we might be able to get that. i guess if you have any insights as to when we might be able to get that

Speaker 13: I think the formalized release that they've made, Angel, is that it will be a 35 milligram standard come 2027. That's the law, and there's not any kind of modification expected to that in terms of it being a 35 milligram standard for new engines in 2027. The parameters around that, I think, are things that they will have to contemplate or are contemplating based on customer and market feedback. I think the formalized release that they've made, Angel, is that it will be a 35 milligram standard come 2027. i think the formalized release that they've made angel is that it will be a 35 milligram standard come 2027 That's the law, and there's not any kind of modification expected to that in terms of it being a 35 milligram standard for new engines in 2027. that's the law and there's not any kind of modification expected to that in terms of it being a 35 milligram standard for new engines in 2027 The parameters around that, I think, are things that they will have to contemplate or are contemplating based on customer and market feedback. the parameters around that i think are things that they will have to contemplate or are contemplating based on customer and market feedback

Speaker 1: Got it. I wanted to go back to maybe the margin discussion. Could you, I guess, just give us the shipments number that you or deliveries guidance you provided for 2Q? Could you give that by region, specifically how much you expect U.S. and Canada versus Europe? If we could kind of revisit the 13.5% gross profit margins. I get you mentioned, I think, a little bit more uplift from trucks maybe is a little bit of a mix drag on the overall and why you don't see that kind of incremental step change in 2Q versus 1Q. I guess it wasn't entirely clear to me if there's any other drags beyond that keep it from being more of a material step change, quarter-over-quarter just given the seasonality. Got it. got it I wanted to go back to maybe the margin discussion. i wanted to go back to maybe the margin discussion Could you, I guess, just give us the shipments number that you or deliveries guidance you provided for 2Q? could you i guess just give us the shipments number that you or deliveries guidance you provided for 2q Could you give that by region, specifically how much you expect U.S. and Canada versus Europe? could you give that by region specifically how much you expect u.s and canada versus europe If we could kind of revisit the 13.5% gross profit margins. if we could kind of revisit the 13.5% gross profit margins I get you mentioned, I think, a little bit more uplift from trucks maybe is a little bit of a mix drag on the overall and why you don't see that kind of incremental step change in 2Q versus 1Q. i get you mentioned i think a little bit more uplift from trucks maybe is a little bit of a mix drag on the overall and why you don't see that kind of incremental step change in 2q versus 1q I guess it wasn't entirely clear to me if there's any other drags beyond that keep it from being more of a material step change, quarter-over-quarter just given the seasonality. i guess it wasn't entirely clear to me if there's any other drags beyond that keep it from being more of a material step change quarter-over-quarter just given the seasonality

Speaker 13: Yeah. Just take the question in saying that we expect in Q2 volumes are up around the world, pretty much in every market. We've had build rate increases everywhere, that's what's driving the total increase in volume. I think we've kind of spent quite a bit of time already describing that 13.5% being volume-based improvement as well as slight price cost with still pressure on pricing in the market as tariffs maybe haven't been fully rolled through. Yet also PACCAR performing really well in terms of getting share of build up. Yeah. yeah Just take the question in saying that we expect in Q2 volumes are up around the world, pretty much in every market. just take the question in saying that we expect in q2 volumes are up around the world pretty much in every market We've had build rate increases everywhere, that's what's driving the total increase in volume. we've had build rate increases everywhere that's what's driving the total increase in volume I think we've kind of spent quite a bit of time already describing that 13.5% being volume-based improvement as well as slight price cost with still pressure on pricing in the market as tariffs maybe haven't been fully rolled through. i think we've kind of spent quite a bit of time already describing that 13.5% being volume-based improvement as well as slight price cost with still pressure on pricing in the market as tariffs maybe haven't been fully rolled through Yet also PACCAR performing really well in terms of getting share of build up. yet also paccar performing really well in terms of getting share of build up

Speaker 1: Understood. Thank you. Understood. understood Thank you. thank you

Speaker 13: You bet. You bet. you bet

Speaker 12: Your next question comes from the line of Lewis Merrick of BNP Paribas. Your line is open. Please go ahead. Your next question comes from the line of Lewis Merrick of BNP Paribas. your next question comes from the line of lewis merrick of bnp paribas Your line is open. your line is open Please go ahead. please go ahead

Speaker 10: Good morning, everyone. Thank you for taking my questions. We've heard about customers potentially pushing back their delivery dates for trucks. I'm just wondering, are you seeing any evidence of this occurring? Good morning, everyone. good morning everyone Thank you for taking my questions. thank you for taking my questions We've heard about customers potentially pushing back their delivery dates for trucks. we've heard about customers potentially pushing back their delivery dates for trucks I'm just wondering, are you seeing any evidence of this occurring? i'm just wondering are you seeing any evidence of this occurring

Speaker 13: No, I don't recognize that in our backlog. We have not seen any of that. No, I don't recognize that in our backlog. no i don't recognize that in our backlog We have not seen any of that. we have not seen any of that

Speaker 10: Okay. No. Crystal clear. Just quickly on the tariffs topic, could we get your latest understanding on when we could expect the previously announced 3.75% in SRP credit to be applied? Okay. okay No. no Crystal clear. crystal clear Just quickly on the tariffs topic, could we get your latest understanding on when we could expect the previously announced 3.75% in SRP credit to be applied? just quickly on the tariffs topic could we get your latest understanding on when we could expect the previously announced 3.75% in srp credit to be applied

Speaker 13: Well, it's fairly well-defined for the truck side of the Section 232, and so now it's about when we can apply for them and get them back, and we would expect that to be in the not distant future. Well, it's fairly well-defined for the truck side of the Section 232, and so now it's about when we can apply for them and get them back, and we would expect that to be in the not distant future. well it's fairly well-defined for the truck side of the section 232 and so now it's about when we can apply for them and get them back and we would expect that to be in the not distant future

Speaker 10: All right. Thank you very much. I'll turn it over. All right. all right Thank you very much. thank you very much I'll turn it over. i'll turn it over

Speaker 13: You bet. Have a great day. You bet. you bet Have a great day. have a great day

Speaker 12: Your next question comes from the line of Scott Group of Wolfe Research. Your line is open. Please, go ahead. Your next question comes from the line of Scott Group of Wolfe Research. your next question comes from the line of scott group of wolfe research Your line is open. your line is open Please, go ahead. please go ahead

Speaker 15: Hey, thanks. Good morning. On that pre-buy versus buy sort of discussion from earlier, do you have a sense on the buy sort of part of it, how much of that is sort of growth, fleet plans, fleet growth plans, or just sort of pent-up replacement? To the extent that there's just more replacement, do you think as we start replacing more after aging the fleets, does that naturally pressure some of the parts growth? Hey, thanks. hey thanks Good morning. good morning On that pre-buy versus buy sort of discussion from earlier, do you have a sense on the buy sort of part of it, how much of that is sort of growth, fleet plans, fleet growth plans, or just sort of pent-up replacement? on that pre-buy versus buy sort of discussion from earlier do you have a sense on the buy sort of part of it how much of that is sort of growth fleet plans fleet growth plans or just sort of pent-up replacement To the extent that there's just more replacement, do you think as we start replacing more after aging the fleets, does that naturally pressure some of the parts growth? to the extent that there's just more replacement do you think as we start replacing more after aging the fleets does that naturally pressure some of the parts growth

Speaker 13: I think that what's going on is that, you kind of said the words. In the buy side of it there's been a tough little run for some of our customers, now they have the opportunity, hopefully, where they'll be, we'll see better financial performance, which is enabling them to allocate capital to trucks. You know, keeping their fleet at a reasonable age is good for them, it's also good for them from an operating cost standpoint. When they're buying the Kenworth, Peterbilt, or DAF trucks, they're getting a highly efficient truck into the fleet, they're taking out something that has lower fuel economy from past now is the best fuel economy possible for them, it's a good operating performance benefit. It's kind of a tie of their financial performance and then the truck replacement cycle that they're trying to keep up with. I think that what's going on is that, you kind of said the words. i think that what's going on is that you kind of said the words In the buy side of it there's been a tough little run for some of our customers, now they have the opportunity, hopefully, where they'll be, we'll see better financial performance, which is enabling them to allocate capital to trucks. in the buy side of it there's been a tough little run for some of our customers now they have the opportunity hopefully where they'll be we'll see better financial performance which is enabling them to allocate capital to trucks You know, keeping their fleet at a reasonable age is good for them, it's also good for them from an operating cost standpoint. you know keeping their fleet at a reasonable age is good for them it's also good for them from an operating cost standpoint When they're buying the Kenworth, Peterbilt, or DAF trucks, they're getting a highly efficient truck into the fleet, they're taking out something that has lower fuel economy from past now is the best fuel economy possible for them, it's a good operating performance benefit. when they're buying the kenworth peterbilt or daf trucks they're getting a highly efficient truck into the fleet they're taking out something that has lower fuel economy from past now is the best fuel economy possible for them it's a good operating performance benefit It's kind of a tie of their financial performance and then the truck replacement cycle that they're trying to keep up with. it's kind of a tie of their financial performance and then the truck replacement cycle that they're trying to keep up with

Speaker 15: Okay. Maybe just lastly, you know, orders have doubled year to date versus what they were doing a year ago, and you're still talking about a competitive pricing environment. Why do you think we're not seeing a bigger, faster improvement in pricing? Okay. okay Maybe just lastly, you know, orders have doubled year to date versus what they were doing a year ago, and you're still talking about a competitive pricing environment. maybe just lastly you know orders have doubled year to date versus what they were doing a year ago and you're still talking about a competitive pricing environment Why do you think we're not seeing a bigger, faster improvement in pricing? why do you think we're not seeing a bigger faster improvement in pricing

Speaker 13: I think that the orders are sometimes around multi-year things, and there's some projections on orders, and I think orders isn't the cleanest thing to measure. I think it's probably a more clean measure to look at what's happening in the industry through build. If you look at build, that gives you a clean indicator of where things are. The cleanest way to look at is build and retail. If you build it, you'll retail it. Orders don't necessarily, for everyone, come through the same way. With our 31.8% of build in Q1, we feel good about the position, and we do still think that there are some orders left in the second half to be had. I think that the orders are sometimes around multi-year things, and there's some projections on orders, and I think orders isn't the cleanest thing to measure. i think that the orders are sometimes around multi-year things and there's some projections on orders and i think orders isn't the cleanest thing to measure I think it's probably a more clean measure to look at what's happening in the industry through build. i think it's probably a more clean measure to look at what's happening in the industry through build If you look at build, that gives you a clean indicator of where things are. if you look at build that gives you a clean indicator of where things are The cleanest way to look at is build and retail. the cleanest way to look at is build and retail If you build it, you'll retail it. if you build it you'll retail it Orders don't necessarily, for everyone, come through the same way. orders don't necessarily for everyone come through the same way With our 31.8% of build in Q1, we feel good about the position, and we do still think that there are some orders left in the second half to be had. with our 31.8% of build in q1 we feel good about the position and we do still think that there are some orders left in the second half to be had

Speaker 15: That makes sense. Thank you, guys. That makes sense. that makes sense Thank you, guys. thank you guys

Speaker 13: Great. Have a good day. Great. great Have a good day. have a good day

Speaker 12: Your next question comes from the line of Steve Volkmann of Jefferies. Your line is open. Please, go ahead. Your next question comes from the line of Steve Volkmann of Jefferies. your next question comes from the line of steve volkmann of jefferies Your line is open. your line is open Please, go ahead. please go ahead

Speaker 16: Thank you. I figured it out this time. Just a quick follow-up. Thank you. thank you I figured it out this time. i figured it out this time Just a quick follow-up. just a quick follow-up

Speaker 13: I was gonna say, someone beat him, Steve. I was gonna say, someone beat him, Steve. i was gonna say someone beat him steve You beat cousin Steve. You beat cousin Steve. you beat cousin steve

Speaker 16: I wanted to head that off. Just a quick follow-up. I know you guys give sort of average prices in the 10-Q. I'm just curious if you might have those available for truck and parts. If not, I'll wait for the 10-Q. I wanted to head that off. i wanted to head that off Just a quick follow-up. just a quick follow-up I know you guys give sort of average prices in the 10-Q. i know you guys give sort of average prices in the 10-q I'm just curious if you might have those available for truck and parts. i'm just curious if you might have those available for truck and parts If not, I'll wait for the 10-Q. if not i'll wait for the 10-q

Speaker 2: For the first quarter compared to the first quarter last year, you'll see price up 2%, and you'll see our cost unfortunately is up higher than that, so that made our margins down on the truck segment. Price on the parts side was up 6%. For the first quarter compared to the first quarter last year, you'll see price up 2%, and you'll see our cost unfortunately is up higher than that, so that made our margins down on the truck segment. for the first quarter compared to the first quarter last year you'll see price up 2% and you'll see our cost unfortunately is up higher than that so that made our margins down on the truck segment Price on the parts side was up 6%. price on the parts side was up 6%

Speaker 13: I think if you look at sequentially, you'd see price was roughly flat. Cost was down sequentially for truck more than 1%, and sequentially for parts, price was up 2% and cost was only up 1%. I think if you look at sequentially, you'd see price was roughly flat. i think if you look at sequentially you'd see price was roughly flat Cost was down sequentially for truck more than 1%, and sequentially for parts, price was up 2% and cost was only up 1%. cost was down sequentially for truck more than 1% and sequentially for parts price was up 2% and cost was only up 1%

Speaker 16: Super. Thank you so much. Super. super Thank you so much. thank you so much

Speaker 13: Sure. Sure. sure

Speaker 12: Your next question comes from the line of Tim Thein of Raymond James. Your line is open. Please, go ahead. Your next question comes from the line of Tim Thein of Raymond James. your next question comes from the line of tim thein of raymond james Your line is open. your line is open Please, go ahead. please go ahead

Speaker 19: Great. Thank you. Thank you. I'll just start. The first question is just on the customer mix within the backlog and how that may or may not be influencing the truck margins. I'm just thinking, Preston, on the on-highway side, at least in North America, you know, you've always skewed more towards the small and midsize fleets. You know, perhaps not as much today as you once did, you know, years ago. You know, that, presumably that some of the whips, and, or the fluctuations we've seen in diesel costs, can sometimes hit those smaller carriers a bit harder. I'm just curious if that's not the only factor, but, essentially the punchline is, you know, is there a mix here within how you're filling the backlog between some of the, those large, you know, mega fleets versus your historical kind of bread and butter small fleet? Great. great Thank you. thank you Thank you. thank you I'll just start. i'll just start The first question is just on the customer mix within the backlog and how that may or may not be influencing the truck margins. the first question is just on the customer mix within the backlog and how that may or may not be influencing the truck margins I'm just thinking, Preston, on the on-highway side, at least in North America, you know, you've always skewed more towards the small and midsize fleets. i'm just thinking preston on the on-highway side at least in north america you know you've always skewed more towards the small and midsize fleets You know, perhaps not as much today as you once did, you know, years ago. you know perhaps not as much today as you once did you know years ago You know, that, presumably that some of the whips, and, or the fluctuations we've seen in diesel costs, can sometimes hit those smaller carriers a bit harder. you know that presumably that some of the whips and or the fluctuations we've seen in diesel costs can sometimes hit those smaller carriers a bit harder I'm just curious if that's not the only factor, but, essentially the punchline is, you know, is there a mix here within how you're filling the backlog between some of the, those large, you know, mega fleets versus your historical kind of bread and butter small fleet? i'm just curious if that's not the only factor but essentially the punchline is you know is there a mix here within how you're filling the backlog between some of the those large you know mega fleets versus your historical kind of bread and butter small fleet

Speaker 13: Hey, Tim. I think it's an interesting concept. It gives me a little thought, but I don't really think that it's significant in terms of that. I think we've kind of got a broad mix of customers that are buying trucks right now. I agree with your. Hey, Tim. hey tim I think it's an interesting concept. i think it's an interesting concept It gives me a little thought, but I don't really think that it's significant in terms of that. it gives me a little thought but i don't really think that it's significant in terms of that I think we've kind of got a broad mix of customers that are buying trucks right now. i think we've kind of got a broad mix of customers that are buying trucks right now I agree with your. i agree with your

Speaker 19: Yeah Yeah yeah

Speaker 13: Your thought that the fuel surcharges are maybe more cash impactful to the smaller customers. While they affect everyone, they may be more sensitive to it. I don't think it's really informing what's going on. I think it's just that we're seeing the beginning of a market recovery. We're seeing things starting to improve for most all of our customers. They're starting to get better rates. They're starting to buy more trucks. I think it positions PACCAR well for the next coming period of time, right. For the next quarter and beyond, for the year and beyond, for a strengthening market and a strengthening performance. Y our thought that the fuel surcharges are maybe more cash impactful to the smaller customers. y our thought that the fuel surcharges are maybe more cash impactful to the smaller customers While they affect everyone, they may be more sensitive to it. while they affect everyone they may be more sensitive to it I don't think it's really informing what's going on. i don't think it's really informing what's going on I think it's just that we're seeing the beginning of a market recovery. i think it's just that we're seeing the beginning of a market recovery We're seeing things starting to improve for most all of our customers. we're seeing things starting to improve for most all of our customers They're starting to get better rates. they're starting to get better rates They're starting to buy more trucks. they're starting to buy more trucks I think it positions PACCAR well for the next coming period of time, right. i think it positions paccar well for the next coming period of time right For the next quarter and beyond, for the year and beyond, for a strengthening market and a strengthening performance. for the next quarter and beyond for the year and beyond for a strengthening market and a strengthening performance

Speaker 19: Okay. Thanks, Preston. Maybe another one, relevant for, you know, this deep in the queue, but it relates to the lease and rental customers. You know, sometimes we think about them being, they can be a bit of like the canary in the coal mine when truckload markets inflect, you start to see a pull on lease and rental fleets. You know, I'm just looking at the PacLease fleet, I guess similar to what you would see in some of the big publicly traded lease rental guys, has been declining quite a bit over the past few years. I'm just curious if you're starting to maybe see any change in terms of utilization or, you know, aspirations to maybe reverse that and start expanding the PacLease fleet. Just, anyways, just kind of what, if any, clues you're picking up from that cohort of your customer base? Okay. okay Thanks, Preston. thanks preston Maybe another one, relevant for, you know, this deep in the queue, but it relates to the lease and rental customers. maybe another one relevant for you know this deep in the queue but it relates to the lease and rental customers You know, sometimes we think about them being, they can be a bit of like the canary in the coal mine when truckload markets inflect, you start to see a pull on lease and rental fleets. you know sometimes we think about them being they can be a bit of like the canary in the coal mine when truckload markets inflect you start to see a pull on lease and rental fleets You know, I'm just looking at the Pac Lease fleet, I guess similar to what you would see in some of the big publicly traded lease rental guys, has been declining quite a bit over the past few years. you know i'm just looking at the pac lease fleet i guess similar to what you would see in some of the big publicly traded lease rental guys has been declining quite a bit over the past few years I'm just curious if you're starting to maybe see any change in terms of utilization or, you know, aspirations to maybe reverse that and start expanding the Pac Lease fleet. i'm just curious if you're starting to maybe see any change in terms of utilization or you know aspirations to maybe reverse that and start expanding the pac lease fleet Just, anyways, just kind of what, if any, clues you're picking up from that cohort of your customer base? just anyways just kind of what if any clues you're picking up from that cohort of your customer base

Speaker 13: Yeah. Good. Yeah. yeah Good. good

Speaker 8: You know, we're seeing a little bit of increase in the utilization. Also another indicator would be the used truck market, and we're seeing price utilization and volume demand starting to strengthen as well. I think between the beginnings of the increase on both of those factors is just another indication that we're starting to see the market improve. You know, we're seeing a little bit of increase in the utilization. you know we're seeing a little bit of increase in the utilization Also another indicator would be the used truck market, and we're seeing price utilization and volume demand starting to strengthen as well. also another indicator would be the used truck market and we're seeing price utilization and volume demand starting to strengthen as well I think between the beginnings of the increase on both of those factors is just another indication that we're starting to see the market improve. i think between the beginnings of the increase on both of those factors is just another indication that we're starting to see the market improve

Speaker 19: All right. Good stuff. Thank you. All right. all right Good stuff. good stuff Thank you. thank you

Speaker 12: There are no other questions in the queue at this time. Are there any additional remarks from the company? There are no other questions in the queue at this time. there are no other questions in the queue at this time Are there any additional remarks from the company? are there any additional remarks from the company

Speaker 13: We'd like to thank everyone for joining the call, and thank you, Miriam. We'd like to thank everyone for joining the call, and thank you, Miriam. we'd like to thank everyone for joining the call and thank you miriam

Speaker 12: Ladies and gentlemen, this concludes PACCAR's earnings call. Thank you for participating. You may now disconnect. Ladies and gentlemen, this concludes PACCAR's earnings call. ladies and gentlemen this concludes paccar's earnings call Thank you for participating. thank you for participating You may now disconnect. you may now disconnect