Good morning and welcome to PACCAR's Fourth Quarter 2025 Earnings Conference Call. All lines will be in 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, 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 and the Investor Relations page of PACCAR.com. I would now like to introduce Preston Feight. Good morning. Kevin Baney, Brice Poplawski, Ken Hastings, and I will update you on our very good fourth quarter and full year 2025 results, as well as other business highlights. PACCAR's fourth quarter revenues were $6.8 billion, and net income was $557 million. In 2025, PACCAR achieved annual revenues of $28.4 billion and adjusted net income of $2.64 billion, which is the fourth highest profit year in company history and the 87th consecutive year of profits. Adjusted after-tax return on revenue was 9.3%. I'm proud of PACCAR's outstanding employees who delivered these results by providing our customers with the highest quality trucks and transportation solutions in the industry. PACCAR Parts and PACCAR Financial Services each achieved quarterly and annual revenue records. PACCAR Parts and Financial Services represent an increasing percentage of the overall business and contribute to PACCAR's structurally stronger performance. 2025 was a dynamic year in the North American truck industry with soft freight markets, tariffs, and emissions policy uncertainties. In this environment, Kenworth and Peterbilt made strong contributions to PACCAR's results. Importantly, we ended last year with tariff and emissions clarity. The Section 232 truck tariff policy that became effective on November 1st provides advantages to PACCAR, who produces trucks in the United States, Canada, and Mexico for each local market. I'm proud of PACCAR's excellent team, who have created this cost-effective, flexible, and robust manufacturing strategy. In late 2025, it was confirmed that the 35 mg EPA 27 NOx limit will go into effect in January of next year. This brings clarity to the market and helps customers make their buying decisions. PACCAR is wonderfully positioned for these changes with the newest lineup of trucks and engines that are the most efficient and highest quality in the industry. Last year, U.S. and Canadian Class 8 truck retail sales were 233,000 units, and Kenworth and Peterbilt delivered a market share of 30%. The U.S. economy is projected to expand this year. The less-than-truckload and vocational truck sector, where Peterbilt and Kenworth are the market leaders, are steady. The truckload segment is beginning to accelerate, with industry customer demand and spot rates picking up in December. The 2026 U.S. and Canadian Class 8 truck market is forecast to be in a range of 230,000-270,000 vehicles as economic growth, regulatory, and tariff clarity and improving freight conditions are poised to improve customer demand. In Europe, DAF trucks have a competitive advantage in the market with their innovative aerodynamic design that features the largest and most luxurious cab interior and the best powertrain choices. In recognition of this, the DAF team earned the prestigious International Truck of the Year award for the DAF XF and XD Electric trucks. It's noteworthy that this is the third time in five years that DAF has won this award. In 2025, the European above-16-ton truck market was 298,000 units. This year, the European economy is forecast to grow modestly, and we expect the above-16-ton truck market to be in the range of 280,000-320,000 registrations. In addition to the excellent businesses in Europe and Brazil, DAF is also expanding in the Andean region of South America. Last year, the South American above-16-ton market was 115,000 vehicles and is expected to be in the range of 100,000-110,000 trucks this year. Other 2025 business highlights included PACCAR earning the Elite A rating from CDP for its environmental performance, DAF being honored as the Fleet Truck of the Year in the UK, DAF, Kenworth and Peterbilt introducing the next generation of battery-electric trucks, PACCAR completing a new engine remanufacturing facility in Mississippi, and Kenworth completing a new chassis paint facility in Ohio. PACCAR delivered 32,900 trucks in the fourth quarter, and deliveries are forecast to be at a comparable level in the first quarter of 2026. Fourth quarter truck parts and other gross margins were 12%, and we estimate that first quarter gross margins will increase to 12.5%-13%. We look forward to 2026 being a year of accelerated growth for our customers, dealers, and PACCAR. Kevin Baney will now provide an update on PACCAR Parts, Financial Services, as well as other business highlights. Kevin. Thank you, Preston. In 2025, PACCAR declared dividends of $2.72 per share, including a year-end dividend of $1.40 per share. This resulted in a dividend yield of nearly 3%. PACCAR has paid a dividend for a significant 84 consecutive years. Last year, PACCAR Parts' annual revenues increased by 3% to a record $6.9 billion, and pre-tax profits were a strong $1.67 billion. Fourth quarter revenues increased 4% to a record $1.7 billion, with pre-tax profits of $415 million. PACCAR Parts' performance reflects the benefits of investments in connectivity and agentic AI that increase vehicle uptime and enhance the success of our customers. PACCAR Parts is continuing to expand and now has 21 distribution centers worldwide, including a new distribution center in Calgary. This new PDC enhances parts availability and delivery times to Canadian dealers and customers. PACCAR's aftermarket parts business provides strong profitability through all phases of the business cycle. We estimate parts sales to grow by 4%-8% this year, with growth accelerating as the year progresses. Last year, PACCAR Financial Services achieved record annual revenues of $2.2 billion, and annual pre-tax income grew 11% to $485 million. Fourth quarter revenues were a record $569 million, and quarterly pre-tax income grew 10% to $115 million. PACCAR Financial provides the highest quality service in the market and makes it easy for customers to do business with PACCAR through the use of technology and the credit application and loan servicing process. PACCAR Financial increased market share to 27%, a growth of 2 percentage points when compared to 2024. Capital project investments last year were $728 million, while research and development investments were $446 million. This year, we are planning capital investments in the range of $725 million-$775 million and R&D expenses in the range of $450 million-$500 million. This year's investments on key technology and innovation projects include the creation of next-generation clean diesel, hybrid and alternative powertrains, battery cells, integrated connected vehicle services, flexible manufacturing capabilities, PACCAR's autonomous vehicle platform, and advanced driver assistance systems. PACCAR's independent Kenworth, Peterbilt, and DAF dealers consistently invest in their businesses, enhancing our industry-leading distribution network, and they make a significant contribution to PACCAR's long-term success. PACCAR is looking forward to a great year in 2026. Thank you. We'd be pleased to answer your questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from David Raso with Evercore ISI. Your line is open. Please go ahead. Hi. Thank you for the time. I was just curious, can you walk us through the margin improvement you expect from 4Q to 1Q despite the flat deliveries? 4Q to 1Q, the thinking is, David, is a lot to unpack there. But one of the things you look at in fourth quarter is we had Section 232 go into effect. Obviously, that went into effect November 1st, so you had a month where we had higher tariffs. So that happened in there. The other thing that was significant is our manufacturing teams in the fourth quarter did a really great job of being able to convert the factories over to build trucks local for local. So, for example, Chillicothe and Denton are now building the medium-duty trucks. And in Canada, we're able to build all of the product lines principally for Canada. So that was a lot of adjustment in schedules during the fourth quarter, which had some impact on margins. As we look forward, we get a full quarter in quarter one of margins that are benefiting from the 232 tariff. There's the clarity of NOx 27, which happened, so I think that's starting to have some improvement. Order intake has been very good, very strong in December and through January. We're seeing some uptick in terms of customer demand, which is good for our business as well. That's what's driving up the margin, 12.5%-13% in Q1 compared to the 12% in Q4. That last point about orders, I would have thought maybe the build sequentially could be up. What's the translation from those orders into when you expect to produce those trucks? Yeah. I mean, I think you know the cadence of it is a lot of orders at the end of the year come in as fleets that are spread delivery throughout the year. So that's a little bit of what I think everybody saw in the fourth quarter. And then what we're seeing now is a little bit more close in terms of order intake, but it's allowing us to build up our backlog a little bit, increase visibility a little bit, and then that's what's going to translate into higher build in the outer quarters. And lastly, to quantify a little bit 4Q to 1Q, can you give us some sense of the price-cost dynamic in truck in the fourth quarter and maybe how to frame it with the Section 232 benefits for 1Q? Yeah. I think you can see favorability coming in Q1 compared to Q4 in price-cost. Most significantly is cost reductions that we would expect to see. And again, doing that comparison of the work our factories did, that has some cost impact in the fourth quarter in terms of getting the right trucks in the right places. And then again, we get the benefit of 232 in Q1. So it gets a lot more stable in that for a net positive price-cost on truck. Price, you had some. Yeah. We also had a higher level of overtime in the fourth quarter because of the events that Preston spoke to and getting all the trucks out at the end of the year. Our employees did a fantastic job getting all the trucks out that our customers so desperately want to have. So we felt really good about that. That should not be recurring in the first quarter either. All right. Thank you for the time. Yeah. Thanks, David. Have a good day. We now turn to Jerry Revich with Wells Fargo. Your line is open. Please go ahead. Hi. Good morning and good afternoon, everyone. Kevin, congratulations. Thank you, Jerry. I'm wondering if you could just talk about what you're seeing in the performance of your aftermarket business in January by region. It feels like there's an uptick in Europe in particular that's playing out, but I'm wondering if you could just provide the context you just provided on orders for aftermarket Europe and U.S., please. Yeah. Sure, Jerry. So forecast for Q1 is 3% growth year-over-year. The team did a great job, let's say, in a soft parts market with record sales growth for last year and definitely for the fourth quarter. And what we are seeing is soft part market customers really are focused on required maintenance. And so we saw a mix shift towards that. We've got great agentic AI tools to help identify that and not only get that mix shift in our distribution centers, but also out with the dealers. And so we've got a forecast of 4%-8% growth for this year. And we'll see that definitely as we see the truck side accelerate through the year, we'll see that on the part side as well. Super. And then in Europe specifically. And then the split in. Yeah, that's what I was about to say. And then just the split in region is. I think it'll be consistent in North America as well as Europe. Very interesting. Thank you for the color. And then can we just double-click on Europe a little bit? So production was really high in the quarter versus normal seasonality, and you took up your outlook for Europe. Can you just expand on what you're seeing in terms of is it a particular set of countries that are driving the demand acceleration for you folks in Europe, or how broad is the activity improvement? Yeah. The market finished at, I'll focus on heavy duty, at 297,000, and so relatively strong market for Europe. No specific focus on any given region. Obviously, depending on where you are in Europe, some markets are stronger than others. We continue to focus on premium trucks. Preston said we recognized as Fleet Truck of the Year in the U.K., International Truck of the Year for the DAF XF and XD. And so we took the market up because we see similar strong market this year as well. Yeah. Good story. And lastly, can I ask, on Section 232, as that starts to impact your competitors, how are you thinking about market share versus unit profitability from a PACCAR standpoint? As we look back historically, you folks have targeted improving unit profitability cycle over cycle. And so as we're thinking about the benefits from the rebate program as well as chatter out there for $9,000 type price increases, can you just provide a PACCAR perspective on where you see unit profitability going and how you folks are thinking about market share versus profitability given Section 232 evens a playing field for you folks? Yeah. I think the last statement you made is really instructive because throughout 2025, there was a bit of a disadvantage. And now I think we anticipate that to be an advantage. It doesn't come through quickly, right? It's a competitive world out there. So in the first quarter, many of our competitors haven't taken that to the market yet, those tariff costs to the market yet, which keeps things in a bit of a very competitive state, maintains that dynamic nature we were talking about in our commentary. But through the year, we feel good about our opportunity to gain in terms of margin and market share as the year progresses and things stabilize out. Because it does seem stable now. And because our teams have done such a good job getting the local for local manufacturing, it really should be an opportunity for us in both categories. Thank you. You bet. We now turn to Rob Wertheimer with Melius Research. Your line is open. Please go ahead. Rob, your line is open. I'm so sorry. Just following up on Jerry, the cycle margins and where your kind of competitive and production position sits in North America now versus in the past. Is there any reason to think as things normalize over the next year or two or three that your truck margin should be anything different from average, whether higher or lower? I have one follow-up. Thank you. Yeah. I would say, Rob, that predicting out one, two, three years in the operating environment we're in is a little bit challenging in terms of what things are going to look like. There's a USMCA negotiation that's going to take place probably later this year, so it'll be instructive to look at that. So I think that could have an impact on how margins feel. What I think we're focused on is making sure that the trucks we're providing have the greatest value to our customers. And to that end, as you know, right, we have the newest lineup of trucks out there. And one of the things that we're now focusing on is how we're going to be able to help our customers be more profitable through the use of the agentic AI that Kevin mentioned, but also maybe more generally in connected truck data. So our ability to have every truck be connected and gather petabytes of data from our trucks and then use that data to provide customer value is significant in the coming years. So that's what we can control, and that's where our focus is, is high-quality trucks, lowest cost of ownership, highest reliability, and new transportation solutions for our customers to help them be more successful. Interesting. I look forward to hearing more about that. And then just a quick one. Did you mention your European market share for the year? I hadn't yet, Rob, but it was 13.5% on the heavy-duty side. Perfect. I'll have a bunch of questions for you shortly, and thank you very much. Thank you. Thank you. Look forward to sharing more with you. We now turn to Steven Fisher with UBS. Your line is open. Please go ahead. Great. Thanks. Good morning. Just wanted to confirm some of the production dynamics in the quarter. The 15,000 in U.S. and Canada, I thought I heard you say that maybe that was affected by sort of shifting local for local. How much of, I guess, was the 15,000 less than what you expected? How did that compare? How much of that, if you could break it out, was tied to sort of shifting that production plans around, or was there anything else going on in the quarter? Yeah. I think it's not. Can you hear me? What we expected. Yeah. We can. Can you hear us? Okay. Yep. Sure. Thanks. Yeah. So that 15,000 is kind of right where we thought it would be, right in the range of where we thought it would be. Europe probably delivered a few more, maybe North America a little less, but what we really saw is a cadence change through the quarter and a cadence change continuing through the first quarter of stronger order intake, the ability for the truck plants, as we mentioned. I keep mentioning because I'm so proud of them, but for them to be able to keep the build going while they were doing this transition of build was really impressive. So if there was anything, a few hundred units might have been buried in there where they were working through bringing in trucks out of Mexico, bringing in trucks out of Canada, and bringing that flexibility, and then the team in Canada flexing into a wide variety of model mixes built in St. T. There are some inefficiencies in that, but their ability to manage that was significant and really impressive. And so I don't think we're too surprised at all by it. What we feel good about is the stability we have going forward and how that's going to be helpful to the build cadence through the 2026 calendar year. Okay. That's helpful. And then I guess translating that into then the first quarter flat, can you just give us sort of the regional color there directionally for U.S. and U.S. Canada versus Europe? Yeah. We see U.S. Canada up some and then Europe down a little bit as they had higher deliveries in the fourth quarter at year-end in Europe. Okay. Thank you very much. You bet. We now turn to Angel Castillo with Morgan Stanley. Your line is open. Please go ahead. Hi. Thanks for taking my question. Just wanted to unpack a little bit more on the order uptick. You noted the continuation of maybe some of that into January. We saw a strong December order data. So could you just expand on maybe the shape of the strength in January and just maybe any details on what percentage of your order book or order slots are now filled for kind of 1Q and 2Q? And then we were just related to that, if you could expand on just the areas where you're seeing the uptick in orders, is there any kind of particular pockets, whether it's vocational or is it more related to EPA prebuy? What are you hearing in terms of the strength in those orders? Yeah. I think as you articulated the numbers for December, you know those order intakes. I'd say January continued in that same level of cadence of significant overbilled rate order intake. Some spread delivery in there as you talked about fleets that are kind of putting in their buying decisions, but also some things that are closer in. As you mentioned, vocational, and we're seeing some significant orders from bodybuilders coming into our mix now so they can replenish their inventory for 2026, and then a steadiness in the LTL market. So it's kind of a mixture. You articulated that well, and that's what we see. So strong order intake kind of across the board, which is helping us grow those backlogs, which is going to be positive for the year. And then I would say. Very helpful. Orders in Q1, we're mostly full. And then as you know, we'll look at Q2 as we get to the next earnings call. That's very helpful. Thank you. And then maybe just along those lines on the North America truck outlook for the year, I guess U.S. and Canada, can you just expand a little bit? So you raised Europe and South America, but it sounds like the level of orders here is pretty robust, but you kept the North America unit outlook unchanged. How should we read that? Is there any nuances to what you're seeing, maybe whether it's market share shifts or that this positions you maybe better for or the industry better for the top end of the range provided? How should we kind of take that into context given the unchanged guide for the industry? Well, I think the truth is our unchanged is higher than maybe like ACT was previously. So we felt good about 2026. We still feel good about 2026. And so there's really no change from our positive sense of what's going to come through the year and the fact that it's going to be a year of acceleration for us. And acceleration sequentially is what we'd expect to see through the year. Very helpful. Thank you. You bet. Our next question comes from Scott Group with Wolfe Research. Your line is open. Please go ahead. Hey, thanks. So when truck rates start moving higher, we tend to see more truck orders. It feels like some of the reason why truck rates are going higher right now is that there's fewer drivers and the government's focused on non-domicile and things like that. If this is more of a supply-driven cycle with fewer drivers, how do you think about what that means for truck orders and this cycle going forward? Yeah. I think it's a great point, Scott. Obviously, you're dialed in on what's going on there, but if there are fewer drivers that maybe aren't meeting the legal requirements, those drivers probably are working on the lower side of the contract rates and the spot rate businesses. And then what you see is those more established carriers tend to have probably somewhat higher rates. The fact that there's fewer of that low-side drivers enables them to probably command a better rate positioning. I think there's some of that going on right now. Obviously, as they get better rate positioning, their profitability will hopefully improve, and then that will drive their ability to have better cash flow and purchase more trucks. Similar question. When this order pickup, do you have a sense is this more replacement or is there any growth? And if it is sort of more replacement, I don't know, just thoughts on how you see the used truck market evolving over the course of the year. Yeah. I think in the used truck space, it's kind of interesting kind of read-through to me is we think that as the year goes on, used trucks could become more valuable simply because of how things are shaping out in the marketplace, even in the next year. So that should be positive. Right now, there's been a little bit of a downtick in used trucks because some of those buyers might be the people that are being affected by the CDL enforcement rules, and those might have been the buyers for the used trucks. So there's a temporary moment there. And also, I think we've still seen the finishing up of rationalization of fleets that were going to be in the business and make it through this cycle versus those that are leaving the business. All of that kind of put in, you would expect to see the number of delinquencies diminish as the year progresses, as fleet profitabilities come up, and then used truck pricing follow that. Just so I understand, your point about used being more valuable, is that a sort of comment around EPA 2027 and big increases in new truck prices coming next year? Exactly. Yeah. That's a part of it. Yeah. We saw a 4% increase in used truck values year-over-year, and we expect that to continue to increase for that reason. Thank you, guys. Appreciate it. You bet. Take care. We now turn to Chad Dillard with Bernstein. Your line is open. Please go ahead. Hey, good morning, guys. I wanted to spend some time on parts gross margin. First of all, fourth quarter, what was it? And then how do you think about that scaling in 2026 as that business reaccelerates? Yeah, Chad, this is Kevin. So fourth quarter was 29.5. And as I mentioned, on a soft parts market, I'd say it's pretty good results. And again, teams doing a great job providing excellent customer service, getting right parts to the right place, right time. And so in a soft parts market, customers are really focused on required maintenance. And so we were able to address that shift. And what we're forecasting going forward is kind of a rebalancing of that mix as the market improves and a higher take on proprietary parts. Got it. That's helpful. And then just really quickly, inventories, can you just give us an update on where PACCAR is versus the market? And then just in terms of truck pricing, how are you thinking about that evolving as we go through 2026? Sure. When you look at the industry inventory, I think the industry inventory for Class 8 is 3.2 months, and PACCAR is at 2.2 months. So we feel like we're in an optimal spot on our inventory positioning. And at least for us, we would expect build registrations to be fairly aligned this year. So that gives us a good opportunity as well. And we're starting to see that. We're starting to see dealers come in with stock orders. And as we mentioned previously, bodybuilders want to have their spots put in. So that's the way we see inventory and its relationship to our build. Got it. Thank you. You bet. Our next question comes from Jamie Cook with Truist. Your line is open. Please go ahead. Hi. Good morning, everyone. I guess, yeah, good morning, everyone. I guess my first question, understanding your retail sales forecast for North America, and now that we have more clarity on EPA 2027, obviously, markets appear better versus where we were. But Preston, to what degree are you concerned the supply chain can't ramp if things really do improve? And where would those bottlenecks be, and how are you handling that? And then my second question, which is, my guess is you won't answer, but I'm going to try. The revenues were better, deliveries were better, your gross margins were in line with your forecast, but you said it was hurt by your shift in manufacturing local for local. Is there any way you'll quantify what that impact was in the fourth quarter? Thank you. Yeah. So your second question, you're right. You understand it. It was significant. I'm not going to give you a number because there's a lot of gray in that number, so I'd be taking a number that has multiple inputs to it. Say that it was a significant impact to us, and it is one that we don't expect to carry forward as we look into the future quarters. From a bottlenecks of suppliers standpoint, does that have an impact on the year? I feel like that's something that our customers are going to need to think about. We have great relationships with our suppliers. We've given them our forecasts, and we've given them that cadence of sequential growth and acceleration through the year and our expectations of our build. So they're aware of it. That helps them, right? So having a good plan helps them. But it does mean that if we get into a third, fourth quarter where build is significantly higher, then it puts stress on their systems as well. And we've been through this cycle. You just articulated it. There comes a point where if the ramp is too significant, it becomes bounded. We don't see that yet, but we don't rule out that that could happen in the second half of the year as well. And if that's what happens, then that's typically when price accelerates. Okay. Great. Thank you. Look forward to seeing you in February. Yeah. Look forward to seeing you too. Our next question comes from Stephen Volkmann with Jefferies. Your line is open. Please go ahead. Hi. Thanks for taking the question. I wanted to stick with the 2027 NOx thing. Have you guys communicated to your customers and maybe even, if you're willing to, to us, what the price increase associated with that will be? We've talked in generalities. The reason we speak in generalities is because I think the EPA has done a very good job of trying to let people know there would be 35 mg, but they also have stated that they're looking at useful life and warranty and what those impacts would be on cost. Those could still be subject to change. In general, I think the best number is to use ±$10,000. That's what we've been talking to customers about. It gives them a range to think about so they can kind of plan in with a new technology and a $10,000 increase doesn't mean they want to shift their buying pattern around. Great. That's helpful. And then this is almost going back to Jamie's question, but so presumably there'll be some sort of a prebuy as we get toward the end of the year. I think you guys have been in that camp for a while now. But if the demand were stronger, would you be willing to flex up to meet it, or does the fact that 2027 probably sort of comes back down fairly quickly post the change mean that sort of your appetite for building a lot in the second half is more limited? We serve our customers. So if our customers are asking us for trucks, we do everything in our power to get them trucks. Okay. Great. Thank you. Yeah. You bet. We now turn to Kyle Menges with Citi. Your line is open. Please go ahead. Thank you. I wanted to follow up on the last question. I guess not as much on the customer side, but just from the standpoint of the potential of dealers stocking up, you may be willing to carry a little bit more inventory into 2027. You made a comment that you're seeing dealers ordering stock trucks right now. So yeah, it would be helpful to just hear about how you're thinking of the potential for dealer stocking and, I guess, risk of an inventory overhang exiting 2026. Well, I mean, I think the statement of an inventory overhang has a negative connotation to it to me. And I'm not sure that if they had inventory going into 2027, that would be necessarily too big of a problem. I think that it's a little early to predict what the fourth quarter is going to look like because, as I said, we have to see what the rules end up being from the EPA. I do think there will be an acceleration through the year. That seems obviously starting to happen to me. How big that is and how significant it is at the year end, I think that's a lot of speculation that we can't really get to yet. Got it. And then just on the parts guidance, the 4%-8% and starting the first quarter at +3%, just how much visibility do you have to that ramp going from 3 to, I guess, +7% or 8% as we move throughout 2026? And just what are the key drivers of that acceleration in growth? Yeah, Kyle, the key drivers are just the anticipated demand as we go through the year with the market. We've had, if you look at last year, it was a relatively soft market throughout the year. So just with customers accelerating, putting trucks back into service, we're anticipating kind of a steady growth as we go through the year. The other thing you could maybe think of is tariffs should be a favorability on the parts side just like they're on the truck side as you look at the year. That's right. Helpful. Thank you, guys. You bet. As another reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Tami Zakaria with J.P. Morgan. Your line is open. Please go ahead. Hey, good morning. Thank you so much. First question is on the tariff-related surcharges or price increases you talked about last year. Are you rolling back some of those price increases or surcharges given that Section 232 eases some of the tariff cost burdens for you now? Yeah, Tami, we are. We've done road tariff surcharges for 2026. So they sit in there in terms of what our actuals are because remember, EPA is still sitting out there as a tariff cost for everyone. That needs to be clarified still. But we are seeing some price slide in Q1 expectation, but more than offset by cost. So that gives us a positive in price cost. Understood. That's super helpful. And as a follow-up, I wanted to understand the first quarter gross margin guide a little better. Did you see at any point in the fourth quarter the gross margin rate being in that 12.5%-13% range? Meaning, is it fair to assume that you exited a 4Q at a 12.5%-13% range, and that's what you're expecting for the full quarter in the first quarter given deliveries would be similar? Yeah. I think what you're insinuating is, are we seeing sequential improvement in margin by month? We don't break it out that way, but in general, yes, we're seeing improvement in margin as we go sequentially, even within quarters. Understood. Thank you. Our next question comes from Jeff Kauffman with Vertical Research Partners. Your line is open. Please go ahead. Thank you very much and congratulations. I just wanted to think a little bit about margin opportunity or market share opportunity in 2026. We've been speaking with some trucking companies that have said even now they still can't really put in orders for Freightliners or Internationals because post the 232 tariffs, they're not really certain what those prices are. So you talked about the shift post 232 and how that's an advantage for you. What are your customers telling you about their ability to, those that have, say, more than one nameplate, more than just Kenworth and Peterbilt in their fleet? Because we've seen the uptick in truck purchasing. To your point, that could be a combination of, okay, we got EPA clarity, we got 232 clarity on our domestic-produced trucks. Our understanding is your customers are still having trouble putting in orders for their non-US-built trucks post 232. Could there be a bigger opportunity for market share for you? When will you get some more certainty on that? Jeff, I think you must be talking to the same people we're talking to because I think they would like to have that clarity as well in terms of what pricing is going to be from some of our competitors. And that will certainly find its way into the market in the coming months. We've been able to give them clarity from our standpoint, I think, which is helpful. And so we feel like we should be able to meet their demand when they're ready to make those decisions, which should be good for us through the year, both, I think, from a market share standpoint and a margin standpoint. So just to follow up on that, the increased confidence you're seeing with their customers (and I know ACT Research just put the prebuy back into their numbers) how much of this do you feel is increased confidence in the environment versus maybe just increased clarity on what's going on with EPA? Yeah, I think it's both. I think that the clarity is helpful, but without the confidence in the freight markets, without the rate increases, and without increased profitability for the carriers, the 40% of the truckload carriers being in the market, they need those things in order to be more than just tariff and regulatory clarity. So I do think it's a both thing. And I think that's where we're at the point where we have tariff clarity, we have regulatory clarity happening, but I think we're just in the beginning parts of having the truckload carrier profitability return. So that has to continue to evolve, which will be positive for the year when that happens. Okay. Thank you very much. Yeah, you bet. Thank you. See you soon. Our final question comes from Michael Feniger with Bank of America. Your line is open. Please go ahead. Yep. Hey, guys. Thanks for squeezing me in. I appreciate it. Yeah, you bet. You got it. Appreciate it. You guys touched on the price versus cost trending more favorably in Q1 versus Q4. It's mostly on the cost side. You commented on pricing is a little soft in Q1. You pointed out how competitors have not fully taken in the tariff cost of the market. We're hearing commentary out there on discounts. How do you see pricing in Q1, but beyond Q1, kind of playing out through the year as we start to get closer to that prebuy? Well, I think that's what's going to be telling, is once there's price clarity from everybody in the market and the tariffs are affected into things. It's going to be, there will be some costs that come along. I think that's where price will start to become a favorable factor through the year. When we think, is there a rule of thumb we should think about your cost of goods sold, how much is raw materials, what we should be watching, what the lag is there? Yeah. This is Brice. The material in our product is the vast majority. It's 80%-85%. So labor and overhead are the remainder. So materials mean a lot in our pricing. Fair enough. And look, you guys have an analyst day in a few weeks. I remember at the 2022 Investor Day, there was just a lot of focus from investors if PACCAR can drive higher margins cycle over cycle. And you clearly delivered that in 2023 with strong profitability. Now, as we're coming off this Investor Day in a few weeks, early innings of this we're hoping a new truck cycle, do you think we can see higher cycle over cycle profitability that continue? What are some of the factors we should be thinking about as we're assessing the profitability as we're moving to this next recovering truck cycle? Thanks, everyone. Yeah. Thanks for the commentary, first of all. And then the question because the commentary is great. I think it's absolutely objectively true. Cycle over cycle performance that teams have delivered is really significant and outstanding. We'll share more of that on the Investor Day. And then as we look to the future, we feel great about the opportunities in front of us. It's not just trucks, and it's not just parts, and it's not just financial services, but we think there's other new opportunities coming towards us in terms of how we support our customers with advanced transportation solutions, data, connectivity, and the interplay of all of those. So those are all positive for the business looking forward. So feel great about not just this year, but the future. And look forward to seeing many of you in Denton. 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 we look forward to the upcoming analyst day on February 10th. Please keep an eye on the PACCAR Investor Relations page for a link to the webcast. Thanks again. Ladies and gentlemen, this concludes PACCAR's earnings call. Thank you for participating. You may now disconnect.