HEES - Earnings call transcript Q1 2018 | H&E Equipment Services, Inc.

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Operator

Good morning, and welcome to the H&E Equipment Services First Quarter 2018 Earnings Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead.

Kevin S. Inda

released welcome company's Equipment quarter results XX, which and to conference ended John, XXXX, the morning. review for we you, to Services H&E call March Thank this earlier the first format on website posted today's which our includes slide at the The presentation, for is www.he-equipment.com. call proceed to X. Please slide and be Engquist, Operating Magee, Leslie Officer; Executive call Secretary. Brad Officer; Officer the Conducting John Barber, today and Chief will Chief President Chief Financial and proceed Please slide X. to

we've our and these to release, certain During GAAP non-GAAP in measures today's call, will figures measures to we which refer financial is website. reconciled our earnings available on

Before words we meaning call of offer as expect, believe, such expectations about similar cautionary the contains securities federal note. and laws. Statements may, constitute could, start, This let and forward-looking me statements. the our anticipate within containing forward-looking expressions statements statements beliefs the and

harbor Engquist. to publicly risks the uncertainties stated, statements. of turn the other slide also XX-K other not cautioned described to these and not or I'll and contained The date from which Reports contained reports. that John evaluating periodic Form Investors, Forward-looking risks these to statements potential this on of for forward-looking statements the over unknown undertake the cause and company With the are involve to any include call today's call in place and any on forward-looking the listeners materially consider in safe the such the and urged statements are differ call. factors does investors results factors reliance forward-looking update carefully revise in those most forward-looking conference actual after now undue is in presentation recent in and uncertainties, company's included summary to A known Annual in risk could company's statement statement.

John M. Engquist

Thank Earnings Welcome Services and XXXX morning, good Quarter Call. to you, everyone. Equipment First H&E Kevin,

few focus and Leslie Operating President call are Officer; with Kevin I Leslie happy markets our today we'll Demand then which our will our Chief to results, rental for Proceed quarter. close quarter take questions. Chief will My When after Barber, remained strength business the our quarter with segments Vice X, market comments to overall year-over-year please. a with strong improvements. Leslie continued our results Investor our President and brief footprint. first your our comments, the solid delivering financial review and non-residential finishes, of both Inda, be in morning Brad our first our Officer, Relations. Finance on will construction On and the distribution during and business The in conditions, our me across slide Magee, this

very performance our pleased begin the We with year. are to

CEC million also April. XX.X% $XXX.X million compared increased to ago. in the to on compared XX.X% to revenues our a in Inc. million early We first growth Margins Total executed acquisition Rental early the a ago. the grew XX% in $XX.X acquisition over $XX.X closing Adjusted and year EBITDA to XX% approximately quarter. January strategy, year were

year share, share compared income quarter, $X.X or million or diluted to generated per first of per diluted the For ago. $X.X million net a we $X.XX $X.XX

Move quarter, achieved increase year the new to positive with Our sequentially. XX.X% sales, The year-over-year distribution basis utilization consecutive our a rates increased the fourth please. first business to increasing and sales was continued ago. The quarter up compared to grew XXX rental points year equipment million $XX.X an a and activity new net equipment business, during new to for X, $XX.X XX.X% million XX.X% ago, XX.X% utilization Dollar the for from time X.X% X.X% the a quarter in to increasing crane year we specifically improved in slide primarily with increase new total of result from equipment ago. in sales sales.

result, rental margins XX.X% to increased increased year compared revenues XX.X% to rental ago. and $XXX.X from a a gross year ago to As a million, XX.X%

size sites fleet various slide to acquired slide beginning reflecting footprint, sites course illustrates to our since regions, and million X, CEC. please. quarter, our branch acquired the expanding Proceed with the normal This increased the locations, nationwide have XX we that Inc. $X.X purchases Rental and in $XX CEC greenfield XXXX, During and billion, of assets in opened both the the acquisition. CapEx

throughout the revenue the CEC Rental as well. substantially has we for CEC in been Rental contributing of quarter. early the expect integration currently of The branches XX April, Inc. the acquisition of is $XX.X U.S. complete to integrated With performance closing and we have post-closing solid, quickly The Inc. in be located million

We and and warm by business starts. acquisitions, exploring will greenfields to continue additional grow our footprint

the spend second Let totaling underway, projects XXX,XXX financing, and more over comments solid demand expansion wave has about the of investment in completed associated Over could throughout capacity billion new permitting Several which since announced billion as to that supports remainder Gulf in recently of According Energy Coast, remains to years, to engineering me brief well. the Coast next and Gulf and Corporation been energy-related boost ExxonMobil the $XXX few Coast. phases. announced projects announcements a in $XX capital its Coast. has industry doubling with refining along than make recently move announced, has Rouge Economic new Partners, business in capital energy-related Louisiana new Beaumont Gulf oil $XX as industrial U.S. its have forthcoming. a refining non-residential is XXXX investment capacity Chemical as Gulf projects plans in result includes jobs. of Transfer billion U.S. at that a alone refineries, and permanent project the well five or Westlake company Louisiana as projects both have expectations others the a expand significant Activity which with Baton been other and activity. attracted Development, that is

forecast mix improve. demand Please can for our industry end-user well-diversified economy proceed Continue data the construction The slide that the The ongoing and to will markets. the machinery indicators are more this returns for environment pricing. than at progresses. the we it's aerial growth advantages highly high seeing to markets. We With industry, mix next call competitive is arises. to continued this construction, continue easily in going our for in markets the Coast bullish was many in during age believe Leslie slide one XX.X fleets a year turn and business results. industry that for exposure on XX% strategic we're embedded we're growth are high. business. quarter achieve believe our At our and experience Gulf time, XX, forecast With have age in fleet years. a as generally financial Leading and for strong. fleet, our to We our Energy business. fleet strength right please. the slide We which for the advantages demonstrates the Demand market. expectations strong to need positive markets good result months, also remain if regarding is our our I'm to a delivered to large of rental non-residential Our and utilized the now over believe demand as this X. We of in segment end-user youngest fleet the historically positive again several

Leslie S. Magee

our I'll XX to financials you, in and everyone, on thank Good slide greater detail. begin discuss John. morning,

pleased we results first year that solid and strong we markets in indicated, our John As quarter compared are were demand ago a remained to the serve.

Our operation, results which January X. first include CEC's quarter legacy on was acquired

million, the million XX.X% revenues high-level million to year largely a and Margins our XX.X% XX.X% overview, $XX.X to as total in primarily $XX.X driven a year XX.X% result higher compared gross strength million For increased were rental distribution first to million the or margins. the business. $XXX.X in Gross from profit increased $XX.X period same ago a by of ago. or a rental compared a $XX.X to quarter both year ago,

level for Let's based and XX.X% now points, and XX.X%, in utilization deeper time revenue wet equipment the XXX and rental year utilization flat and that part to not $XXX.X from in OEC, to Rental dive truck John product markets lift OEC the including a again X.X% rental points points XXX with XX.X% for year-over-year, to to all provided data increased increased year for a million, Crane rate utilization XX.X% year out, increased was CEC. average our top-line at as quarter's with XX.X% in underlying earthmoving pointed compared points growth to increased details this line general Demand of on increased Arkansas to XX.X% and detailed CEC increased the due XX.X% rates Rates also X.X% a XXX data. XX.X%, sequentially. and Rental include product XXX basis into our of up rates year utilization Mid-Atlantic. ago, AWPs results at improved the of the Louisiana, basis XX.X% note basis ago to the quarter, quarter XX.X% with time utilization ago. improved revenues. earth-heavy compared Please in do revenues physical weather our the the lines. basis beginning essentially ago, was

integrated. the Moving captured are fully last forward, to dollar versus returns consistently With now is strong XX.X% and information year. this be as utilization increased in future our systems XX.X% rates, expected reporting to periods,

used comprised $XX.X crane equipment, year earthmoving during was New Used year used total improvement $XX.X sales. compared million. $XX.X sales $XX.X equipment quarter, XX.X% earthmoving new to to million fleet lower XX% compared were equipment or $X.X higher sales to million Sales the XX% our million, from million or quarter. which to ago. by result XX.X% equipment a to was of decreased to increased offset sales, and $X The a These by crane million. of offset decreased AWP This increased equipment rental this used largely partially increase sales lower a of declines new as or $XX ago. XX.X% sales which higher partially new sales in due largely sales million

I'll in was primarily a and segments. year service $XX.X performance margins revenues. discussion quarter increase million increase to combined X.X% margins ago, ago, with gross business Consolidated an rental on compared profit on solid driven XX.X% ago. Our XX.X% million gross revenue to on from a parts up million improved for by other were XX.X% and the in delivered combined of a of compared year to in $XX.X $XX.X move profit a Total year a a XX.X% gross segment brief margin. now basis,

detail new margins quarter gross to crane by XX.X% strong on to ago, and new for primarily to margins compared XX.X% XX.X% quarter the gross positive for Margins rates. year, and XX.X% first higher to due utilization were segment, last on For sales. year due the largely were a compared sales earthmoving margin rental equipment

a XX.X% XX.X% parts year ago. gross last rental (XX:XX:XX) Margins to was a compared to were year basis on Our compared sales margin only XX.X% XX.X% pure margins a year. fleet gross used combined with our sales service And were compared equipment and ago. XX.X% on XX.X%

or compared quarter, million And XX.X% please. year XX. year improved the income tax $XX.X to were to EBITDA quarter, XX.X% partially of gross operations to business to XX.X% ago. million, margins solid was to were result $XX.X compared in sales Proceed Income further primarily equipment XX.X% a XX. the compared share first $X.XX the compared year I'll first which ago, improved to increased for slide on our ago. per as slide gross margins to the new income XXXX $XX.X move declined Net ago. to of diluted to of in to of a a effective a revenues XX.X% and X.X% from on XX, performance $X.XX this revenues business. same or XX. year other ago Adjusted expenses share XX.X% segments margins, first rental increase year year quarter increased Let's the quarter a year in period rental compared was of million ago, ago. discuss a slide margin per million $X.X to in million a Please operations move due slide and $XX.X rate to revenues, million, from The or $X.X diluted same compared a or is the in SG&A XX.X%

XX.X% SG&A labor, or million. incentives million periods. over million, $X.X was due in year, an $X.X same both totaling to period a other benefit increase slide and Next, employee and increase SG&A largely was $XX.X higher net costs the last was XX. wages, The revenue as percentage XX.X% of

for these $X.X to for first CEC's the the our increase prior addition year. accounting legacy of quarter include months three of In the to operations, costs, results million compared

million with increased We year $X.X amortization intangibles And recognized million compared also allocation $X.X costs expansions of price of of last, branch the a associated to ago. CEC. purchase

expenditures the capital expenditures transfers net fleet was fleet were gross capital Net for our CapEx for million, the XX, inventory. quarter Gross the during first non-cash PP&E $XX.X million. slide was million $X.X including on Next, and $XX.X million. quarter rental were $X.X quarter from

Free fleet average the was use of age for was of XX includes the March a as and quarter of CEC. million first cash $XXX.X Our XX.X months. purchase flow

of was included GAAP appendix operating Inc. of compares Rental our activities results have slide do the and this flow reminder, ago cash a business. to cash $XX.X on acquired periods purchase X; flow presentation. at reconciliations we net As the for year a presented April not provided of by the this to cash the to and free million end This include free therefore, the on

from We $X.X increase had our Proceed our growth amended billion, call first a ABL and Therefore, John. capital of million this XX, quarter, ago. slide of under please. XX.X% outstanding XX.X% the slide outstanding strategy. the of availability end, rental end At And balance XX.X% Next, Average compared supports we based size going $XXX.X utilization was I'm credit. balance letters on to believe dollar year or fleet of turn at no year on to XX. facility. of strong to we of million to a is the $XXX.X $X.X ago. back OEC a was the of time, the first structure net at the our end our quarter, At quarter had the million

John M. Engquist

we we continued strong slide growth in for first pursue trends is XX. our XXXX acquisitions. intend Leslie. about to for continue Rental a We're business be our conclude, complementary the delivered We strength the of excited CEC you, the by Demand our to strategy. and rental Please on in expect Thank year business. end-user distribution proceed solid business improving our our highlighted markets results and in quarter, and remain acquisitions Inc. industry. additional and to strong focused to To and

cash dividend X. our paid we quarterly XXth Lastly, consecutive on March

your future dividends we'd approval review always, time, board this are Operator, provide and please questions. subject take quarter. to to As At each instructions. like

Operator

Thank first from Buckingham you. take Neil Research. our Frohnapple We'll question with

Neil Frohnapple

Hi. Good morning.

John M. Engquist

Neil. Hi,

Neil Frohnapple

corner with quarters had need the Do above first? activity like in we've now two you turned robust and growth. feel particularly aftermarket do sales think will staying a we We've of $XX? consecutive oil you pickup growth crane Or continue, greater

John M. Engquist

sales said markets? both pickup looking activity. Brad better. seeing I and are be XXXX, we not is prepared be service But And are recovery. parts We're last it prepared stronger expect say Look, we're will quoting going our to we're in than comfortable full-blown full-blown very call, it's there's as to We're the we this yet. more, We're say be. to XXXX, on better recovery the I but crane a crane but the to see on not and to and a there a increased side,

Neil Frohnapple

pickup in lead early growth then, by that mean, the some was a activity? indications starting are to John. the indicators you see much in the in how X% driven parts mean that the rebuild I to that I are starting improve? quarter, And Okay, business crane

John M. Engquist

will... Brad

Bradley W. Barber

we we repair. represent. projects necessarily that select had. They Neil, accidents was otherwise a had. accident were even They to ticket the that more of were We They not may sure. items, more a large manufacturers Yeah, an related to more some had weren't that like we couple rebuild, but do due cranes it all-makes repair. have

Grove most Of course, around and of it's centered Manitowoc.

happy the was rebuild referred the get it, we large past to us good are that we've but, just and that we not no, So in for were yet. to seeing

Neil Frohnapple

market you about And mean, guys just I support growth quarter. you. one I more rate talk the rate year? increases then rental second, solid think I for expectations? will this had was in me. one you above X% outlook? end you rental do guess, further Okay. the that I can And first, mean, Thank final guess, then demand that

John M. Engquist

Yes, we do.

high real far environment seen utilization April solid positive. in expect rate We increases. is a with what we've We're and in further so

picture good of remainder feel the the the we about rate year. So for

Neil Frohnapple

Great. Thank you.

Operator

our Feniger with next Merrill question Lynch. Bank We'll take America of from Michael

Michael Feniger

on Similar step for up taking the question. if take obviously thanks guys. my year-over-year. I X% Hey, mean, a to Yeah, back, we question rates,

of we pricing about really I'm of anything talking like year-over-year You're an equipment environment that? a to you are talking environment you you are curious labor, say their lot can't? some strong long-term, players see cost inflation where we X% Is prices about return a base prices. environment. there just X.X%, to on like A can or do can think up think

John M. Engquist

are we time don't utilization to know and to we're but it that If No. types in with anyone is most prediction, were levels, to right It impossible? necessarily cycles. those I likely, we've on getting continue Look, guide possibility they that's that companies it's things not but to possible. exist, of previous now, our as think do nor No. likely? planning is That's seen the question. rate, running that improved would your want

Michael Feniger

Then of just That's they've some your helpful. right. seeing my some question, suppliers, second surcharges. we're All announced

clear, to that. equipment the your you year have been I purchased implemented? most or be on can before whatever have Just could some shed color for of just you this was hoping surcharges guys you

John M. Engquist

from Yeah, impact so We surcharges in have we that early very being will have our surcharges. announced, prior essentially impact orders to get to will no us. little

Michael Feniger

apologies lastly, What Okay. acquisitions? That's this recent was? break you out your but before, the excluding helpful. guys did guys if And just it clarified margins you

Leslie S. Magee

No, we did not.

John M. Engquist

across pleased would all speaking that the improvement with been associated margins our business add We very with regions existing smaller the we've generally but acquisitions. of did I seen have not, and

Leslie S. Magee

ex same the Yeah, directionally alone, about acquisition. they business I just rental the mean, up the I just mean, are

acquisition, way. about so results without either So the XXX strong points basis

Michael Feniger

you. Thank

John M. Engquist

Thank you.

Operator

Stifel. question from next with Elliott our take We'll Stanley

Stanley Stoker Elliott

talked up about all of kind of Just guys. any the of Is cranes? thinking activity we we're Good question. about smaller go-forward help this Quick there Is on the more crane this a on a quoting kind out? you the taking picking demand as way to Thank side. question, basis. parse Is for morning, larger cranes? there

John M. Engquist

large product. now. soft I we're strongest crane is think spotty, That's the I the is Brad? still demand, the on German Yeah, terrain the and say crawler strength are seeing Yeah. the right all-terrain cranes, cranes Rough activity would the in market

Bradley W. Barber

would that. echo I

John M. Engquist

in is strength cranes. the But all-terrain

Stanley Stoker Elliott

some to of Perfect. (XX:XX) you say I this I handful and But it went timeframe quite beginning, returning apologize a John, hear at Coast. through the projects Did didn't larger all. you Gulf ground or start of on these is will more we of to of just thinking should be this where term things business? the break when trend the kind directionally think longer about

John M. Engquist

I think then and really you'll about term regular basis see pretty here. But second some excited some of we're in the we're it's stuff half year on break seeing announced – projects this longer the a certainly, ground projects. big

a announced think pretty $X.X just It's that seeing for but Formosa basis, billion long-term manufacturing project Gulf Coast the but regular a project, chemical picture on Louisiana. bright. is in a we're we the

Stanley Stoker Elliott

Last for me.

active the for you and Should acquisition continued You or front, the pipeline greenfield guys even growth, right have been start. the pretty we all is warm looking with and on M&A then how expect now?

John M. Engquist

Yeah, to a us you We more announce we're and of to look, future. should front. acquisitions see expect see opportunity we out hard lot on that working the think there,

Stanley Stoker Elliott

of best and guys, you, Thank luck. Perfect.

Operator

Bill Baird & We'll Mastoris take question our Company. next with from

William McGoldrick Mastoris

are a – Thank earnings the talk in very of going your be and kind additional involved you. acquisitions. release, is Leslie, you question prepared also – and follow-up John that to about to and you last in remarks in this the

For maybe series of the balance sheet? acquisitions, it's smaller far the willing stretch or to you are how right a acquisition

John M. Engquist

smaller not turns. our to a significant can two four taking take done probably would on turns. want much We do our a We're doing to year three comfortable analysis beyond really leverage acquisitions – acquisitions and impact acquisition have The we've leverage. small we on four to leverage not

or leverage that. Our turns would three less stay at doing

we're be pretty continue our balance conservative to So and with sheet we'll so.

William McGoldrick Mastoris

for be is more where would that something about Maybe up. a acquisitions. criteria Okay. be acquisition including this I going mean, times, maybe on little bit seem synergies? a appreciated. And color make to maybe little you bit Multiples for an would six the

John M. Engquist

walked paying we saw for I you, I turns six very sense Yeah. And transaction. us. the acquisition. right for on what I we could That plenty disciplined think make could pay mean, that assets. you us Neff for I away from see when tell we will of the can But be

pay So in for to we're going be disciplined assets. we what

William McGoldrick Mastoris

these And your then in Is have, question granular oil Or the and in plans? on short-term this view? bit where oil a gas. little these next are another projects? the way, is maybe maybe more long-term maybe and are stated detail So the increased Okay. one-off I sustainable activity this something

John M. Engquist

it's those oil exposure I Basin, high Yeah, Permian so. oil more two field activity there as and and We've primarily probably utilization. down, and than drilling we the got to Eagle think strong running is did Look, today the fleet our is when turned the been. basins exceedingly Ford in ever

now, think look, to goes So, for to yeah, we where sustain time. we if $XX, don't to – if oil it some oil is, think but issue, close this stays is it's another itself going

William McGoldrick Mastoris

much. very you Thank

Operator

Michael to Merrill with back America Go Lynch. Bank of Feniger

Michael Feniger

Hey, guys. Yeah.

Sorry.

squeeze more mentioned if Are saw the I seeing any weather wanted April, any comment market to you the you some in guys just sequential of with mean, one the rate some X.X% change and and you We guess momentum rate trend on you April? with concerns maybe would increase on I comment quarter. the issues? guys in in there? over-fleeting momentum, April that kind rate in can environment. if there's Just Just in.

John M. Engquist

right now but prefer at what get seeing, monthly, we're tell in you side quarter, on what we're over how as we'll there, expectations pleased pans very the strong I some and good it's to this the year. a quote rates look, Yeah, movement seeing mean, basis have can this environment. in we that I a looking but and on rate We're strong opposed April I point we're to is out quarterly with. see you rate will for

Michael Feniger

Thank that. you. Appreciate

Operator

Frohnapple go And Neil we'll Buckingham with back Research. to

Neil Frohnapple

some as run wages, due year? rate rest increase Rental in Leslie, for higher think the the follow-up, the you incentives, year-over-year. moderate Were acquisition? labor, cetera, And the a you Could a I inflation, out just Hey, there year, we then I guys. of QX talk move called SG&A one-times one-timers quickly – potentially et SG&A guess that would Inc. the to and through including there $X million as about Thanks.

Leslie S. Magee

Right.

in as did So bonuses we of the in as $XXX,XXX quarter, we operations versus their the be legacy million have about related the that one-timers far out $X.X worth would called stay $X.X CEC the million. of in to that

So be one that would thing to consider.

So that was your year. for full second question. the talking question about And was then your just first rate SG&A run

your the forward, that the looking kind how of result to of and So on sort plays a accounting into so of kind result from of of some as business, the the take do the the we percent greenfields, we in SG&A of that cost a as flat amortization the revenue, percent called in then, and purchase acquisition, a rental have impact and view of basis one adjustment, of We as really growth to a acquisitions, intangibles of kind related And that's revenues. like quarter. out it thing. further, the of year-over-year step

forward So that Rental Inc. CEC for and will increase the both SG&A acquisition. moving

we of revenues percent flattish a SG&A So as year-over-year. view

Neil Frohnapple

Okay.

as that basis year well? full For

Leslie S. Magee

Yeah.

John M. Engquist

Right.

Neil Frohnapple

Okay. All much. very right. Thanks

Leslie S. Magee

Sure.

Operator

remarks. to additional over concludes for that speakers question-and-answer like to it closing or today's turn I'd And any session. our back

John M. Engquist

I the want to good, in on being call. everybody a Again, we're solid thank for environment.

talking our you Thank call. to to strong on for and look next have We expectations year forward you. the

Operator

Thank you participation. And today's for your concludes that call.

now You disconnect. may

H&E Equipment Services (HEES) 26 Apr 182018 Q1 Earnings call transcript