HEES - Earnings call transcript Q3 2019 | H&E Equipment Services, Inc.

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Operator

Good morning, and welcome to the H&E Equipment Services Third 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

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

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

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

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

involve forward-looking known any cause materially in contained unknown which from those to could and actual results uncertainties, differ statements statements. Forward-looking risks and

forward-looking statements statements does of update forward-looking cautioned publicly listeners to such the A Factors in investors not any company's carefully described are recent urged evaluating consider presentation summary the today's included and conference are is revise potential Form periodic the for call. forward-looking to other includes and the annual in Risk XX-K to the the factors call on also or undertake and company's company in Investors, slide report this statement reliance harbor the of risks date uncertainties place these other reports. safe these contained in not The statements. most on and after undue in

that stated, to the Barber. I'll over With call Brad turn now

Bradley Barber

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

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

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

please. X, Slide

strong during the produced quarter performance third results. Our

by in For rental total business $XXX million. XX.X% The increased up the X.X% a with revenues revenues to year quarter, our momentum continued from ago.

key as well. rental prior quarter Our were positive metrics year over

Our from XX.X% and total XX.X% year million, year increased grew gross to XX.X% XX.X% Adjusted ago. to XX.X% to improved ago. a EBITDA from a $XXX.X margin margins

share to Our versus $X.XX XXXX net year tax income diluted compared was the third or year on ago. $XX.X a XX.X% ago, per XX.X% per diluted million share rate $XX.X of $X.XX a quarter effective million or of in an

with execution rental X.X% achieved X, and from year of in the We ago quarter, significantly fleet. Slide a please. increase remain business. larger third a XX.X% our we utilization the physical of In pleased a rental rates on

dollar utilization increased XX.X% to a ago. XX.X% addition, compared In points year XXX basis to

variety slide acquisition XX and markets Slide remained of locations serve, include our growth existing through project which involves demand plan, illustrates a the XX our broad-base wide regions footprint, We This density in geographic on X, states. in a encompasses both please. organic focused types. increasing remain across we expansion. which Rental

solid rental focused while better opportunities return while customers. continued of overall our of X, fleet nonresidential other X% our markets, for to of advantages for the on revenues types. which we composition, to end business. our product especially investment a now the fleet significant all please. slide drives our our which of XX% revenues. over The illustrates This mix in grow crane investment, less we of are our than earthmoving pace construction, faster at remain serve slightly is has than Slide is believe and both rental of our fleet We Demand look improving

Our XX.X XX.X at average months fleet to compared the the an of of industry industry in months. remains fleets one youngest

please. XX, We activity in markets stable construction Slide the see we serve.

the While similar of levels. been construction we healthy markets, of there health some the activity continue have and to see vitality mixed indicators

projects solid Our projects indicate unchanged. customers of project be activity, continue significant to pipelines and ground, breaking of to appear backlogs future

now with our results to positive. markets call view Thus our financial serve to outlook that consistent we remains over in throughout detail. our this Leslie? remain Leslie year stated nonresidential discuss construction the I'll more turn

Leslie Magee

I'll begin Brad. morning, everyone. Good on XX. Thank you, Slide

results third the quarter. strong for produced business Our

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

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

with solid OEC year quarter time XX.X% based fleet a $XXX our million a compared was versus ago. expanded We to XX.X% utilization physical the XX% ago. approximately utilization year of on Our by average for or

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

million New crane million to were down which $X.X by $X.X compared decreased sales, $XX or last equipment primarily year. million. lower $XX.X X.X% driven The to million sales decrease XX.X% was or

our a a from sales. Our sales the quarter, total of or $XX.X increased used fleet result $X.X were sales Sales this XX% of year same equipment million earthmoving million, X.X% higher rental as which equipment comprised to used ago. largely used

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

gross margins. profit and move let's Now onto

basis as margins. increase shift Our ago. a higher-margin positive improved margins from combined rentals, of points, gross mix of a to gross rental XX.X% XX.X% result XX.X% were consolidated million to $XXX.X And ago, with compared to a profit a increased primarily XXX year year an

year, previously to for period. XX.X% period XX.X% Used on equipment largely quarter were detail segment, sales ago. due rental XX.X% sold. margins, compared were Margins rental during quarter to reported, ago our new to the third margin by XX.X% gross gross ago. were as margins on year with For for compared compared XX% pure sales gross mix -- year fleet decreased only the XX.X% Margins the XX% to the last of compared a the a year to equipment change of equipment sales XX.X%

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

revenue Slide operations XXXX million a rentals, was quarter gross the revenues increased for XX.X% to The to or improved margins, of of combined increase, a XX.X% ago to net margins. in result of third with Income $XX.X million revenues $XX.X point the compared XX, or quarter. higher-margin primarily rental change shift from XX.X% in year please. XXX mix basis of in

Proceed to please. Slide XX,

$XX.X per the diluted net or in third of share $X.XX XXXX. Our share or diluted net third XXXX income quarter million quarter million $X.XX in of was the of per income compared $XX.X to

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

the to primarily in to ago, increase the compared in a a Adjusted of third ago, EBITDA rentals. XX.X% quarter shift an $XXX.X this XX.X%. EBITDA year to margins quarter was to year points $XXX.X million due basis compared expanded million revenues XXX margin to higher

salaries, SG&A of expenses third Next third on XXXX, compensation other million the the $XX.X related in a million expenses XX.X% higher wages, expenses were compared our a to XX. were and compared And taxes $X.X workforce improved for X.X% incentive employee-related payroll $X total increased $XX.X largely of employee benefit quarter September revenues XXXX the larger and year million, Employee to Slide percentage to acquisitions XXXX of costs prior a ago. XX, and increase. as SG&A with profitability. related due quarter million a for or XX.X% since year,

year related Facility related Expenses amortization to ago. greenfield million. Insurance-related million, costs million and increased a $X.X expansion and increased million. expenses, depreciation rent $X.X increased primarily expense, $X $X.X expenses to increased compared branch

Slide XX. on Next

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

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

to the by of fleet cash operating at activities we was quarter presented Our by appendix of impacted cash a compares for flow capital $XX.X free the and in million. included lower working cash to million quarter provided of rental ago, of this third year $X.X This have flow for was which use reconciliations periods to slide cash the this the CapEx, presentation. GAAP lower of XXXX a on use positively the and the flow free net end free a third

I'll turn And quarter of outstanding XX.X% $XXX.X credit. XX, quarter, on the of amended $XXX.X facility end a third $X was call ABL million availability end to the million back OEC of or borrowing the cash on net Slide At XX.X%. was please. of million. based end, our to fleet We this under XX. $X.X was increase Slide And the the Proceed At billion, year third $XXX.X the And at which time, was dollar rental letters the of balance ago. of outstanding had size at next compared to utilization Brad. a million the quarter, of XX.X% our from average

Bradley Barber

Thank to I'm our you, Leslie. execution performance quarter solid, Slide with And please XX. my To and proceed and pleased from year-to-date team. been has third the conclude,

acquisition and do rental store successfully business, more growing we our to organic through are continue and We so growth, openings.

our XX. dividend quarterly continued of cash we September Lastly, payment on $X.XXX

We'll Board As approval payments each Q&A. instructions provide subject your review questions. to always, and now the for are please quarter. Operator, future dividend take

Operator

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

Steven Ramsey

slightly and improving this sell do even levels like are I slightly you've XXXX need to start flat supports or scenario? wanted to you still a much feel this market younger a in would you kind down, looking to algorithm larger growth fleet fleet, how your change? with I of got guess forward. market to If rates? similar year Would down And

Bradley Barber

going or time rental with future, Utilization not first. you pressure are flat view generally are say If a we for of is we but me rates; would don't were can let it's things is when the to Steven, pressure forecasting slightly rates. do be my point a mix and some in that position there -- So decline it geographies. at into XXXX, down. middle I rental to -- your in certainly not can to there in the

very question. some demand -- utilization would a enough declines, but And just of there to level. to of of the that on yes, decline are not mean, I fleet then variables there's So decline, business hypothetical, I is lot rental speculate percent in fundamentals want then what at mean there generally someone if rates the declines,

Steven Ramsey

talked and was Excellent. slide about. this the in And I then know

to from Gulf you like and talk going supports has pipeline side Do it side? the of good forward? With maybe been you maybe the strong demand as new expansion, the there and Coast results visibility is the if maintenance feel the as activity still can construction both the

Bradley Barber

that really on going what's let time. at pretty I a do. maintenance Maintenance does consistent. point has petrochem view up these Most of facilities particular their of in been not require with

well advance. So in continues. planned stuff it's That

work new likely and the and see far to are to speaking to we continue believe you announced, about that As grow. pipeline, to is the as we've continued geography improve continue

So both.

Steven Ramsey

the know supports can then kind forward? disruption the results maybe seeing you Are imbalance fleet I And it of to been But has balance guess, And Does exposure reduced like you lastly, over energy just there? fleet talk Excellent. time. any there? markets. feel going I just, good

Bradley Barber

it to imbalance no rental fleet, As whatsoever. our pertains

is a exposure weighted to Our Eagle the and less the to Ford really degree heavily Permian.

physically fleet is with Our XX% today. most approximately market rental exposed their utilized

that we markets. to view So of kind speaks how those

Operator

We'll Weber, RBC now on Seth question our to Capital from next move Markets.

Seth Weber

really non-res project to wanted on to side, you're visibility do just and talking I of side similar sort mean, the level? the okay you about a usual? handicap is trying question industry. When kind the construction think Everybody on trying you field, closer the of Brad. on to is how kind handicap. do the you visibility, is than of but I to sense in folks the exists a construction just that seems ask is now, typical visibility everybody Everything it in much at Or

the just with you So from you if not? what there anything discussions or could sales folks your I'm share or -- have customers

Bradley Barber

Yes.

who forward. as Seth, more both a remains the That differently, and sales And slight to our still the steady. same to our well would senior with their incremental XXXX. enough remain it's is customers and just there and think revenue work. view the very to perspective, two, markets internally get feedback other going bet. sentiment into that as Talking impact growth, a have the I people it a is disciplined balance. and say we'll good XXXX. about a supply of being single is of as of remains coming other I But The rates, with You have feel very from consistent job do concern is we And has two natural, level acting like customer forward to that some produce feel than that can't I I or demand. come managers force, utilization right? as biggest it's XXXX concern being incremental really demand supply see. directly, good are into high. coming has I on person manufacturers, Stated I some very not could one; competitors, rational think If healthy, that They and balance view it of talked starts workforce. rental believe that They I consistent, are are into number healthy said, supply think that in balance our consistent continue markets go construction number ways. fronts, also to both rental externally

Seth Weber

much in equipment. towards an just you which then to infrastructure area how acquisition you following might In helpful. just more that you where potential the like infrastructure, have And about seems an feel growth up. projects, might you earthmoving is get That's bias do about Okay. slide good some exposure particular? talk to deck, talked increasing like here that you it's your has area going Can to forward? exposed an And

Bradley Barber

Sure.

bet. You

not the the better into rental we markets And John of to construction for could. those we same, We're specialty infrastructure as we of demand. earthmoving to types. pent-up for companies happen rental an as it just of some turning business, looking like the our business. view profile the earthmoving and and I level H&E that appear would serve, When as we return out opportunities, are we balance well a is types view So be consider project

area So it? a general the You but it more bet, we would than consider broader then we and are particular is it's companies. construction -- on not considering no it's that focus

Operator

will Fisher question from We on with move to UBS. the Steven next

Steven Fisher

rate how driving that was growth? could that impressive. rate if in pretty That about terms growth there either was of that? mix your rental quarter anything or talk sequential any this particular and Was Wondering product region, or you mix customer affected X% that like

Bradley Barber

No. It's broad-based. really

one that number. said think That in had we was product Leslie are I line, of proud we very that X%, that sequentially. prepared comments not up cranes,

Our our using information systems. good working team of a we're in lot outstanding is hard,

it's good we everything pretty was now The have geographically, So that typical. sequential spread. X%, in. get And not else well growth looked product investment did that cranes we the pretty and about one X.X%

Steven Fisher

earlier to how think of relatively the has upon year. of And Okay. fleet mean touched the the double lots be reductions on industry fleet of growing players And about the the what over goal utilization it on in there you're you changed half then a because fleet fleet size year? rumblings bit little do plan plans call, should to about been I and but your of the of the since year-over-year? kind the steady your amongst first is year? next CapEx still focus keep digits kind this Have you CapEx obviously

Bradley Barber

typically we guidance tweaks going going we year we year. operate as through the are And were are about we shorter-term thought to end in start capital, where specific there but don't give the we we make on and views. always general, to Look, in go

As we key our how of for many going utilization well grow we returns, as fleet, business go is will other. the dollar are we for the a to much forward, as look business indicator improved always

to continue then solid incremental fleet. to get continue utilization, we As as rental are going we to long rate our performance, grow

believe has may grow, forward in been us that last not in not be supply I think continue to I muted more going mean As opportunity is demand. few there Seth, is the years. for catching my to than but it up with That to I've said it comment do that does

John Engquist

is Yes, Steven, is, have supply catching would that. John. We'll see that, growth I to demand, with or our I the think what to belief add that this What we'll will growth moderate spending lower is up capital. probably you

forward. we been So have we'll less than little fleet probably grow going a our

Steven Fisher

helpful, here, down. new to Obviously, primarily That's couple quarters of in a sales, Okay. row on And maybe guys. sales. lastly crane your lower it's you stated equipment then due

the of equipment sales? outside in curious new you're Just seeing cranes what

Bradley Barber

mean, really a dollars. be gross for earthmoving continues Yes, or the majority cranes And earthmoving strong. several of crane our bumping continues up We years around. where or it be a now to couple crane I sales and in always been has decide to new make up year-over-year And down quarter vast period-over-period. we're given talk if

really but it's So same, earthmoving of more remains strong. the

John Engquist

guys view our our that changed. On first use comment. run just indicated me our you has and rate, call, probably I quarter as not on let equipment Yes, quarter new sales that should a second

new last is quarter. run an match expectation extraordinary fourth go back the from that would modeling. quarter our our the sales not And equipment again, for was I first your That So year's. rate quarter will to

Steven Fisher

up earthmoving are year-over-year, Okay. it sales But sounds your like.

Leslie Magee

for the quarter. They were

John Engquist

they Yes, for quarter. the were

Bradley Barber

are. They

John Engquist

Yes, they are.

Bradley Barber

Had well. a really strong as first quarter

Steven Fisher

in what on be thought your And that fourth quarter, will earthmoving year-over-year? what's sales

Bradley Barber

to I that I'll with traditional utilizing process and the going a good that remain earthmoving more we visibility that mean good we product relatively have you They're of are see we've seen tell group. -- rental more. buyers speaking. our as some

So with we're that to sales. fourth nice quarter answer question, have to going another earthmoving yes,

John Engquist

look that revenue will it's and because rate size for year a revenue with not, to total be revenue to ago. ago to be is like a Steve, our of kind mix going total quarter very up down, our and a different, fourth what equipment revenues lot being sales of is similar rental fleet modeling, going will but your expectation new be year

Operator

to Bank question Gilardi with Ross from move our we'll next of And America. on

Ross Gilardi

put utilization, your like and you're but very, talked I industry in out I based the running fleet don't of moving tight. the still Obviously, some mouth, sounds about to very want your on mean words leaders it pads. oil

markets more does if into -- they need other next be tighter where demand that, redeploy might curious your even any exposed it I right you regions now do make energy So fleet feel the into actually year mean, do and/or to healthier? I'm

John Engquist

No.

We are levels. running utilization high

Bradley Barber

some We of fleet. amount always move

Some cases. in we one of operate competitors our than referring different large markets you're and some to, they do in the

demand. be, more we limited continues our well. exposure many -- And a we of From oil are with our rental again, gas about quarters think that where So X% fleet, in supply and with I was is revenue times, to quarter. utilization doing I've for what it now. utilization I are us recall that that our utilization, last year, QX been When in stated was with the in just highest fourth it's has physical concern, up broader but the where at a we memory catching look in can few that running

to Specific checking are comp a and to to run don't to just continuing our we QX. as have, utilization utilization, see be I gas, going difficult up up and like we year-over-year on we So very that are in pertains to against it physical XX% oil XX% us.

Ross Gilardi

supply eclipsing in demand further got say catching feel make mean, more increases supply does is you you growth? the demand a I like is exceeding third bit to actually growth growth? I challenging? When think obviously but And with nice you still mean, starts growth you pricing supply that is do up it, demand, it rebalancing, Do quarter, price

Bradley Barber

I it that to are can will. but could, be I don't you, I in business. -- tell we going our It disciplined believe believe

to than of channel levels I to see not inventory. don't stuff a larger doing cause the behavior. very disciplined other competitors way. I anything running think bad operating doing new our manufacturers And healthy are anything in They're

balance. to it's So I will at But point in it's improvement. good get able equilibrium, time, I we we'll are rate this think when in incremental continue continually watch. think an caught think I I up, to be say we And reached

John Engquist

Yes.

rate. material it's -- allowed I get just us utilization running our would we last three some the prevent utilization really into years, supply really Brad, that expect come been have to And unlike demand. and has everyone hard. that and has nothing think supply continuing from with forward, going behind to And demand, but push For nothing balance could impact

Ross Gilardi

up issues? And you growth. lumpier, some a Was the in is nice that to service Got you. like service and up timing business Or sustainable? bump due really has picked had that

Bradley Barber

level been That than a growth bigger is have we growth level showing.

will we service our grow think I to continue incrementally business.

level One of some quality in cranes. driven a this sell growth. service technicians of the by much is earth with business, our are larger distribution mind, our base experience and both challenges of revenue to sourcing with Keep

nice are a guys, So those done proud we have they of job.

they I the level, Will at continue same grow. to will probably be think not. it

Ross Gilardi

might And X Brad, slightly, a just recoveries X market? used down on but they months equipment and you year just margins for can to or any lastly, have compare good how ago comments I equipment been quality about your to talk ago? think

Bradley Barber

Sure. was Very ours good. issue. I mix mean, a

in earthmoving participate the pricing. that More not think results that seeing were healthy further recently, results lower, through our that still shadow in where I any And products some at early want the products auction with in slightly, not values is is we slightly on that -- we've findings we a steady were will And We we there there that material worked very are and I know and with that participated that be. slightly some be I anticipate our to were emphasize some are to do there cast comment lower. of select are degradation there and kind still I them our shown was people year, auction And levels. don't very larger really pricing good. decline. -- were I concerned. have but of and need

-- we inventory fleet our need periodically. don't with as just much we down, being volume to don't Our just sell age,

So again, oftentimes business by rental distribution not disposing -- that of volume only is assets. driven a by

Operator

with hear We'll Bill Baird. Mastoris from now Instructions]. [Operator

William Mastoris

be And your would free LTM an capital policy, go your on though prioritize a is you basis. some and more lines that better would demand, you the point wondering, earlier least what would this increasing you could conference sounds your along maybe would down a allocation a the more little follow-up seem coming Any maybe paying Or CapEx question. probably bit color down cash there would I'm flow, supply at bit suggested it, be with And some just From little on of debt. at with now acquisitions? it greatly provide add-on I appreciated. have into it then alignment as calls, on of

John Engquist

acquisitions look, and and being very out forward, part going looking. tell are can we and tuck-in continue disciplined our strategy Well, selective to we'll do are very we're so, definitely acquisitions, I but you can continue about spending do to expect do forward. coming I into you're with that. see question to No balance, our come us going to believe going supply down. of growth you acquisitions tuck-in

to will We we're starting and going maintenance spend growth, And but somewhat. will Brad continue as capital, moderate we to our have it's just process. fleet then, said, budgeting

So we'll our and concrete go that through spending. on some more make decisions

William Mastoris

rank? within Okay. reduction priority that I'm curious. debt where And list, just John, does

John Engquist

look, definitely to down we generate when are -- going cash. little capital Yes, pull more a growth we bit, our we're

fourth we a that think pay question. will going are cash No down I generation, quarter in be solid to and have to debt. used

Bradley Barber

that stay in in we've that we broadly, time periods shown -- and to Xx that over typically more of Yes, X.X stated debt-to-EBITDA.

that less, debt to how umbrella we're to view comments broader so we acquisition will these opportunities. allows view. we the now, we time we're more if find acquisitive, cash, should that the maybe or going range is it to opportunities, in stay pay us we be should are over but And down fleet our casts capitalize us just make and -- same probably more more grow the over more to going have having then that we And

William Mastoris

be, around cranes unusual very follow-up This crane acknowledging just kind with there Okay. of considerably? helpful. unusual be decline. developing unrelated that Or just is would this anything That's unusually Is sales to seemed is there trend? an steep a a bounce anything And behind that? certainly

Bradley Barber

have unusual. X anything just that few point needle sold I'm can there mean, asked. think don't I making been quarter wouldn't more units move in cranes, we that volume. particular a or on question have No. really our the would I X is if a the

anything So going on there the in I is crane unusual markets. don't think

Operator

remarks. would any turn closing the I like over for additional now Mr. or conference to Barber to back

Bradley Barber

call. on to quarterly time you next Sure. forward our We we appreciate, get to and everyone, call, you. at quarterly talking look taking the will to Thank

Operator

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

may You disconnect. now

H&E Equipment Services (HEES) 24 Oct 192019 Q3 Earnings call transcript