HEES - Earnings call transcript Q2 2019 | H&E Equipment Services, Inc.

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Operator

Good morning and welcome to the H&E Equipment Services Second Quarter 2019 Earnings Conference Call. Today's call is being recorded.

At this time, I'd like to turn the call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead, sir.

Kevin Inda

released welcome Company's Equipment quarter results XX, which and to conference ended Bethany, XXXX, the morning. review for were you, to Services H&E call June Thank this earlier the second format on website posted today's which our includes slide at a The presentation, for is www.he-equipment.com. call

and will Chief and Board proceed Bradley of Secretary. today the Barber, to Financial President; Executive Engquist, Chief Conducting X. John Please Officer and Directors; Magee, Leslie Chairman Officer Slide Executive call be of the

Slide to proceed Please X.

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

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

involve and statements forward-looking unknown risks from of A contained in in Safe could differ to Harbor these uncertainties, materially summary the known, cause statement. is any results included those Forward-looking actual uncertainties which in the also the factors presentation reports. periodic described for Company's today's include reports risk most call in XX-K in and the recent Company's other and slide risks the annual contained Form statement on

carefully forward-looking of place these or not Investors, forward-looking are does are to conference publicly the potential statements update listeners investors The not in after date on reliance undue revise evaluating the factors such other to to consider call. urged and cautioned forward-looking undertake Company any this and statements statements.

to I’ll Brad said, now call that turn Barber. over With the

Bradley Barber 214

XXXX morning, Equipment to good H&E Services Welcome second earnings quarter Thank you, Kevin and call. everyone.

Vice Magee, John of me Engquist, President Kevin with our Investor our Inda, today Leslie call the Financial Relations. Officer; On and Chief Chairman; Executive are

we the results, will My quarter. this and our financial will conditions, quarter our Leslie for then Slide results a focus review finishes, few take close I on second will X, please. comments. your and morning business with will When questions. After, market Leslie our comments overall brief

please. We see markets in is quarter performance with we X, construction Slide second we the believe serve. continue strength our to the consistent

As expected, in all geographies This group across we of the including ran, product we types is business. has demand broad-based increased served, the rental project our and demand diverse types.

solid and Our end year optimistic customers end remain this with at activity of expected XXXX. of the

total X.X% $XXX.X result, a million the revenues As in increased approximately second quarter. to

well with Our year rental XX.X% ago. revenues from perform business continues a to up

of to improved increased net year margin the gross from XX% to year diluted $X.XX And on million. share a grew ago from XX.X% to versus Our XX.X% quarter XX.X% margins year million was per XX.X% Adjusted $XX.X second an $XX.X ago. share in a XXXX of the $XXX $X.XX XX.X% compared or second a effective a diluted income EBITDA XX.X% year quarter million ago. rate tax In per or ago.

Slide X please.

results Our capitalizing user rental end deliver our increased in demand continued to business on solid markets. successfully

We high XX.X% in a significantly a for fees also X.X% rental from fleet. a utilization rates of and larger year achieved on increase ago

second the from ago. a for quarter revenues rental increased result, a As XX.X% year

to increased addition, compared to utilization value XX.X% ago. In year XX.X% a

Slide X please.

the in store have states. our first now Prineville, presence Xst of we in in With July branch Oregon, our XX opening

organic the both geographic us nation. plan location in customers existing in increase which better service coverage, to as projects Greenfield acquisitions expansion. existing expansion strategy Our continue one strategy. our growth fastest And with in representative by states. the density our economies support and adjacent branch our locations markets growing to other large and executing by the includes served area is and in We on branch our upcoming well this as Prineville of Oregon has positions of better provides

believe revenues in over XX% are and please. solid drives especially illustrates X our slide which Demand in construction which all of business. mix of revenue. markets, our we significant of non-residential This composition end advantages of our our Slide fleet is both

continue improve achieving invest rental We growing fleet to opportunities assist on to the us in in improved us and returns. diversification our focused that allow rental fleet,

have industry the industry of months. youngest to We XX continue fleets one of to months XX.X the in of average compared an

XX Slide please.

positive. earlier As construction economy indicated is in markets strength the exposure. The performance we indicators rental as with my the a is remarks, and as our industry as where non-residential the consistent have whole well remain industry strong in

ground, Our that the projected breaking solid is most activity currently projected is activity and phase. important our announced growth new sentiment robust project activity -- and cycle we belief the to see is indicator current in supporting and in customer continue still

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

Leslie Magee

morning everyone Brad. thank Good you and

reclassified due Appendix of this presentation, rental related a there’s the and of the a fleet to quarter, to related equipment reminder included components the adoption As XXX changes last again we topic a rentals activities. table of have the in detailing

also rental preserved and income an prior as reporting reflect basis a included on on basis. have our revenues consistent data historical We comparisons adjusted of the to statement theory

at So slide XX please. now look let’s

driven with our business. of and the year or increased to strength revenues period for million We same X.X% by rental performance business total the $XX.X ago the are to a compared our pleased quarter in $XXX.X million, the the second partially

XX.X% rental to $XXX.X highlighted, previously as increased Brad million. revenue, As reported,

based average Our to physical compared for on high time utilization quarter utilization XX.X% of the year OEC with a XX% remained ago.

fleet rental approximately versus year our by ago. expanded We XX.X% a

expansion, rates in in returns X.X% improved rates up X.X% well. again year. strong quarter versus to increasing year-over-year, basis our product raised increased also points XX.X% rates last in sequentially, this product dollar as improved rental lines, all lines XXX and utilization all rate Our With

fleet the comprise sales compared million was ago. $XX.X year sales and compared of last decreased XX% rental XX% sales crane equipment to equipment decrease our increased or million to aerial respectively. XX.X% and of a to $XX.X $XX.X equipment as New quarter and result to year, and XX.X% lower million which higher million XX.X% driven total sales down XX.X% largely primarily by or And used were sales Used of sales. a million from $X earthmoving $XX.X this use earthmoving

up in ago. million service on X.X% Our segments basis, year combined revenue a $XX.X a parts delivered from and

let's move profit time on margin. This gross and to

Our year to used ago gross year and ago, were compared increase XXX service million our margins points, business. of primarily a XX.X% in a XX.X% sales performance an combined consolidated shift mix higher a basis rentals and profit margin strong with and of a increased XX.X% from equipment positive to $XXX.X as new result to

margins pure largely the segment, year were margins for rental sales ago compared the XX.X% sold. equipments the and to compared to XX.X% lease gross ago, last XX.X% period. mix margins fleet on increased quarter XX.X% were on previously due during to gross Margins XX.X% rental the to quarter, with a detail For ago. second margin a by of sales as Used to year new XX.X% as year, our increased XX.X% gross and same sales year compared reported the equipment equipment

compared a Our service ago. gross basis parts and margins to combined XX% XX.X% on year a were

Income A increase, combined offset revenue in quarter. solid and from the or margins, higher revenue XX.X% higher ago. XX.X% of for XXXX margin the a basis operations of decline XX in point to equipment gain to $XX.X was year second The compared costs or rentals the increased partially of new quarter of XX.X% compared these net result ago margins to million to in change Slide please. revenue property a a sales XX of mix primarily in $XX.X with SG&A shift service used sales and results in on revenues. year million and

$XX.X diluted $X.XX income slide compared quarter the $XX.X XX. Net per or or million diluted Proceed was second share income per million quarter of share XXXX of of net XXXX. $X.XX to the second in in to

year XX.X% tax Our XXXX was income second rate quarter ago. in effective the XX.X% versus a

basis EBITDA quarter slide EBITDA quarter slide points ago. a to compared operations reasons Adjusted on XX. income in $XXX.X margin was move margins previously of same to for on million a expanded second increase year to to XX.X% this margins the increased the year XX%. mentioned ago, XX. discussions from $XXX compared And Please million an the XXX

were expenses of million as percentage SG&A compared year second XX.X% ago. with an million were the a next slide, million increase. quarter the of of in year, the compared $XX XXXX XX.X% in XXXX $X.X $XX.X a XX.X% to or for revenues XX. total SG&A prior second Our quarter expenses

salaries related wages, and June other to acquisitions our compensation XXXX, payroll related related due largely employee million and benefit larger taxes since $X.X Employee work to profitability. employee a higher expenses XX, incentive increased improved and force

million. expense related and expenses Expenses related depreciation amortization Solely $X.X to million increased branch year ago. $X.X compared increased Greenfield $X.X to expansion rent primarily a and increased million

XX Slide on Next please.

expenditures noncash were fleet for million Our transfers expenditures gross quarter $XXX.X were the the fleet net from second quarter million. $XXX.X rental during capital including inventory. And our capital

$XX.X was net quarter million. PP&E Our $XX.X for the gross CapEx and was million

months. Our average was June fleet of XX age XX.X as

quarter free cash acquisition during this Our million year was of a free by of flow $XXX.X that impacted million also compares second cash a which flow was of an period. $X.X use for completed use to ago, the a and

to end cash in GAAP the for the slide operating cash about activities We've on free included the the presented to reconciliations the at flows net presentation. periods provide of appendix this

a based the Slide dollar rental increased was size XX. from $XXX.X second XX.X% a XX.X% Average the OEC fleet was on At a end to our utilization XX.X% on Next or million year of of $X.X ago. ago. quarter the million the compared year

under the million end the XX quarter of amended of we which letters facilities million. was the net Slide was balance second And quarter, end to ABL of credit. of Proceed outstanding $XXX.X of outstanding At have the please. availability at million $XXX.X $X.X

going to And time, the to at I'm call Brad. back this turn

Bradley Barber

To positive. proceed on we achieve continued rental areas business. encouraging and physical remain XX. are Please utilization, Leslie. trends conclude for rates business on our all in our you, improving our to Thank a of rental business the emphasis remains with outlook focused we're with to results our continue Slide positive year the growing and pleased high The and solid

our dividend $X.XXX quarterly on we XX. of payment continue to cash Lastly, pay July

are dividends quarter. subject As and review to always, future approval Board each

now provide your questions. please instructions. We'll take Operator,

Operator

will And RBC Markets. Instructions] first Capital [Operator question Seth come Weber from of Absolutely. our

Seth Weber

everybody. morning, Good

Bradley Barber

morning, Good Seth.

Seth Weber

time Wanted Good utilization. morning. to about ask the

XQXX quarter, at took guess Just looking quarter, a year. on the into I of -- softer lot looking you last a was fleet third

we're mean, year? where in So, do you XQXX in at flat back to to of half think actually up here be I the start setup here utilization time a the or could

Bradley Barber

Seth, possible. I think do that's

think going a our that we to much a of continue. good look will were I a we that performance be of fleet; fleet think But down, or that additional to But be look kind up expectation. we're is satisfied take. on think, flattish some coming larger kind good and likely in. if got up. We've slightly to was we year-over-year were still flat have rates I with

Seth Weber

anything And you then would for highlight helpful. that's markets. Okay, Brad, energy

there around in out in lot of there So, that fleet there's fleet a you'd whatnot. from Is anything you're of seeing a the and of know, markets Texas, lot or some for highlight ground angst example? obviously kind you in utilization the -- of a your on Texas

Bradley Barber

same, the footprint, of will that more and really it's very remain that's it's and be rate solid, time expectation No, to utilization continues solid. our we've best our solid, within got,

Seth Weber

And is case do or -- soft in feeling sorry. is previously new that flipping you Okay. the over flattish business, there flat think kind being about quarter. that could number you a to On or like some -- sale, looking business we're of I downside there then talked think? any distribution there still are little Is for are equipment the just the year-over-year. be to you Is that numbers that had maybe still

Bradley Barber

Look, we pretty I talked hurry. they I Is could about before be potential be? think there that in crane it mean, can us sales large big a we downside, could swing flattish.

question, better. blows cranes. I to retail particularly to that soft do you; risk on it's backlog. been some just your we have don't got get direction, that quarter a they've the we helped And And few that so, impossible that a a if in didn't could still we flat answer sales. And think machines But the new We flattish little number. not back year-over-year some would QX so tell make our in new wind we our delivery for maybe we have I will little quite had for year-to-date. numbers,

Seth Weber

Okay. And that…

John Engquist

Seth, Just comment one give. I might

sales last that, and we quarter the as first that that if rate On mentioned you pretty a run good. of call, kind think use that's I took the

Seth Weber

Right.

John Engquist

we what do. for think Proxy we

Seth Weber

I'll appreciate I Okay. you. That's helpful. Thank get guys. in back queue. it

Bradley Barber

Thank you.

Operator

will come UBS. of question Steven next our Fisher And from

Steven Fisher

morning. Good Thanks.

little sales strength Just there. more weakness? to cranes types seeing what new Seth's us within kind cranes on just relative follow-up relative a with the you of -- question any Can on give particular you or the color are of

Bradley Barber

sales have cranes and sale same, real change. change, the been more the end that we've really it's Steven, remains historic remains, expect more it's is seen levels. the But been have really of there no have volume spotty and on the going that that crawlers more RT just forward. the lower of been been same higher been the All product, No, same of no there's popular more product

Steven Fisher

curious market the you just and stands on it something how And supply-demand you where than maybe Okay. describe balance observe looser the rental Is overall any regions that there tighter, there getting of out the overall market? would sort out different fleet? are

Bradley Barber

I'll of So, pretty or take consistent question. change last relative improvement our mean are year-over-year. most the part I No, with regions of

in As it's balance, look at we our improving favor. supply and demand

with expected, increased be of utilization. to the that's think I off typically we seasonality get based the

the opportunity consistently for given within guidance incremental we rates. forward, As is our expectation gains our fall to continuing was an utilization see on that get rate We move increase.

-- to improve, supply very it healthy to improved. think that's And and it have it perform demand think absolutely So, it incrementally? us we continue improved, to Will well. balance going I I has has a of allow

Steven Fisher

a cycle the rate steady as the assume half? second so, Do progresses? the do deceleration you of conditions the should low percent direction you support base And for the of of we that kind growth case market X rate can some rental sort over think plus growth or have

Bradley Barber

I not assume would deceleration; assume I of the would same. any more

Steven Fisher

it a impact? just would obviously, out, couple came if ago. just, a called want sure. storm did, Does through And but assume Okay. there to that you have was any have it make that noticeable I weeks

Bradley Barber

the lighter. No, no was of very and much fortunate really storm the We were the timing that magnitude impact.

So, day, it business. for was half pauses to but rainy and may have a the no impact

Steven Fisher

lot. a Thanks hear. to Good

Bradley Barber

questions. Thank you for

Operator

from we'll And Ramsey a [ph] of Thomas Group. Steven question Research take

Steven Ramsey

Good real and you Denver of map of regions areas and area, that? kind think discuss, factors to like your morning. in the only Coast have areas, branch if I that of Louisiana, density looking areas kind a discuss Gulf where areas of seems maybe areas you of at There are rates utilization guess, you of density certain Texas. your the one branches are certain I Can about of it concentration the locations. like outperforming have wanted

Bradley Barber

-- generally in So, mean, I markets. in we're case some yes. denser larger

some That high level. continued to have growth That's good are said, we focus individual at a adding markets We on our being density. performing strategy. really part very have of

are and the asked. we're benefiting they can locations markets, where the Because So, it's difficult we was and way look singular have that at see growth have is, we segregate truth the in growth to But same as have and and hotter kind data more question the tremendous rates. way. of faster But markets that we're call well some the them robust out both. generally, you the larger market markets, in

Steven Ramsey

those or and going you as Great. case branches new to fleets thinking open densified Oregon, an -- into of incrementally areas mean like add And is the areas in did kind is have theme. locations launch more that you about in to branches branch? add intention there fleet better only where I one you investment and forward, add

Bradley Barber

Oregon, both. case certainly Right, not grow the good handful customers, and add term only activities our that in some existing of It's of find into existing question. we that customers, got we've we who of spurred presence, and but were customers running cases, existing In with of our It our in revenue, we as footprint. exponentially locations, market. good long -- our moving interest a geographic many helps new out project relationships, of

answer play about outstanding. of is were will priorities, makes be If new think we're to That smart said, where sense. opportunistic, we and is to a look density. improving going also density I both. that it and you like the being the we magnitude So, tell the markets into

Steven Ramsey

kind you longer is balance Excellent. growth much them? or is strategy, of then, branches implement And areas, you that fleet those quicker maybe it going in you of as putting pretty branches then, regions, establishing I mean, much of guess, having these it kind I transferring decision you way then for fresh and into fleet -- new -- adding how the into a new do into and growth? payback densified are are and term the fleet,

Bradley Barber

Let I locations, more into me cases. going touch on have but through markets, fleet an be in where typically general will moving acquisition. think geographies likely new done new not as We're when those It's than that rule, some a one. that assets, so presence always don't a new enter we we

that'll new That's that where some through From had There's we start to projects general customer there, rule. on like in we can a a there. density warm openings. big big markets, we standpoint, are exceptions store these where done a be Prineville increase base

Greenfield, in new be a an done went we a enter acquisition. through we when with but it'll So, there markets, as general,

Steven Ramsey

you. Great, thank

Operator

our Ross of question Bank from America. come next And will Gilardi of

Ross Gilardi

Hey, good morning, guys.

Kevin Inda

Hey, good morning.

Bradley Barber

Good morning.

Ross Gilardi

do the spend or curious, to are just less you it of lowering, was what to you relative this intending are is year, I adding the you or year, on, capital and beginning you're spending more feel how same? it to

Bradley Barber

same that do we anything, more it's the same, the going talked single were would If view we of is we high to digit but incrementally maybe add to Ross. plan. growth our It's about currently, be

Ross Gilardi

national market? CapEx you here? you United regional similar will Got or taking seeing the a more tighten Rentals adjustment further think other And it? Do players are tact larger any

Bradley Barber

to continue incrementally we're sequentially. what that's again, to gains that my the utilization rate largest any be I physical incremental I fuels capital, very would going I our rental competitors particular not improve acting that prefer it on commentary But to and whether my continue we can to about, Look, say their on get adjusting really focused competitor. comment confidence And, rates. responsibly, see and being our

I and view habits reasons think see of that exists you. everyone's dynamics for people's disciplined what But we pretty variety equation. So, I a certainly, of But market. in feel the that's the hope being are part the helpful to of in buying we

Ross Gilardi

Your just XXX reflection differences recent acquisition to that? in gross up basis strength equipment margins on that your tied general mix were is prices anything that used schedule fleet some in like or used a of or just calling points of year-on-year, equipment is depreciation or or like

Bradley Barber

as and but but the is push well. equipment I pricing of market tell that piece some a to ability used improvement, that both, will It's mix you our large there's

Ross Gilardi

of fleet, or just types relative the And different equipment in you across used prices? are weakness strength seeing

Bradley Barber

think no Really, good remains some been quite I -- it's change. -- same. No for and the time

Ross Gilardi

sound what guys -- construction like So, Why index does bullish -- non-residential the architectural and and metrics do you the you obviously billings and some of very numbers on why outlook? the a obviously, of data much lot a right numbers than seeing mean, concern different are out that other lot these points saying? you what you're are non-res there I now? something don't

Bradley Barber

we how Sure. Listen, those way reports. And markets and do we watch all on the how our shape view we the grow certainly thoughts they about business. of

ABI, take accurate and proven has You the not to some that volatility be shorter it's to in time from time. of window shown one a report time

continue we look discussing see, us. course with got handle reporting, can if good our negative would a with at of We've out with opportunities, ABI period and our it environment. to of numbers type current to of we more customers, on were So, time, weigh a over really

about. can And multiple cycles think the generally, reporting region a we're sure small proven I the a But in more have can another them. one geographies in I we now. that a we you're over markets thing serve. we types in that we've well that favor have location overall piece within little we think a of makes talking Regionally, those of our is perform such softness of

Ross Gilardi

the the ago years XXXX you other now you've recession, industrial mean that and similarities ‘XX. you But, evolving in that are soft saw we're elements market on XXXX. window with look we conditions real to see if of into sit, if are I this your going clearly answered answers. where few right way Just to this and markets that kind And of worried a out you did patch, lastly in what you do any Brad, like ‘XX, not from

little to For guys a few it had correction deal. market. maybe that context? of you have rates you a maybe what a at bit the flattened a of out, quarters, like all, you're mini just and compare that you years did of down able a kind big seeing of wasn't Are ago contrast But in rental couple now in you to

Bradley Barber

we it we really. us, positive. try available our Not pay to like to stack that's critical to obviously, when mean more Listen, attention, want be to I of continue with it's we thoughts. going be same, the looks everything But to

do recent we're to watch, but them. what to our starts continue of term job we're bidding marketplace, continue getting the with will to have a the quite from seeing few feedback We the activity, to say, in frankly, and these the in support going but customers reports we're watch more not had

Ross Gilardi

thanks much. Okay, very

Bradley Barber

Thank you.

Operator

from Stanley Stifel. Instructions] [Operator hear Elliott We will of now

Stanley Elliot

everybody. morning, I'd to weather you there on apologize central we utilization at Thank quarter? earlier. the the Is much U.S. the the the Good quarter's to results. an of way touched curious this for question. of parts a on taking as saw had that if of attractive if how I see impact kind be talk the you about

Bradley Barber

throughout the typical, improved as what's and expected Generally, the utilization incrementally quarter.

improved holiday that throughout of improve a, kind But fall, a trend like or the it's can and when to a today. sit the events line. in particular, an get it have general, you holiday can we as continues quarter You within here incrementally anomaly

Stanley Elliot

more we're maybe you the at, just be in marketplace? marketplace feel in structurally it discipline curious talked that, improved rate. of that a there does terms more looking data have be of ideas that of driving like a thoughts marginally that there's nature, And because things maybe overarching kind you lot and of maybe I'd but about or in Do what seems fleet, to any Brad, terms

Bradley Barber

Yeah.

opportunity ourselves, believe business other disciplines have competitors in market. think subs would have confidence we company fleets, is made and all or smart So, not I information regional previous What in they our in about the is to that players that clear other and future much that the than their use drive not who the I'm a that. say making And companies more talk today marketplace, there our good look, I to the I going see out I using compete is larger I've within information is positive in void have a decisions information of there with. of people we good the and type lot in and of there cycles that good, management decisions. because

And the so highest of degree confidence. what me that give

I just have add aggressive that In kind see specifically would the previous through in in of build discount manufacturers also types then speculation or within product may that extra there been I any inventory create any don’t see happening manufacturers of that certain the who building cycles have manufacturers and select inventory. been I product more and type. stuff that with of financing behavior. of tight any channel don't our of

this the the lot well are as the as fundamentals folks So, making making discipline folks who who within were or equipment equipment. the

Stanley Elliot

do or then should the thoughts towards caveat And that in how co-targeted change, you the kind to for leverage? expect want relates to range, are of we bottom to acquisitions? last Perfect. kind that tackling should that me, thinking at be run about your business of How leverage the you lower run that of end the

Bradley Barber

got there through, at coming is far point as no say in change continue is to, time. have just that traditionally down, our as will that change expect leverage I in leverage target we our Well, this we would

Stanley Elliot

or that of for mean year, back depending be opportunity certainly M&A the would strong of possibility you would on half conditions? kind upon your market that So the

Bradley Barber

Absolutely.

Stanley Elliot

Best of Thanks luck. Appreciate Great. guys. it.

Bradley Barber

you. Thank

Operator

And closing back for Mr. to Barber no there would to I call the over are questions. remarks. further Brad turn like

Bradley Barber

and today like would next thank Thank look our we on to time attending quarterly you speaking everyone and their you, call I to forward to for the Sure, call. operator.

Operator

participation. gentleman today's you and conference. this for conclude your does We thank ladies And

You disconnect. may now

H&E Equipment Services (HEES) 25 Jul 192019 Q2 Earnings call transcript