HEES - Earnings call transcript Q1 2019 | H&E Equipment Services, Inc.

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Operator

Good morning and welcome to the H&E Equipment Services First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead, sir.

Kevin Inda

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

today's we'll and is which release this to in During call, non-GAAP to refer financial of earnings we've GAAP available to measures, on our and certain appendix each measures in our the reconciled website. these presentation, figures

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

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

Bradley Barber

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

Leslie business comments with financial year in please. We're Chairman; revenues first our year quarter. of and end-user Financial our activity we take a When and increased as $XXX.X Engquist, brief distribution will focus with X, market are our will few close Total Officer; a business approximately Vice call to morning Project today me will Magee, On for Kevin overall the start and questions. My improvement solid comments. the Leslie segments our rental Inda, this your John Leslie review finishes, well. the results, Executive our X, then in and Slide quarter. our results with our market After, conditions, the remained President I performed both Slide Relations. quarter our will XX.X% pleased to please. on our delivered and from first ago. Chief healthy, Investor million

in in increase ago. XX.X% improvement year strong a reflected revenues results and Our combined used compared rental new equipment sales with a to

Our XX.X% from year margins various to revenue the due increased to ago, performance gross within primarily improvements segments. XX.X% a

quarter. for in a strong into year The maintained $XXX.X and X, was $XX.X tax effective margins grew quarter to With the physical Slide XX.X% income ago, X.X% the rental delivered million, expected, quarter rates please. yielded ago, in from ago. rate XXXX of In a compared a share high XX.X% million increase metrics. adjusted larger footprint, quarter, first we or to year per from broad-based year $X.X Our demand XX.X% our first the on continues $X.XX improved $X.XX the year share momentum a million per on compared and first key to to a in an in significantly a utilization across diluted EBITDA rental achieving XX.X% fleet or $XXX.X diluted net XX.X% ago. of as rental revenues our million first business

utilization dollar to X, to addition, please. a compared increased ago. year XX.X% XX.X% Slide In

As you of spanning a XXXX, XX locations footprint states. diverse very total can and starts Nonresidential construction occurring. we're remain because and we footprint continued has throughout Since be show where with a Greenfields, we from warm Industrial We opportunity slide, oilfields branch through improvement, have our to branch the healthy. XX work combination regions. locations and of our the geographic for acquisitions. like and we projects have this see added is solid continues stable all serve XX

existing please. increase our both continue markets We're includes will by strategy, geographic fleet We mix serve. expansion. our Slide both expand and with of pleased our in X, and very markets on revenues our executing location to and the which we acquisitions presence density growth organic for

by evidenced mix consistent by remain rental end composition. our with we on revenue charts our and As both the market this fleet slide,

healthy We to industry market DOTs months, and please. be State which nonresidential we spending construction XX.X continue year-over-year. Market XX.X of Spending to the the and also projects. our to an and another is increasing youngest fleets have markets XX, industry continues infrastructure-related energy-related indicators advantage strategic positive. at business. at transportation remain in Slide demand one for to solid are compared months average continues conditions of rental is End-user steady, levels. in projects broad-based. grow forecasted on Activity for believe

will we year in XXXX good visibility our the to Lastly, another for with year, be continue business. better believe

in the to turn financial our Leslie Leslie? discuss results detail. over call more Now to I'll

Leslie Magee

Thank Brad. Good everyone. morning, you,

recovery fees sales may like as quarter in historically prospective-only XXX reclassification resulted would accounted and I have begin, cost been Topic sales other cost damage noticed. or of to statement of certain explain adoption I XXXX of of of environmental and rental revenues for some in our leases rentals related and in revenues other activity of cost sales. that associated the with equipment the such other fees to Before have The our financial waiver, first and changes you

to of historical presentation. rentals ended sales. other of presentation Pursuant two to components, our rentals X-month Given the margin and as reconciling by determined the presentation gross the meaningful of gross equipment in sales, within profit and a breaking included sales down in Further, recast XXXX consistent reflect variances the cost retrospective is as-adjusted related reclassification certain a end the the included XX, at period this resulting costs statement year all is the been provide Therefore, changes rentals and to accordance treatment GAAP. we sales the the from we for to of XXX, line and with table on on retrospective include We an their income to equipment income and prior rentals required for data rental of period the XXXX was of revenues for retrospective release. in more it basis basis presentation results have into and it in Topic on believe period current appendix March opposed for light hauling prior cost items. our have Reg Also, equipment the comparative prospective basis the we've other; with a inclusion treatment important hauling statement to S-X, in revenues, of and cost fees. items year a data

You throughout may as-adjusted hear relevant. us when refer this period to transition

XX. behind metrics rental we additional We have helpful. have that our Slide us, revenues. reporting explanation now let's you'll changed, hope at using Likewise, revenues rental disclosures look our find preserved and With new historical of

good Our business delivered again results.

the or business strength driven $XXX.X in XX.X% sales. ago to to increased by our million, rental revenues and compared quarter the in period year $XX.X million both the total largely Our equipment first a same

versus last and ago. returns year year rental increasing acquisition, recent year rental which X.X% compared to time OEC's in we comprise a Including affected completed this XX.X% both increased expanded year. None about sequentially, up adoption ago. crane metrics remained trends, our increased consistent strong utilization XX.X% as XXX. XXXX, With Topic also the approximately Rental $XXX.X as and at improved the versus AWPs, which were lines As we ago. XX% quarter, to Rates the with year-over-year to improved average earthmoving of rate XX.X% our February by XX.X% were again of XX.X% utilization a fleet all of Brad mentioned, product well. utilization XX.X% in expansion, and on increased X.X% revenues, by year. million. based product fleet, to on XX.X% these high utilization previously compared of a all quarter OEC X, last rates reported, And Physical lines. dollar with rates of were for physical our We-Rent-It compared utilization XX%

aerial equipment fleet sales comprised offset The $XX.X year. New XX% $XX.X XX.X% up sales, used million by sales crane XX.X% our million improvement and a of in equipment net earthmoving used as sales a and million was to total partially sales. to rental or equipment million year $XX.X by increased was from compared were XX.X% decline million, XX.X%, respectively, largely which earthmoving $XX.X compared higher last ago. to new primarily X.X% result an sales. driven this in and $X.X new increased Sales quarter higher sales crane and or of equipment XX% Used to

Our and service combined time, At me let move on and a million X.X% margin. up basis, gross delivered revenue onto this segment parts a $XX year ago. from profit

result increased XX.X% equipment ago, unfavorable to revenue XX.X% as sales resulted sales million gross impact rentals, were a a and XX.X% equipment performance of and to margin. $XXX.X from Our our year compared Group in year a and ago, to gross profit primarily consolidated mix used margins new a gross improved service. in slight year-over-year

our sold. gross year. during by a pure quarter, the detail a maintenance and to to year-ago margin compared on rental margins, first ago, XX.X% a XX.X% were as XX.X% were segment, XX.X% operating gross was and expense on or due XX.X% quarter $X.XX Slide mix the or increased by XX. compared quarter of a revenues XX.X% for in only and combined of XX, ago. of increased a XXXX year please. or compared repair revenues on Margins was in to gross sales compared equipment XX.X% service net to as share gross income due quarter. revenues revenues. the service lower points per to margins income margins XX.X% higher compared a of sales of reported, Income share the $XX.X the diluted of new cost combined first fleet to from results XX.X% XX.X% of as sales modest in SG&A quarter. to of year million $X.X primarily equipment result to percentage compared Used in used for revenue decreased diluted XX.X% with in the leverage. first compared XX to primarily $XX.X to basis last XX strong a quarter quarter were XX.X% point the operations basis million profit per year Proceed Parts rental, rental to equipment improvement to previously this quarter to largely XX.X% basis For margin rental XXXX revenues or and $XX.X of increase sales $X.XX in The to Net ago. rental in equipment Slide rental expenses million declined year-ago XX.X% first million Margins of percentage and the XXXX.

to XXX mentioned discussion an income ago. this operation's the points of ago. Please Our ago, basis year XX. million effective on first the in previously versus move for income was the a on increase a reasons year Adjusted to XX.X% tax was compared a margins to EBITDA margin in expanded quarter million first XXXX And $XXX.X to of rate Slide XX.X%. increased Margins $XX.X quarter XX.X% XX. XX.X% the compared from year quarter Slide XX.X%

payroll a were $X.X SG&A other to $X.X higher $XX.X related the largely rent Legal a our to million expenses $X.X and improved XXXX Next the of with a primarily quarter Greenfield year basis for year, to XX. XXXX compared related XX a expenses, compared improvement. or prior quarter million. XXXX, branch million since profitability. employee and $X.X acquisitions XX.X% year expenses first increased million benefit expenses Expenses Facility-related taxes to March Slide a as Employee And point of total in increase. $XX.X SG&A and $X percentage to increased liability revenues professional incentive $X.X expansion million compensation employee-related workforce million XX.X% $XX.X compared for the XX, XX.X% a increased due first fees larger wages, ago, increased of million. salaries, increased and million million. related ago. expense, -- insurance cost to were

on Slide Next XX.

and Net capital from quarter was first fleet $XX.X noncash were including $X.X inventory. expenditures gross million, million. for the net capital million, during PP&E CapEx the fleet Gross Our transfers million. expenditures quarter, $XX.X for was quarter $X.X rental the

completed Our March of flow the was normal cash use end the use compares this of at average slide impacted XX.X million a we've of reconciliation Free months. first quarter $XX.X in cash deck period. This and fleet million our the for acquisition XX to flow age $XXX.X as by included a was presentation. free the the and of year was of a ago, GAAP

to a of XX.X% of size $XXX.X related Next Slide of had acquisition. a increase ago $X.X quarter, the and XX.X% includes on net million first fleet, end credit. at million. XX, compared $X.X end, $XX please. XXXX availability ABL letters was the first the amended of year dollar was quarter, OEC, first rental At the outstanding fleet Slide At ago. on XX. $XXX.X to million the of XX.X% balance Average based utilization from billion, Proceed the quarter the of We year outstanding under was our quarter or $XXX.X million end of million the to We-Rent-It of a

the strategies. At time, back Brad. to I'm turn strong and growth to ample this Our sheet going our support call liquidity balance

Bradley Barber

our summary, Thank the be year. visibility XX, quarter, are opportunities. conditions for conditions, start good return solid business off XXXX same-store focused With growth and performed first market our encouraging accelerating, during clear believe starts We year you, Slide end-user believe please. warm and another the additional will and Leslie. is remain markets year to well business. normal project seasonal for we in physical and on we're our the activity of into acquisition, increasing. a through In Current utilization is the we

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

quarter. to instructions Q&A. board future each Operator, always, for dividends As are provide please subject approval

Operator

from Thompson Group. with Research question Steven [Operator Ramsey take first our Instructions]. We'll

Brian Biros

This is Biros actually for on Steven. Brian

utilization to the more acquisitions as those, to some get fleet running And now? new details With those last, they're the similar months, or are could And can branches of XX gotten around you've you bolt-on XX done you added? core have is say, the provide efficiently whether those how business? performing kind rates if

Bradley Barber

we The Barber. date Brad you better to the for than is all performed have This Thank your have Brian. that that of absolutely, will acquisitions Yes, is I question. detail provide anticipation. our done

of of gone metrics, Fleet business. other But growth beneficiary positive these -- performance Some our to there. on the and your of have to well. exceeded very all a was in that specifically, an grown has them, metrics are business expectations, portions certainly of tremendously. in performance the is heels broad-based question, hurricane one acquisition, otherwise, And similar their our and of Florida the

Brian Biros

And hear. to Good one more rates. regarding

build good, was If maybe increase, demand? Or QX building increase I that you QX? demand and do in rates to, show sequentially rates would demand to kind CapEx? you in momentum of So a consider QX X%. rate Or continues to driving guess, how expect and increasing in greater react year-over-year

Bradley Barber

sure. Yes,

X.X% nice before, be QX still So the have year We year which sequential rates sentiment that that we see to the stated increase. view. would digits. than believe single for greater It was we and sequential was increase, low last

with changed utilization nothing's really We're opportunity. physical So rate our on focused rates. balancing with well our

the year. remainder the for improvements rate of get will We

pertains lot growth the of we're the really digits to As guidance within in a specific But to level this the single expecting it give to same compared fleet be of growth. year CapEx, on CapEx. business as we high don't

Now lot consistent keep mind increases. benefit going full a same, get with in the from more along of investments utilizations we're of But we've positive healthy to made that industry-leading last the rate year. year

Operator

Longbow with Research. from now Sabeiha take next Faheem will our question We

Faheem Sabeiha

but rental the question it A quarter, be a performance I there the be would from given for guess any color the excluding integrations, that on Leslie. know the able would little maybe revenue comment you the to I difficult, acquisitions? benefits helpful. in

Leslie Magee

those the I We-Rent-It, a acquisitions, more then be and are the But say, difficult. Inc. they just business that approximately that it or so months Rental does integrated, up WRI, would roughly, ex bit is the Once would of become little yes, two ex Sure. rental that acquisitions. XX%

Faheem Sabeiha

basis Was an around absorption great. primarily point was from was maybe Okay, a fleet? the in mean utilization your -- there? color impact could there little that from XX provide pretty larger quarter. decline? but the guys weather more time a Or I you year-over-year And the impressive

John Engquist

of bit it was both. think a I little

Bradley Barber

of fleet it physical level Certainly, utilization of we're was at little that got you, had has year-over-year But our that the think early little maybe, March a a February, normal to I I pretty impact. that than some consider February late Yes, tougher, seasonality. was bit achieve, the both. into growth. we did tell we proud growing when

and at exist Our view higher. same is to level I expect us much improve and had some perform utilization that the that relatively of at similar we that time, physical last think rate positive flat we to our year's view physical opportunity to been previously still and point with probably utilization potentially utilization it's larger would still I in tell a for our year-over-year. But you is possibly improvements. this on consistent perform last fleet year's

Faheem Sabeiha

sellers Okay. selling X-part us maybe the of a the given for X can guess I premium on tuck-ins market you're And a strength Are John now question asking price more And is more that price. on in and trend Just also you an in comment you on of wondering the given the just the final pipeline? now? seeing if H&E's -- update on achievable the question. discipline Can market? to provide M&A. strength a for still year X

John Engquist

you, expectations. these what change going we disciplined valuation for change don't of a and no out And we there. year There's mid-sized tell to expect Yes, in X achieve multiple to seen be anything And X in is there. a expectations assets, pay or lot or We've we of year. to I we're will small, look, opportunity ample expectation X think acquisitions I to have acquisitions X achievable. a players that

of to a I year. expect pipeline, can you good these X X us or think acquisitions and So do of plenty opportunities

Operator

with from Weber our next We'll Seth Capital Markets. question RBC take

Seth Weber

year? give the I'm I maybe, or level my pretty and talking like do square you positively. bit But strength? just of I trying what your to us how of term the things that That's guess, year. the of are areas pretty confidence -- squishy you particularly your you metrics industry understand longer visibility the like term, provided question. guys telling for through what good mean comfortable in this but the obviously, a some And just first gauge you I balance get are, ABI in up little been you've field? are the of lately. outlook And near guys here construction non-res seeing Maybe have

Bradley Barber

broad-based. absolutely -- been opportunities Seth. It's mix the Sure, of there's It's been see the we change no in non-res within construction.

as I appreciate I is other base our confidence that direct it As I -- in same. And few weeks. VPs out correlation. at And tell ABI change. pertains and do to from last really our and it's the more our that as reflective of the a is tell in We're this on about not of ABI, we now number how the certainly recent point metrics. And visited expect of of But sales it XX hearing talking have ABI We to you nor attention the what lot customers to managers who I well projects, that you And time not I've seeing. personally consistently. a locations or will pay that region to that's other we're the ties question. specific direct feedback unchanged

Seth Weber

up as so of think a Maybe a Okay, last But -- was just you SG&A here you for versus do be dollar Leslie. percentage a in Leslie think, think the this super just revenue on basis it decline could Brad. down that's the year-over you couple quarter. year -- for percentage? on do year year it helpful, will Do

Leslie Magee

rather of quarter the rate would we SG&A a Seth. rental call, that segment run Always as And fourth on our business. other as rental which we attention of the Not still requires run we really continue revenues discussions our segments more grow focus to were as times our with that percentage that than SG&A really, business. had of than of And really are people slightly just as dollars. SG&A percentage we've revenue the several your comfortable talked on really increase earnings to

year slight a for we percentage year to For the the SG&A undergo expect full XXXX. as percentage revenues of XXXX, of pressure that XX.X%, of and was full

Seth Weber

it anything Or Anything Okay, that's then the Or lastly, mix margin really channel? used in just kind the in it of fleet? issue? Or helpful. there younger a juiced is was quarter? just that sale that was And quarter? extraordinary was the

Bradley Barber

equipment pricing and only improved, I has the contribution a If from there's margins. reference nice quarter, result -- strong, of product have crane something off. net tell But certain remains segments been that margin But consistent think used fleet would across positive. I others at no, would have amount all decent did leveled I very the the that, you we and types. sold rental I very so is mean,

John Engquist

a really, market, really Seth. equipment healthy used That's

Operator

And on we'll move to Elliott Stanley now Stifel. with

Stanley Elliott

to comments used the think I more more one relates think actually that, crane People As on business to there help it down. buying that be Anything the about was the distribution that equipment? used you of sales, that's out biz? talk sales would the used Do part great. of new you was timing? can the

Bradley Barber

Sure.

a we slightly had couple to -- prepared margins, led crane some comments slightly sales. a were but slight new Leslie really still the margins due about And at her Crane in road-building nice in sales. larger sold reduced those that had equipment healthy It we was typical spoke we were margin by generally speaking, new earthmoving. quarter, for in pressures mix. So packages down go The it's view as out still same. could on. we I maybe And really our your would forward. specific cranes We that think at choppy. has sales year, crane would point It's But early got new this the expect XXXX. be our limited quarter. lumpy. market to still the And for XXXX of full visibility. more to question, similar And it's is level the sales

John Engquist

run to of against That's the that think forward, you part a going at in an And kind first X if guideline. year, going growth give first quarter, easy the rate you of as next think when Yes, use good quarters, quarter it. that pretty the look and a was look, year-over-year rate that's I you of for rest the comp. the I

Stanley Elliott

great. et has, introductions, you of because parts been of very frankly, moving very, there's mentioned cetera. are internally you how Just all that that? talking doing in of about? that improve that. good. Yes, there drive Okay, opportunity which to of to product What Is been products looking the mix kind with to Brad, help you're at lots out anything utilization, you're terms new

Bradley Barber

spent direct feedback. we're through the that how That we to that needs. and customers' really we're think we get that's receiving of I and will the our to. technology. Sure. our I Well, underutilized but be of to of it a always job biggest don't than deeper We allows key what's be we continue can to mix run being management. event. a products. improve fleet that's use very everyday we've fundamental mean that, single our continue efficiencies customers, assets, ongoing questions. to about Those appreciate that's visibility, want automation I questions Probably, employing good systems little confidence responding of an and industry-leading how utilization delivering does information as stated, of That well and continue to gain being a and around yard resources efficiency. lay That really we probably kind lot we're as touching better questions. good a our systems some area to When out time with forward those team in things us are within and And stated,

Stanley Elliott

talked that that lots then past, sort the of and it? deals. capacity the right sheet, to Great. is to maybe, In X.Xx guys for still think lastly, I'd in And are way there. terms of about what's balance be about, curious you just obviously, I were some Or you think see for there. flexibility your dialing to mean -- metrics the I of back? up

John Engquist

But opportunity a Look, on not have were to big I material do comfortable X on really leverage acquisition, to we on really a transformational think X X that as can and beyond our our If we'd go our would a that's of has high be leverage no an one, have turns. taking these and acquisitions tuck-in view year view effect kind hasn't our No, changed. that. not leverage. for leverage, X, We as we changed.

Operator

Research. [Operator from from take next Neil We'll question Buckingham Instructions]. Frohnapple our

Joseph Nolan

This is for on Joe Nolan Neil.

So most been improvements but year? of me think said of answered have the the I if rate expect already, remainder correct for you that my wrong, questions I'm you

Bradley Barber

We do.

Joseph Nolan

you commentary I was on just so any And quarter? rental-rate wondering provide you're far the seeing second Okay. if for could what in performance

Bradley Barber

let talked Well, had Leslie improvement prepared saw that product her different comments -- me the types. of across we it in rate all about

could probably that's best offer. the think I indicator we

supply We little out make in As quarter continue seasonally of that way. we opportunity. disciplined this competitors going our a part move a is about do moderate very see We year in to QX, balance. our year, to we're in to to see be operating on which sure to going our the slowest want demand we keep and of capital more and our growth rates. we're we disciplined the spoke Because our spending

have certainly a view as the forecast pick So unfolds. strongly opportunity rates continue individual we raise number simply stated, while to and year-over-year year sequentially we we won't that it our is to quarters, and the won't

Operator

time, this to there additional are no any over questions I'd the like at queue. And further remarks. for to you. or management closing in Thank conference the turn back

Bradley Barber

first Sure. look the the to again call talking and We quarter appreciate on QX. to time you. get end Thank of everyone to taking the everyone forward

Operator

for does conference. all That Thank participation. you conclude you. today's Thank

disconnect. now may You

H&E Equipment Services (HEES) 26 Apr 192019 Q1 Earnings call transcript