Good morning and welcome to Packer'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 and if anyone has an objection they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, Packers Director of Investor Relations. Mr. Hastings, please go ahead.

Good morning and welcome, everyone. My name is Ken Hastings, Packers Director of Investor Relations, and joining me this morning are Preston Fite, Chief Executive Officer, Kevin Bainey, President, and Bryce Poplowski, 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 Feit.

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 dollars 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. Packard Parts achieved quarterly revenues of $1.7 billion and quarterly pre-tax income of $402 million. Packard 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 to 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 costs 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 to 320,000. DOF's premium aerodynamic trucks provide customers with the latest technology and best operating efficiency. As mentioned on the January earnings call, the DOF XF and XD Electric Vehicles won the International Truck of the Year 2026 honor. In the first quarter, DOF extended its EV leadership by introducing new flagship XG and XG Plus 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 DOF trucks are desired by customers for their durability and advanced technology, is expected to be in a range of 100,000 to 110,000 vehicles. In the first quarter, PACCAR delivered 33,100 trucks, and in the second quarter, will deliver an estimated 37,000 to 38,000 vehicles. TACAR's truck, parts, and other gross margins increased from 12% to 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 submissions 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.

Thanks, Preston. pack our parts achieved first quarter revenues of 1.7 billion and profits of 402 million gross margins were twenty nine point six percent we estimate part sales to grow by about three percent in the second quarter and be in the range of three to six percent for the full year pack our parts is 21 parts distribution centers worldwide and has plans to expand its global distribution network and 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 to $775 million, and R&D expenses in the range of $450 to $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 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question option 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 Feinger of Bank of America. Your line is open.

Please go ahead thanks everyone just on uh the parts uh guidance maybe you guys can just unpack what did you see in the quarter it feels like a slower start um i'd love if we could just start there of what you're seeing the parts side how we're looking so far for through q2 and how we should think about that in the back half with with orders uh starting to pick up and be better than expected yeah michael this is kevin i'll start with the part side so with fleet consolidations and the higher fuel prices that's impacted let's say operating cost volatility that's resulted in

in the parts market remaining soft and so as we see as customers start to get healthy we'll talk a little bit more about the the truck market side but as customers start to get healthy we'll see the the parks market get healthier with that as well and so just for the four-year guidance for the three to six percent we see that accelerating through the through the rest of the year and and just on the my last question just on the gross margin 13.5 um you know the pickup verse 13.1 in q1 just should we still think that gross margin 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 u.s markets continue to strengthen i'm just kind of curious how we should think about as 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's good to talk to you you know i think you you talked about a few things in there that we're seeing is we do see the increasing volumes 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 thirty seven thirty eight thousands in the second quarter that's on the basis of build rates that we've already put in place so 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 but um 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 revitch of wells fargo your line is open please go ahead yes hi good morning everyone hey jerry i'm wondering

if we could just hi i'm going to just talk about the uh really strong uh profit per truck that you folks delivered in the quarter so with lower uh parts contribution you you folks still exceeded the guidance ranges it looks like your profit per truck was up to about 5 300 from 2900 last quarter can we just unpack that how much of that was better cost execution versus makes and and any other movie pieces as we think about the profile heading into the rest of the year yeah uh jerry thanks for the comments i appreciate them they're nice nice well stated we did have price cost advantage in the quarter sequentially so we saw ourselves up you know over a percent in price

cost which is 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 filled so in the first quarter we built 31.8 of the market which is very favorable and a good position to be in and so we're balancing that growth with price cost favorability super and then 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 Well, we think we'll have favorability as we look forward into the second quarter. Obviously, 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. And just one last one, just to calibrate expectations around orders over the balance of the year. We're hearing that there's just a 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 build slots are already spoken for for the next three quarters yeah like i said as we have we're full on q2 um we're a majority full in q3 4 i'm not sure i recognize the commentary about people not having slots that sounds more like a like a marketing scheme fair enough thank you your next question comes from the line of tammy zakeria of jp morgan your line is open please go ahead hey good morning thank you so much my first question

is on the simplified metal terrace um that went into effect in early april does that change your view on what would be the tariff impact especially for aftermarket parts uh versus the last time you spoke or is it basically doesn't does it not change um the tariff um headwind that you expected hey tammy it's good good to hear from you it doesn't really have a lot of impact for us because of the truck specific 232 has specific offsets and it applies mostly to those materials so there's some moderate impact but not significant.

Same on the part side Tammy.

Understood that's helpful and um just following up on one what Jerry was asking um maybe I wanted to ask it in a different way so 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, so 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 there's gonna have to be already a rapid acceleration and we have a great supply base but they also need to be able to spin up their operations so the rate of increase quarter over quarter is where 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 there's a really good word to use, confidence and demand, Rob. And I would say that confidence, yeah, I think people are paying attention to it 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 size classes, models, whatever? And, you know, how do you see that shape at present. Thank you. I'll stop there.

Kevin, why don't you share some thoughts?

Yeah. So, Rob, you mentioned Europe. And so, 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. So there's been a lot more discussion about battery electric trucks in Europe. And as we said, DOF just won International Truck of the Year with the DOF XF and XD Electric. They just expanded their product range, so in a really good position to address 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, and I think we're really well-positioned with a great product line and I would say Kevin 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 so it's gonna be great for our customers and it just launched in the recent months if you look at the US 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 and we look forward to We just launched a couple of new medium-duty models for Kentworth and Peterbilt. So we have those regional delivery EVs, which is where the market makes the most sense in America.

Thank you.

Your next question comes from the line of David Rasso 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. It must have been around 6.9, something like that, in the first quarter. So sequentially, the truck revenues went up $11 million, but your gross profit went up 73. And I'm just making sure we understand, was there anything in the first quarter about reversal of old tariffs that you could take to benefit with IEPA gone? I know we already had truck 232 already in, but just making sure that's a clean, you know, that kind of strength in gross profit growth on only $11 million in revenue. I mean, I appreciate U.S. Canada as a percent of the shipments was a lot bigger this quarter than last quarter. So maybe that's part of it.

But can you walk us through that gross margin improvement in truck on really no revenue increase? yeah and david you host you such a good job with your numbers and you continue to do that as you kind of get it right is that we had somewhere above seven percent for our truck margin and that came largely because the teams did a really good job selling these best-in-class products and then the leverage we got off of the volume helped us as well so the price cost advantages contributed to that um bryce i didn't think 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 and lower because of how they shut down season and then of

course DOF at the end of the year usually has a few units that they're getting done on their fleets that they hold an inventory so a little bit of a favorable mix effect and where we're selling the trucks as well helped us and we didn't we didn't record any increase for IEPA related IEPA so 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 dollars you know rough numbers you would think then the gross margin impact could be a little more significant than going up only 40 bips at the company level and i apologize i think maybe earlier you mentioned parts gross margin margins for 2q i don't think you call that anything particularly negative for but maybe I didn't hear it correctly so 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 yeah well let's see what the quarter is we kind of gave you the 13 and a half percent is our midpoint guidance for 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. And I also see that pricing remains competitive as our customers are just beginning to experience acceleration in their end markets. So there's a competitive price point out there in the market that's contributing also. And so those are kind of the key factors that inform the second quarter.

Yeah, David, one other comment probably worth making. When we guided 3% growth in parts, obviously the truck volume would be much greater than three percent going up by seven thousand trucks six seven thousand trucks so you have a negative like if you want to call it price mix effect it 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 um as you think about the pre-buy uh likely to hit later this year uh what are your plans for the number of shifts or build slots maybe 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 uh versus where you are today if you got a little bit more visibility into you know the durability of um 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 so i think it's more about what the supply base and order board and how quick they have visibility to it so it's about a hiring cadence across the industry that will probably inform how quick it can go up but i feel very confident in our team's ability to to add the people and the capacity we need to support the market, in any market size.

Got it. And can you talk about how industry pricing behavior has changed versus the start of the 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. and raw material pricing is high, so there is still those things that are putting into it. But I think we're at the beginning of what feels like an acceleration, considering that the first quarter build was just under 200,000, and last year was low. So 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 on.

You bet.

Your next question comes from the line of Steve Boekman of Jeffries. Your line is open. Please go ahead.

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. Well, sorry about that. So I'll start again. You guys are good at managing supply chains, probably the best at that. And we have a big ramp, I guess, in the second half this year. And 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 material of materials and what that might do to their cost as one factor and then 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 for our suppliers to be ready for the ramp up and build got it okay Okay, so nothing specific yet standing out.

And then 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 going to ramp up?

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, so that's helping our truckload carriers the vocational market continues to be solid as well as the ltl so 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 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 and and it sounds like you're expecting improvement really quarter over quarter as we move throughout the rest of the year.

I understand volume is a big piece of that, but how are you thinking about pricing, momentum, 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?

I think the year is a long ways. 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 asked for and how raw material pricing finishes up for us. So 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. And then we are getting pretty close now to the new EPA mandate. Just curious how the new engine is performing out in the market and if you guys think that it will 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 so 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's a great partner for us. We look forward to seeing how the implementation rolls through for everyone, but 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. You can brought us 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 to 20 percent or above that? And then I guess my second question, can you just talk to sort of, you know, channel inventory, where PAC are sitting versus its peers and whether its peers have made, you know, any progress on de-stocking some of the, you know, inflated inventory in the channel?

Yeah, 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. that's kind of around just under three months, 2.8 months, and that compares to 2.2 months back in December. So 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. So that's kind of the lay of the land from an inventory standpoint. Packard 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 of your vocational share so people getting bodies put on trucks as an influencing factor there and then if you just think back to the your first question was on margin and how we see that developing we just see we see margin being favorable and we see that our build percentage at 31.8 percent in the first quarter is good for our performance and good for our customers who to get trucks for us and 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 stephen 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 and you mentioned about clients they're starting to get healthier but i think you also mentioned about fuel having an impact in q1 So 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, but it's a little bit of all of that, right? As we see the increase of the truck orders, so as more trucks are on the road and we see our customers' business improve, we see that on the part side. I mentioned earlier the increased fuel and the operating cost volatility because customers still focus on required maintenance. And so they've delayed their optional parts purchases. So we see both the volume as well as the mix improving. and that leads to the acceleration through the year. So we see as the truck market improves, we see the parts market follow that.

Okay, that's very helpful. And 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 kind of a pre-buy or just a buy. I know it's maybe a little bit early to talk about 2027, but I guess a pre-buy implies a pull forward. So I guess 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 framed 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. So that's a bit of the buy side. and 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 and so i think there's some of the people that are looking at putting orders in front of it so 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 27 will look like yeah just to add is you You know, the combo of the buy versus pre-buys, 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 higher in the end of the year, but we see a really nice balance in both third and fourth quarter.

That's really helpful.

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, but I wanted to go back to the EPA dynamic, I guess. Has the EPA actually formalized the low-nox emissions rule that it communicated, I guess, back at the end of last year? And does that have any bearing on the ability of the industry to ultimately launch and move forward with these engines that meet the latest low-nox standard? And likewise, I guess, any implications on the customer's ability, I guess, to move forward with any, you know, orders or potential pre. But I'm 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'll be a 35 milligram standard come 2027. That's the law, and that there's not any kind of modification expected to that in terms of it being a 35 milligram standard for new engines in 2027. And 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. And then 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? And then 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 mixed drag on the overall and why you don't see that kind of incremental step change in 2Q versus 1Q. But I guess it wasn't entirely clear to me if there's any other drags beyond that. that keep it from being more of a material step change, given the seasonality?

Yeah, just take the question and saying that we expect in Q2 volumes are up around the world, pretty much in every market. So we've had build rate increases everywhere. And so that's what's driving the total increase in volume. And 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 that also PAC are performing really well in terms of getting share of build-up. Understood. Thank you. You bet.

Your next question comes from the line of Louis Merrick of P&B Paribas. Your line is open. Please go ahead.

Yeah, good morning, everyone. Thank you for taking my questions. We've heard about customers potentially pushing back their delivery dates for trucks uh i just wonder are you seeing any evidence of this occurring no i don't recognize that in our in our backlog we have not seen any of that okay no crystal clear um and just quickly on the terrace topic um can we get your latest understanding on when we could expect the previously announced 3.75 nslp uh credit to be applied well it's fairly well defined for the truck side of the 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 okay thank you very much you bet have a great day your next question comes from the line

of scott group of wolf research your line is open please go ahead Hey, thanks.

Good morning. So on that pre-buy versus buy sort of discussion from earlier, do you have a sense on the buy part of it? How much of that is sort of growth fleet plans, fleet growth plans, or just sort of pent-up replacement?

And 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 this been a tough little run for some of our customers and 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 at a reasonable age is good for them and it's also good for them from an operating cost standpoint when they're buying the Kenworth Peterbilt or Doff trucks they're getting a highly efficient truck into the fleet so they're taking out something that has lower fuel economy from past and now is the best fuel economy possible for them so it's a good operating performance benefit but 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 and then maybe just Lastly, 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?

Well, 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 and if you look at build that gives you a clean indicator of where things are so the cleanest way to look at is build and retail you build it you'll retail it orders don't necessarily for everyone come through the same way but with our 31.8 percent 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 volkman jeffries your line is open please go ahead thank thank you i figured it out

this time uh just a quick follow-up i wanted to hit that off so um i just a quick follow-up i know you guys give uh sort of average prices in the 10q i'm just curious if you might have those available for for truck and parts if not I'll wait for the queue 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 and then price on the part side was up 6% but I think if you

at sequentially you'd see price was roughly flat cost was down sequentially for truck more than a percent and sequentially for parts price was up a couple percent and cost was only up a percent thank you so much your next question comes from the line of tim thine of raymond james your line is open please go ahead great thank you thank you um i'll just start that first question is just on the customer mix within the backlog and how that may or may not be influencing the truck margin.

And so I'm just thinking, Preston, on the on-highway side, at least in North America, you've always skewed more towards the small and midsize fleets, perhaps not as much today as you once did years ago. But presumably that some of the whips and the fluctuations we've seen in diesel costs can sometimes hit those smaller carriers a bit harder. So I'm just curious if that's not the only factor, but essentially the punchline is, is there a mix within how you're filling the backlog between some of those large mega fleets versus your historical kind of bread and butter small fleet?

Tim, I think that'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 thought that the fuel surcharges are maybe more cash impactful to the smaller customers while they affect everyone that may be more sensitive to it. But 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 and so i think it it positions pack our well for the next coming period of time right for the next quarter and beyond for the year and beyond for a for a strengthening market and a strengthening performance okay thanks question maybe another one um relevant for you know this deep in the queue but it relates to the lease and rental customers um you know sometimes we think about them being they can be a bit of like a canary in the coal mine when truckload markets inflect, you start to see a pull on lease and rental fleets. I'm just looking at the path 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? Just anyways, just kind of what if any clues you're picking up from that cohort of your customer base?

Good. We're seeing a little bit of increase in the utilization, but also another indicator would be the used truck market. And we're seeing price utilization and and volume demand starting to strengthen as well so i think between the the beginnings of the increase on both of those factors is just another indication that that we're starting to see the market uh start 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 Packers earnings call. Thank you for participating. You may now disconnect.