Good morning, welcome to PACCAR's first quarter 2023 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 like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead. Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Harrie Schippers, President and Chief Financial Officer, and Michael Barkley, Senior Vice President and Controller. 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, including general economic and competitive conditions that may affect expected results. For additional information, please see our SEC filings and the investor relations page of paccar.com. I would now like to introduce Preston Feight. Hey, good morning. Harrie Schippers, Michael Barkley, Ken Hastings, and I will update you on our first quarter results and our business highlights. PACCAR achieved record revenues and excellent net income in the first quarter due to continued strong global demand for trucks, aftermarket parts, and financial services. PACCAR's revenues increased 31% to $8.47 billion, and net income was $734 million, including an after-tax non-recurring charge of $446 million. The charge relates to civil claims in Europe, was previously reported in an 8-K last week, and is the total estimated cost. Excluding the non-recurring charge, first quarter adjusted net income was $1.18 billion, up from $600 million in the first quarter of last year. In the first quarter, truck parts and other gross margins expanded to a record 19.3% compared to 15.9% in the fourth quarter of last year. PACCAR is benefiting from investments in new truck models, global growth, and PACCAR Parts continued expansion. PACCAR Parts first quarter revenues increased by 17% to a record $1.62 billion. Parts pre-tax profits were a record $439 million, or 29% higher than the same period last year. PACCAR Financial had an excellent quarter, achieving pre-tax income of $149 million, which is similar to the same quarter of last year. I appreciate PACCAR's outstanding employees who delivered these excellent financial results and the highest quality trucks and transportation solutions in the industry. Their commitment to the company and to our customers is foundational to our success. Looking at the U.S. economy, GDP is estimated to grow modestly. Freight tonnage continues to be good, customers are updating their vehicles with new high-performing Peterbilt and Kenworth trucks. This continues to be a favorable operating environment, we're increasing our forecast for the U.S. and Canadian Class 8 market to 280,000-320,000 trucks. European economies are also experiencing modest growth. DAF's excellent new trucks are providing customers with the latest technology and best operating efficiencies. We have raised our 2023 European above 16-tonne market projection to a range of 280,000-320,000 trucks. The South American above 16-tonne truck market is expected to be in the range of 115,000-125,000 vehicles this year. In Brazil, DAF achieved a record 8.6% share in the first quarter. DAF Brazil is celebrating its 10th year of operations. DAF trucks are highly desired by customers in South America and the region is an important part of PACCAR's growth and success. PACCAR's industry-leading truck lineup, highly efficient operations, best-in-class parts and financial services companies, and the continued development of advanced technologies position the company well for an excellent year. Harrie Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harrie? Thanks, Preston. PACCAR delivered 51,000 trucks during the first quarter. The supply chain is improving, but there are some periodic supplier shortages affecting production. In the second quarter of 2023, deliveries are forecast to increase to a range of 51,000-54,000 trucks. Truck parts and other gross margins increased to 19.3% in the first quarter. We anticipate second quarter gross margins to be strong and in the range of 18%-19%. PACCAR Parts had an outstanding first quarter with parts gross margins expanding to a record 32.2%. PACCAR Parts business model is based on the application of technology to provide our customers excellent access to high-quality parts. PACCAR Parts is expanding the use of technologies such as e-commerce and leveraging data from PACCAR's connected trucks. PACCAR Parts' expanding network of 18 parts distribution centers serves more than 2,000 dealer locations and 250 independent TRP stores, which provides best-in-class uptime for our customers. PACCAR Parts is a high growth and high margin recurring revenue business. We estimate parts sales to grow by 10%-12% in the second quarter of this year compared to the same quarter last year. PACCAR Financial Services benefited in the first quarter from a larger portfolio, excellent portfolio quality, and good used truck business. Pre-tax income improved to $149 million. PACCAR Financial's 13 used truck facilities worldwide contribute to higher price realization compared to wholesale channels. Used truck prices have moderated but remain historically strong. With its larger portfolio and superb credit quality, PACCAR Financial is having another very good year. PACCAR has invested over $4 billion in new and expanded facilities, innovative products, and new technologies during the past five years. These investments have created the newest and most impressive lineup of trucks in the industry, as well as highly efficient factories and distribution centers. PACCAR is continuing its investments in clean diesel, zero emissions, autonomy, and connected vehicle programs. Capital expenditures are projected to be $600 million-$650 million, and research and development expenses are estimated to be $380 million-$420 million this year. Customer demand is strong for PACCAR's industry-leading trucks and transportation solutions in all markets. We expect 2023 to be an excellent year. Thank you. As we complete our comments, I'd like to thank our Senior Vice President and Controller, Michael Barkley, who'll be retiring at the beginning of June after a wonderful 32-year career. Michael has participated in 66 earnings calls over the past 16 years. He's a great controller, he's an excellent business partner, and he's a true friend. Michael, you're appreciated, and you'll be missed. Joining us today and for future calls is Brice Poplawski, our new Vice President and Controller. Brice has been with PACCAR for 25 years. Welcome, Brice. Now we're 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 followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. We will pause here briefly as questions are registered. Our first question comes from the line of Tami Zakaria with J.P. Morgan. Please go ahead. Hi, good morning. Thanks so much for taking my questions. Congrats on the great results. That gross margin number was nothing less than spectacular. In hindsight, what was the biggest source of the upside versus your original guide of 16%-17%? Is the 18%-19% that you're expecting for 2Q sort of a good run rate for the rest of the year? Well, thanks for the question. Good morning. What we saw in the first quarter was we saw very good operating efficiencies and cost increases were less than expected. Those are the two contributors to the margin improvement over what we had guided. As Harrie shared, 18%-19% is what we expect in the second quarter. We think we have a really good year. Perfect. If I can ask one more question. Sure. Sure, Harrie. I think the parts growth of 17% exceeded our projections a quarter ago, and parts margins were better too, and that contributes to the 19.3% as well, of course. Got it. Thank you so much. If I can ask one more. I think some industry data showed some orders slow down, but my understanding is that PACCAR numbers are not really in that data. Can you from your perspective share with us what you're seeing in terms of order activity, how deep into the third or fourth quarter your order books have opened? Any comments on order trends you're seeing? Sure, Tami. Glad to. What we've seen is good order intake, continued good order intake, and we're substantially full for the year. Third quarter's full. A few slots left in the fourth quarter, substantially full. Great. Thank you so much. Sure, you bet. Thank you. Our next question comes from the line of Dillon Cumming with Morgan Stanley. Please go ahead. Great. Good morning. Thanks for the question. Just wanted to ask first from a financing perspective, you know, a lot of concern in the market with regards to customers not being able to get financing from, you know, smaller to mid-sized banks. You know, in terms of what you see on the ground, first of all, has that impacted your kind of order intake or kind of customer sentiment? Second of all, has that created an incremental opportunity for PFS to maybe get some more financing business as a result of, you know, smaller banks maybe not being able to finance the same number of customers that they're used to? Yeah, I'm not aware of any customers that are not going to get the financing that they need. It's good to have PACCAR Financial who's able to finance our customers in good times and bad times. PACCAR Financial had a great quarter. We're financing about 25% of the trucks that we sell. In some years that has even grown to 30%. We're there for any customers that need us. Got it. Thanks, Harry. I'm going to ask kind of a longer-term question around pricing sustainability. You know, we're obviously coming off of a couple of years here of really strong pricing. I'm kind of assuming, given the margin performance in the quarter, that pricing was also pretty strong as well. Kind of as we think about how the back half of the year develops going into next year, you know, pairing that off with the potential kind of pre-buy dynamics in 2025, 2026, can you just give us any flavor/color in how you were thinking about pricing kind of developing for the rest of the year and next year, if there's a kind of scope for it to remain more resilient in the event that 2024 builds are actually down year-over-year? Well, I think that we feel good about 2023, as we said. We think we have an excellent year that we're working on right now. We see continued strong demand for the products. I mean, I think we've reintroduced or introduced new products in North America and Europe and in South America in the last couple years. Those products are providing great value to the customers. That value to the customers is why they would like to have them. We're helping their operations, which is good. As Harrie mentioned, the parts business continues to perform well. We're utilizing technology in new ways to help improve the value to our customers through the parts business. They're doing a great job in those things. They contribute to good performance for the company. Great. Very clear. Thanks for the time. You bet. Thank you. Our next question comes from the line of Chad Dillard with Bernstein. Please go ahead. Hi, good morning, guys. Morning. My first question is, compared to the last cycle, can you just talk about how much structural uplift in parts margins, do you think you've seen? Sure. I think that I would point towards, again, the way I just talked about the scenario in the last question, is the parts team has done an excellent job of creating value for the customer. It's not just providing parts, it's about having the right parts in the right locations. Our 18 PDCs located throughout the world make it easier to have parts available to our customers next day and even same day in many cases. They're also using tools like MDI, Managed Dealer Inventory, that we work closely with the dealers to make sure that we know what parts they need, that's really supportive to the business. I think that the connected vehicle status is also helping us as well. Those things all help the parts business. We see the powertrain business, the engine business being a good contributor to the parts growth. As we look forward into the future and think about the electric vehicle world, that will also be likely accretive to our business in parts. We feel like there's a great future for us. That's helpful. Second question, how should we think about PFS profitability for the balance of the year? Do you think the environment is strong enough for you to maintain the current run rate of loss provisions? Yeah, like we said, PACCAR Financial is having an excellent year. Used truck gains are a little less than what they were a quarter ago or a year ago, the portfolio is larger with the growing number of trucks in the portfolio and the higher value per truck in the portfolio. In addition, we see a strong portfolio performance with continued low credit losses, low past dues, we expect the finance company to continue seeing good quarters as we progress during the year. Great. Thank you. Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Please go ahead. Hi. Thank you. My question is on supply chain as you kind of exit and Q. Industry volumes seem to have improved markedly. You guys obviously had extraordinary risks. I was curious, is supply chain disruption direct, you know, direct costs from shipping, et cetera, back to normal? Is there still more improvement to be had there? How would that, if at all, impact your decision on pricing? Sure. We, you know, we've worked really closely with the supplier partners we have over the past couple years, and I give them a lot of credit for what they've been able to accomplish in a, in a dynamic world environment, but it's not finished yet. We still do see some constraints in supplier deliveries, and we keep working through those, and they kind of act some ways as a throttle on our build right now. Generally improving circumstances, and we look forward to that even improving further throughout the year. Okay, perfect. Thank you. If I may ask one other one. When you look at your, you know, your raised outlook, and I guess competitors have done the same, so you guys are seeing definitely strong demand, and yet there's fears of recession and slowdown out there. Are you seeing any material mix shift within your orders, say, to construction with, you know, project activity versus sleeper cab? Would you say it's kind of strong throughout? I'll stop there. Thank you. Rob, I think you're right on it. I think that what we've seen is strong demand through all parts of the market, if there's a trimming in the truckload area, I would say that's fully offset by the robust vocational markets that we see. Great. Thank you. You bet. Thank you. Our next question comes from the line of Stephen Volkmann with Jefferies. Please go ahead. Great. Good morning, everybody. Thank you for taking the question. I'm wondering if we can go back to the gross margin, and I just want to try to understand some of the drivers because if you have a slightly higher production in the second quarter versus the first but your gross margin's down, call it 100 basis points or maybe a little less. I'm just curious what would drive that gross margin down lower sequentially? In the first quarter, I just mentioned the supply base has not fully improved, so there still are costs and things that we experienced in terms of deliveries. In fact, in the first quarter, there were some trucks that we didn't finish delivering, so we had better absorption in the first quarter than we might see in the second quarter, which contributes a little bit. I don't know if there's anything you'd add, Harrie, to that. I would say the with trucks production and deliveries increasing to 51,000-54,000 trucks will grow a little faster than parts. We would see a little bit of an unfavorable truck versus parts mix, which is why we get to that 18%-19% excellent margin for the second quarter. Yeah. Still very high, but just wanted to understand the moving parts. Thank you. Then maybe Preston, you mentioned this, but supply chain, I guess we assume that'll continue to improve as the year progresses. If that's the case, would you imagine, given the demand environment, that you would be able to continue to increase kind of quarterly production rates in the second half as well? Continue to improve might not be huge changes in production output, so we'll have to see what that looks like, Steve. We're always looking to build those trucks, especially with the backlog we have. Understood. Thank you, guys. You bet. Have a good day. Thank you. Our next question comes from the line of David Raso with Evercore ISI. Please go ahead. Hi, thank you for the question. Essentially the sequential margins, right? We've got truck revenues up sequentially, parts revenue down sequentially, so a little weaker mix and a little less overhead absorption from, you can kind of see in the company inventory, right? What didn't ship, but you built. On price cost, I'm curious, the rest of the year, how do you see price cost versus what you experienced in the first quarter? I'm also curious too, if you could help me a little bit with the FIFO, LIFO change a year ago. I know it's only about 40% of the inventory got changed for it. Just curious at all if you could help us, how has that accounting change helped a bit with the margins? Last, I'll throw one in there if you can answer it. When do you expect to open the order books for 2024? Again, price costs. Why don't we take them in reverse order? LIFO and order books. All right. Thanks. Why don't we take them in reverse order and say that we're already having good conversations with some of the customers about their needs in 2024, and there's a strong interest in the trucks, so that continues to be good. It's early days. We'll see what happens there. Michael, you've got 66 calls under your belt. Why don't you do the LIFO, FIFO call? Well, you know, last year the FIFO difference was about $50 million in cost. This year it'll probably be something similar to that. It's really, it helps a little bit, but it's, you know, maybe a 0.1% or 0.2%. It's not a huge mover item. Helpful. You know, on your first question you asked about price costs. I think we have shared that we had good price to cost realization in the first quarter. We expect that in the second quarter, and that we have a good order book for the third and fourth quarter. It should be pretty good. The price costs wouldn't be part of why gross margin's down sequentially. It's really more the sequential revenue mix and the reduced overhead absorption. Is that a fair? Yeah, that's how I would get it. Summarization? That's correct. All right. I appreciate it. All right. Thank you. Yep. Thank you. Our next question comes from the line of Jamie Cook with Credit Suisse. Please go ahead. I guess just my first question, back to the margin again. Your pre-tax truck margins were, I think, 13.9%, which is a record high. Can you help us understand sort of what's structural or related to some of the new product introductions that are more profitable versus sort of, you know, you know, just in, you know, de-deflation sort of helping the margins? I guess that's my first question. My second question, you know, when you talk about the order book for 2023 being substantially full, is that, you know, across sort of all geographies? What are you telling customers about pricing specifically for 2024 as you're engaging in conversations? Thank you. Sure. First of all, I think that on the new products. Thanks for bringing them up, because, you know, we've shared that we've invested billions of dollars in these new products. You know, we brought them out in the last couple of years here, but they're fully introduced. They're providing 7%-10% better fuel economy. That's just one thing. That's $15,000-$20,000 of value for the customer over a few year cycle. It really makes it important for them to replace the trucks they bought even four years ago with these excellent new DAF, Peterbilt, and Kenworth trucks. It's important for them to do that because they get an operating advantage. Never mind the fact that these are the drivers' favorite trucks to drive, and there's a lot of demand to have them. You see them on the road, they're beautiful. It's what people want to be operating in all the markets. That's really important as well. I think that the other part of it is they're efficient to build for us, so that's also helpful. I think that new products are good for us. It's not just limited to the traditional markets of Europe and North America. South America is doing excellent well. The DAF brand is a leading brand there. We're gaining market share quickly. The dealers are doing really well, and South America is just a growing part of our performance, which is contributing to our overall margin growth. As far as what we see, it is substantially full in all markets. That includes South America, Europe, North America, Australia, Mexico, pretty much everywhere. The demand for PACCAR is great right now. As far as 2024, well, 2024, it's the early conversations with people as they're kind of figuring out what their capital plans will be and how many trucks they'll buy next year. Those are early conversations. Thank you. You bet. Thank you. Our next question comes from the line of Steven Fisher with UBS. Please go ahead. Thanks. Good morning. I want to come back to the parts business, and I'm curious what actually drove the faster than expected revenue growth in your parts business, because, you know, the guidance, again, is somewhat similar to what you rolled out for Q1. I'm so curious what was the surprising part to you. I mean, it doesn't seem like it was an accelerating freight market since we don't really have that. I'm curious about that and maybe just generally how cyclical or really not cyclical you think the parts revenues might be over the next few years. Well, Harrie, you want to share some thoughts on that? Sure. I think I want to echo what Preston said, that we've invested a lot of new systems to make it easier for our dealers and customers to have the right parts on the shelf when trucks come in the workshop. It's the proprietary components, the PACCAR Engines, the PACCAR Transmissions, PACCAR axles, all the new proprietary parts on the new trucks, where customers only can get service at a Kenworth, Peterbilt or DAF dealership. The trucks come into our workshops, and once it's in the workshop, our teams do a great job making sure the parts are there that those trucks need. That sells the parts. We've invested in more distribution centers, added a new one in Louisville, Kentucky. We continue to build out that footprint. I think the first quarter was especially strong in Europe, where we saw parts, growing, really strong. It's just a combination of all those efforts that come together and, having the parts available, strong performance by the team worldwide. I would add into that, echo everything Harrie said, but I'll say our dealers done a really good job of making investments into their workshops, making it more convenient for trucks to come back to them. That's good for our customers and good for the parts business. I also wouldn't lose the idea that truck age is still pretty high. There's been an under supply for three years, and those older trucks are consuming parts still. Even as freight tonnage may have trimmed a little bit, I'd still say there's a lot of consumption of parts on the trucks out there. Okay. Just lastly, could you just remind us of where you are in that penetration of the new products and how much runway there is still to go? For DAF, the new DAF is currently about 75%-80% of the production mix, and you could compare that to around 25% where we were a year ago. That ramp-up has been really successful, well executed by the operations team in Europe. In the U.S., it's been complete. The transition is complete fully. For heavy trucks, but also for the new medium-duty truck that went into production, what is it, one and a half year ago? Yeah. That's completely changed over now. That new medium-duty truck is made for those customers, Class 6, 7, 8 or low Class 8s. Provides, like the heavy trucks, more value for customers and built in a very efficient way. Thank you. You bet. Thank you. Our next question comes from the line of Tim Thein with Citi. Please go ahead. Yeah, thank you. Good morning. Maybe just continuing on the parts discussion, the full year revenue growth, projection at the 8%-11%, I apologize if I missed that. Are you sticking with that or do you now see that higher just given what you see in the first half of the year? We didn't say anything on the full year. We said it would be 10%-12% for the second quarter after 17% in the first quarter. At that run rate, you would get somewhere between 10% and 13% for the year, maybe. Got it. Okay. all right. just on the, you mentioned the supply chain issues that continue. as we think about the interplay there with production for the full year, do you foresee any change to the extent maybe the assumption that the supply chain is getting better maybe in the second half than the first. Do you foresee much by way of a mix change there in terms of potentially maybe some units that weren't able to get completed, you know, and I'm thinking of a heavy versus medium-duty mix. Do you foresee that changing much in an environment where the supply chain is better or is that just kind of around the edges? I'm just wondering if there's been somewhat of a, you know, an emphasis to maybe get certain units out the door faster, and if that normalizes, could that potentially have some impact on mix in the back half of the year? I kind of think your words were really good there, Tim. I think it's around the edges right now that that would be dealt with. I think it's fairly just generally improving, and we feel pretty good about the way it's working through. There's just moments, our teams and the suppliers are doing a really good job of solving those moments. It feels like we'll just continue to see that trend upward. Okay. All right. Thanks for the time. You bet. Thank you. Our next question comes from the line of John Joyner with BMO Capital Markets. Please go ahead. Thank you very much. I feel that things are always great at PACCAR. Sorry for another supply chain issue, you know, maybe I can ask it, I guess, another way. With all the work to, I guess, help improve available supplies, are there any areas that are actually maybe better today than prior to COVID? Can you possibly bucket kind of the percentage of areas that are relatively more normal today versus ones that are still constrained? You say that Is your question compared to pre-COVID, did you say? Yeah, I'm trying to understand. Well. I mean, I get that things are improving, but is there? Just given a lot of the work that's been going on to help the supply base, to help the kind of velocity, you know, within the supply chain, are there any areas that are actually structurally better? I mean, maybe that's a dumb question, but I feel like it could be the case. Well, I think that I would give a lot of credit. We built 51,000 trucks in a quarter. That's a lot of output, so the supply base is doing a good job. That's a high number if you wanted to go back to pre-COVID. Our 51,000-54,000 in the second quarter is also a high number. I would say that great suppliers, good partnerships there, and they are doing a generally a good job. Just always opportunities to keep improving, and we do that together with them. Okay. All right, thank you very much. With regard to the CapEx, you know, bumped that up a little bit this year. What incremental investments are causing this step up? Do you expect the total to keep progressing higher or maybe in that $600 million-$700 million range for the next few years? We think the six to six fifty is the right number. We've got some really fun and exciting projects that we're working on that are coming along nicely right now. It's the third phase of our battery electric vehicles. It's engine platforms that we're developing. It's new truck platforms that we're working on. Just a lot of really interesting things, and as long as we can make good progress on them, we'll spend the money and commit to that. Okay. All right. Excellent. Thank you. Question. You bet. Thank you. Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Please go ahead. Yeah, thanks, guys. Good morning to you. Hello. Can we just start with South America? I think you tweaked your industry forecast a bit lower there. We'd love to hear, you know, what you're hearing on the ground in that region. Thanks. Sure. I mean, we've had great success so far in South America in the first quarter. What we see is there's pretty high interest rates down there, and I think there's questions from the customers about what might happen with those interest rates. There's maybe been, for some parts of the market, a pause in that space. Really, we still have a great backlog there and expect things to keep going. Our build rates have increased there, and we expect them to stay high. Those are the kind of primary things that are happening. Our tweak down is really about that interest rate pause that we've seen in the market a little bit. Yeah, at the same time, Brazil is transitioning from Euro 5 to Euro 6, and we know DAF has an excellent Euro 6 product in the market out there, so great opportunity for us to grow our market share a little bit further. Got it. Okay, that's helpful. Second question on the 2Q build guidance. Any thoughts from a regional perspective? Like is everything kind of flattish sequentially versus the 51,000 in 1Q, everything up slightly? Like, just any thoughts by region would be helpful. Yeah, I wouldn't try to differentiate too much between the regions. I think we're going to see good performance in all of the regions for PACCAR. Thanks. I'll pass it on. All right. You bet. Thank you. Our next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead. Yes. Hi. good morning, everyone. Michael and Bryce, congratulations. Thank you. Yeah, thank you. I'm wondering if you could just talk about the cost performance. Really interesting to see operating costs per truck down about $1,000 sequentially first quarter versus fourth quarter. As we think about the potential for continued improved supply chain performance, how should we be thinking about the pricing part of that equation as costs normalize for you folks? Should we think about pricing following suit, or are we thinking about delinking the two based on the value proposition at this point? Our focus is on making sure our customers have the best trucks in the world, and we're doing that, and that has a value to them. That's kind of where we see ourselves positioned in the market, and that's what we would expect to continue as we look forward. That's clear. You know, looking at your pre-tax profit per truck, this quarter, so $17,500. You know, in 2019, pre-COVID, you folks had a high of $10,000, so really outstanding performance. I'm wondering, can we just step through what proportion of that would you attribute to the higher value add of the new products versus difference in the marketplace and competitive discipline? How would you counsel us to think about the relative sizes of those pieces and any others you would add? I would say 2018, 2019 were very good years as well, so you'd put them in kind of comparable markets. I would say a lot of that value is really because of the investments we made in the products, in the trucks. As we've said earlier in the discussion, it's also has to do with the outstanding performance of the parts team and what they're doing. It's trucks, the value they create, it's parts, the way they support the customer, and I would add the third leg of the stool is really becoming technology and how we're employing technology, which is helping us a lot to provide reasons for people to want to buy the PACCAR premium products. I'm wondering, first, can you just expand on that point on technology? Are we talking about the functionality of the telematics or what specific technology? Can you just expand on that last point, if you don't mind? Yeah, sure. It's the use of telematics, which is also a great opportunity for us, and we announced that we have a partnership, an enhanced partnership with Platform Science, which is a great partner for us in terms of how we can connect the vehicle, bring useful apps to the customers, and that's accretive to their business growth. We like to be participative in that. I think the other part of it is with the dealer systems. We mentioned Managed Dealer Inventory a lot over the years, but now it's like a complete seamless operation with the dealers of them getting the parts based upon the needs as defined by PACCAR Parts. That's a great way to see the business growth, and we continue to see that expanding over the years. Great. If I can just sneak one last one in, Harrie, the parts performance, really strong as well in the quarter. Is this the new run rate for parts% margins or as, you know, volumes are going to be down seasonally, should we think about margins being good but maybe not as good as 1Q? We don't guide for parts margins typically in our calls, but 32%, like you said, was really strong in the first quarter. We continue to grow the parts business. As the parts business grows, we leverage the cost structure, so there's a good basis for PACCAR Parts to continue that strong margin performance. Yep. Appreciate the discussion. Thank you. You bet. Have a good day. Thank you. Our next question comes from the line of Matt Elkott with Cowen and Co. Please go ahead. Good morning. Just one more follow-up on the parts, what you said on parts already. If I look historically, parts revenue went from 15% of total revenue 10 years ago to 20% in 2022. I think the growth has been around 8% CAGR versus the remainder of the business at 5%, and it's been more linear, less cyclical growth. My question is, do you see this level of outsized growth continuing for parts revenue at a similar level in, you know, for the next 5 years or so? Is there a sweet spot for parts as a percent of the total that you'd like to see longer term? I tell you, we don't think of it that way. We think of value creation for the customer. I think that the parts business is doing that. That's why it's picking up share and it's picking up overall share of the parts business. I think that the trend is that the world is becoming a little bit more vertical for us with our powertrains, but also with technology and those things both will contribute to further parts growth over the coming years. I think that the value opportunity for the parts team continues to be there for us. Okay. Makes sense. Just any update that you guys might give us on the Infrastructure Bill and if there's any kind of demand that can be attributable to that? Yeah. I think that the amount of spending being done into the economy, whether it's reshoring or infrastructure, is really great for PACCAR. We're the vocational market leaders, and so as money is spent in the economy, that'll be good for us in the long term as well. Got it. Thank you very much. You bet. Thank you. Our next question comes from the line of Jeffrey Kauffman with Vertical Research Partners. Please go ahead. Thank you very much. Just 2 questions. You mentioned interest rates and the effect on your South American outlook. Can you talk at all as to your dealers with their floor plans and how interest rates might be affecting your dealer base? Let me offer one thing. See if Harrie has any other thoughts. I'd say that structurally in North America, interest rates are still at a reasonable level. From a historical standpoint, they're very much in the middle of the world range or middle of the road of what history has had. We're not very worried about interest rates here. I don't know if, Harrie, you'd add anything else. Brazil is a little different story. Interest rates in Brazil are running at, what is it, 14% kind of rate. That's completely different than what we see in North America or Europe. It gets a little bit more customer and dealer attention in Brazil. Like we said, the new trucks come with a lot better fuel economy. If you're buying a new truck, the fuel savings for many customers offset the higher interest rate expense. All right. Thank you. I just want to pivot to a more forward-looking question. You were talking about the new telematics packages. I know we don't have autonomous trucks on the road yet, but, you know, everywhere I go, there's an Aurora Peterbilt truck on display someplace. When do you think we start to see revenue potentially from things like connectivity, things that you're preparing for the customer? As we start to see that, does that get reported as part of the truck business? Is that a standalone business as you think about it? I just kinda want to think forward on maybe some new streams you may generate from these technology additions. Sure. I think from a connected vehicle standpoint, we do see revenue, I'd call it indirect revenue and profits that we get. We've been talking a lot about the parts business. We can talk about the vehicles being connected and what it does for the customers, but it's an indirect play in, so it shows up in parts, it shows up in truck. It even shows up in financial services in terms of how we're able to help customers manage their business. From the autonomy standpoint, Jeff, I'd say that, you know Aurora is a really good partner, and we're pleased with the progress they're making with their autonomous driver, and we're pleased with the progress we're making on having an autonomous vehicle platform that operates with that. Together, we're just trying to make sure that we focus on safety being the primary tenet of this. We'll be on the road with those, with drivers now. I think that we'll just have to wait and see when it'll be time for us to go into a revenue-producing autonomy model that doesn't have a driver, and that could be a while. Okay. Thank you very much. You bet. 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, operator. Ladies and gentlemen, this concludes PACCAR's earnings call. Thank you for participating. You may now disconnect.