HEES - Earnings call transcript Q3 2020 | H&E Equipment Services, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the H&E Equipment Services Third Quarter 2020 Earnings Conference 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 Inda

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

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

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

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

Brad Barber

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

On questions. Magee, and our from Vice call Slide a will After, X, Executive Officer; what financial I'm today's trends, more trends characterize moment. review our first the and Leslie with has results Chairman; Leslie call the color Slide in Inda, as the John But financial the of third positive discuss briefly our X, quarter environment our please. in performance stable progressed additional pleased I physical are would quarter President saying Relations. we will Financial utilization Engquist, then Chief I expansion. and review Kevin our market begin current highlights. I will we're your for to Investor me to provide experiencing in our rental today let markets operational me and take some on end-user top-line will please. by quickly detail.

results EBITDA decline improvement $XX.X rental declined meaningful decreased new in XX.X% see financial year year down ago sales points XX.X% of equipment $XX.X a in our revenues Adjusted to million and continue decline $XX.X the we below While total XX.X%. a rental from $XX.X ago. million ago. or year basis or million year Total was result from to or million XX.X% XXX in in largely remain ago This levels. the or XX.X% an to business, were revenues compared margins

second we rent, that now this balance second utilization our our a we Instead, markets. me the within during demand point XXX increase solid XX.X%, the that for non-residential a on continued third by quarter, below of be stated our in to assets. was selling call Let equipment while the during through address experienced I in business. year. flattish rental improvements the could older expect basis I our construction Physical far adjust improvement fleet levels, has opportunities oilfield Even though in rental the remain our from utilization industrial improved quarter historic quarter.

As around with rate negative, Keep of very seasonality to utilization. Rates holidays in XX%. however, are demand mind, in cadence becomes was trend our and just still historically the decrease XX, positive physical begins are XXXX, but improved. September the pleased we our physical running a over utilization greater headwind, sequential

As Leslie remain will and sheet on we size, appropriate managing our detail, balance inventories. rental maintaining fleet and focused the

Our in and cash expenditures ongoing the activities resulted free for quarter. to costs reduce operating capital significant flow

growth believe the plan creating the continued renting also we further This the for environment of could equipment, In owning increasing leverage in accelerate conclusion, includes towards is improve encouraging. have We starts our rental our strategy. momentum significantly visibility, liquidity. year. shift warm increase our improving secular to We number versus and greater opportunities on H&E. Based business next the our to current

remain financial results also in more rental focused both of in businesses. on the We turn opportunities the quarter acquisition discuss now rental and call to I'll pursuing the specialty Leslie? our Leslie general third detail.

Leslie Magee

Good morning, Brad. everyone. Thank you,

revenues Total million Let's or to same Slide our $XX.X a of for compared details million $XXX.X decreased proceed period year to ago. XX to financial the XX.X% results. more

decreased The year revenues million declined with million decreased our year-over-year compared prior comparable year this the $XX.X or sequentially. by rental Rental a $XXX.X Our $XXX.X of X% fleet $XXX.X rates ago. million periods. size from rates million decreased X.X% quarter XX.X% and to X.X% also or

sequential from in So the second this improvement decline the is a significant quarter. X.X%

points the but utilization our year, physical last XXX by dollar meaningful compared reflect quarter. declined second basis also XX.X% to expansion rates, in to Given returns lower from

well other million other $XX comprised to last the this in equipment million in primarily fleet our to the equipment or product to equipment year. sales declines sales and or total increased increase or year of decline all XX% The $XX.X with rental all quarter XX.X% $XX as as $XX.X $X.X a equipment $XX.X ago. was used Sales lines. million new compared in categories to decline of XX.X% million from XX.X% Used sales. sales, million million result New decreased XX.X% compared new of sales crane exception

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

our margin. and to profit on discussion gross Moving of

gross year of because $XX.X to lower decreased segments. from lower ago to margin. all were and rental million gross our XX% also primarily margins a year ago, in consolidated Our Margins XX.X% other were XX.X% compared profit a

For operations Margins only third XX.X% shift Slide pressure an margins SG&A tax fleet on to were by XXXX were compared period. SG&A income ago, and and of in to sales XX.X% $X.XX in The Slide property as income gross of relation XX.X% to rate revenues last margins the percentage compared to gains year to XX% and share a XX.X% prior from gross by a year revenue remained the service sales rental for rates result permanent third was ago, to positive basis of a Margins in the higher $XX.X the impacted offsetting from quarter margins year on to rental gross third on from $X.XX continued of all increase primarily margins rental to higher revenues, XX.X% in These compared income during quarter on and in primarily margin. and equipment equipment decreased categories million or operations the in lower XX.X% due pre-tax of year third during of share margin despite were quarter sales were XX.X% compared in except to unfavorable or margins cranes income. was XXXX. a solid combined to to year, detail and year differences decreased crane third diluted were to from quarter net per revenues of earthmoving. $XX.X and sales mix. year rate effective ago, income The a or income XX.X% XX.X% pure declines in a and XX.X% was primarily XX.X% quarter lower margin the quarter XX.X% per of and Net XXXX gross segment, effective a declining compared in due lower costs and decreases XX, $XX.X a million Proceed the please. by equipment new to of XX. Used income XX.X% of compared XXXX million due decreased X.X%. decreased revenues XX.X% or operations million a time new in to Income these to gross $XX Partially compared XX.X% to tax ago. ago. to decline on diluted largely utilization. parts

also of XX. ago, as in this margins due ago, first decrease rate year SG&A resulting our gain of XXXX these compared rate our on impact sales period effective goodwill third to month Adjusted tax a of on $XXX.X quarter Based third share, percentage million the the quarter effective to of a higher have earnings September quarter costs impairment $X.XX equipment tax EBITDA and were margins property, to quarter XX.X% per was the a net and been $XX.X and for million the revenue been primarily third XXXX, to Partially XX, quarter XX.X%. Adjusted quarter results rental ending lower income higher Excluding revenues. offsetting the XXX tax business XX.X%. declined would effective in a respectively. charge, million and the Slide year rate of compared have move EBITDA $XX.X per in mix. third to Please for share of XX.X%, nine would basis points a XX.X%,

primarily pay payroll the reduction. X.X% a quarter $X.X increased combined of employee benefit of related quarter XX.X% to third and Employee wages, related XX. or commission XXXX were million. expenses a to of employee Slide by result in the compared with decreased Next, a million other ago. ago. for to and expansion percentage third costs branch Greenfield lower $X.X of million, SG&A total year expenses to expenses compared headcount year a $XX XX.X% $X.X incentive XXXX expenses revenues salaries, SG&A decreased as Also, taxes, as million

flow Next find cash XXXX. slide, the and XX, On on nine Slide period please. September our for ending XX, this CapEx you'll month

a Gross the gross including was noncash quarter to from million $XX.X CapEx inventory. third ago. Our CapEx quarter the in fleet down was third XX% compared year transfers

third for $X.X million quarter was $X.X for and was a net million. rental Growth net fleet was Our the $X.X third million. CapEx PP&E negative CapEx the quarter

fleet age of a lead million compared net the of year XX average to use Free XXXX cash $X.X Our this ago. largely months. XXXX for increase flow September XX free as to investment due in quarter was year. The $XX.X lower flow was was cash million third

ago. the dollar improved utilization our utilization the to XX. on yet rates of based from size third year was billion or of from lower of it quarter, please. $X.X time a utilization and XX, XXX.X year second XX.X%. a rental XX.X% Proceed compared to decrease Slide XX.X% reflecting billion, the quarter Next, ago, dollar X.X%, on OEC fleet, was At Slide Average the end

and third the quarter, remains Lastly, outstanding the our no near liquidity balance $XX sheet balance very with under of maturities. quarter of December million the million was ample facility of of and down availability cash the $XXX.X of At had end ABL strong $XXX.X term letters since We $X.X amended is end of net credit. outstanding million million XXst last at year. borrowing

Our excess availability $X of excess in billion. was

coverage is availability measurement springing used fixed the if our determine to excess applicable. Our charge is

Our senior excess before covenant secured million this spring. availability of $XX requires facility even credit would

continue very Board approval September is our cash have always just excess Operator, intent therefore of Q&A to dividend. So availability dividend over while XXth session. please are we consecutive dividends policy. subject instructions. company into no we'll XXth With that, Directors, and liquidity strong concerns. paid billion, move quarterly with our the its by provide to $X it the a the at The covenant we're position And in

Operator

[Operator Instructions]. you Thank

comes Fisher Steven Please with ahead. go from UBS. first Our question

Steven Fisher

I of cited improved you some that your driving more just the you that's accelerate could plans. talk little about bit wonder you if visibility Brad, growth a to

we're about visibility that utilization sort seems still we've other sequentially, is you the markets, visibility. but like there's improved of driving -- know broader It what has that there's construction Just that? heard not in much I What's have? places your hearing

So I'm curious improving? what that's seeing you're

Brad Barber

cases, postponed projects we we're the cases, of primary that of started. indefinite driver than for and in have for project some ago. period were that six projects is The months just seeing In were fewer cancellations In fewer we're getting to much customers postponements feedback time an comment activity. three other from our

always our our product Going of of indicator earthmoving Right products the example, these are now, are leading are both we both kind prior at what above larger products prior forward, for steers, construction that earthmoving, we've couple looking our excavators, utility of and health view utilization some information, our year's of as skid above lines of And categorize significantly a got the we utilization. construction well year as markets. mini and earthmoving levels. vitality a

and anecdotal information. of quantitative got we've So kind

also We to the selected continue markets. look at reports in our of some

the during a XXXX. first maintenance level I postponed. it's start most time expected at oil more just broadly, H&E. even reported time with associated has could the facilities that maintenance some pent-up As in anticipated increase. we'll we been have long These believe they to sit here for Coast and see level, really Gulf to that's recovering markets bit sharply that been every postponed for a are the of today, industry, start and And headwind demand these activity of it's if

those are So our can I that's the enthusiasm. offer improving our and around commentary -- you visibility

Steven Fisher

to What the do on cranes about the of again cycle. it how going know kind we still we I and get a And market those some Are bit think off-peak thinking then better? take maybe are sort markets? of a in little crane of will you're just you question some in weaker. coming of broader where are the

Brad Barber

energy it's now, going prepared meaningful very we almost evidenced is for to take year-over-year crane talked recovering think the new Leslie's going. level get in at in Crane as XX% declines a sales. difficult to being I comments about business it right where

well fleet our crane, the investment our is is in our rental or down utilization, although physical that X% crane X% of Our assets, in year-over-year. only total utilization

the to So could there to see be it's the energy be think but back, going difficult. upside come crane a when within tremendous we I business, foreseeable for start future,

Steven Fisher

business? And industry side thinking meaning sort the just more the of kind to process of Or the of are clarify, you big of upstream plants? more energy,

Brad Barber

all I of It's when above. above, the really of it's Steve. all above. anchor all of oil the it, I of speak is obviously, the energy but mean, It's the

Steven Fisher

you the but And much clarification, did on this, storm-related just not how I'm in comment quarter? last been if quick missed sure there may guys work I have

Brad Barber

in there's second hurricane Charles more did it -- destruction. now have interesting. that right product We curse. has Lake and the there. the struck us not mean a we benefit it be in not. rent pressure. first do hurricane, has some when can blessing from It's the run, short We certainly But I on just causes Weather a

knocked And business. so flooding, us. our great destruction for structures where you it helps Real down, bet not so are

our today, location business down sit shut landfall of hurricane a every As New here we to for is about because south make Baton Rouge in there's Orleans.

us. like today, but can headwind be sometimes in short the So a be it positive, will a net it run, for

Operator

Thompson go question comes Our ahead. Research Please next from Stephen with Group. Ramsay

Steven Ramsey

kind load maybe warm starts, can CapEx guess talk with opening? the you the I on required along then more per they cadence to existing some branches. where to And geographies, of new that, on those And process about think building decision of to ones? are strong on place of fleet the these, adding new

Brad Barber

expanding have prioritization first of like a kind density geographies foremost. and existing process, we we and and So certainly adding

are through a We we entering geographies But geography. general, not to new opposed enter in prefer an new to acquisition. would

XXXX And typical over XX of going as we've between locations rule in $XX always As one OEC. spoke starts the in expect going, year million next and into time, far to as somewhere warm open about cadence thumb, we about eight year.

density we're our brand-new of then or mature No but entering But basis, period various For a would a fleet, over particular not for probably levels $X on million rental we geography. opposed our we're to to time, the And about across periods think reason priority. it's slightly top they geographies out be PPE time. they We building will serve of at loaded the not that primarily over greenfield these either spread in a quarter. any footprint in expanding operation. geographies

Steven Ramsey

that you you and the can, pursuit, bigger adding changed? a a to can to maybe it's or densifying if of to, transactions? that the level with maturing of they're how a If that kind if that's has the fit pipeline geography And pipeline new then talk pipeline on acquisition follow-on or that existing? And closing closer strategy acquisitions

Brad Barber

there's a look, Well, variety.

in products as that, both geographies. consistently acquisition and members in opportunities. These well relationships in of We John potential leading specialty we new are on deal helps and are considering that products or are John specifically existing out I today, other both team out and the as always and They working we our working. are rentals. are

I comment continuing opportunities. the right is can looking active, we're to for and that So be what we're

Steven Ramsey

can to QX expectations? did stand thoughts fleet size all, line to Or you then So now expectations? with XXXX size? at you down? better coming size how QX Was maybe talk And more you maybe fleet fleet if in the where at were -- from at offload to does all, And relative prices? on that did it diverges able fleet favorable

Brad Barber

expectations. right is with size fleet our in line The

would I that this to would We've on fleet of our months we I year upper think reporting started the XX-month last I that fleet here we QX. comment end by plan mid- single-digit fleet. rental still the call a aged plan the decrease We only three that in for year. we referenced as be the sit the year. being with old

our really team has the proud so And job done. of

Our solid, there's us been pressure pricing no differently. We're or downward equipment with used just caused on act that's to pricing has but been our working upward plan.

So going a little the take than as bit is is fleet we're plan. further it to today, our down

balance and course, that XXXX, in And us to to process improvement the clearly, continued We're That early so opportunities. today. physical And some As We've for growth. the tell capital. that well. of utilization with fleet is amount can forward. continue achieving will locations I start we of off be and indicator we're XX have be we rental our you sequentially that is our improvement stabilized get against we we opportunity rate feedback warm have that rates good new forecasting focused this middle fleet X.X% our seen greenfield a going we as growth in rates growth, of are stabilize, believe XX, existing were moving on into should

Operator

go question next comes from Stanley Our with Stifel. Please Elliott ahead.

Stanley Elliott

clarification, point Brad. Just a of

were definitely projects? postponed projects? Are started they a trying and a of bunch the Are sense to get You projects being magnitude. back. Just scale mentioned smaller larger scale those of

Brad Barber

have of maybe to and restart Maybe facility around I that were stay that the say want were projects foundation project scope variety. will away the seen that work, a project. It's to forward they about anticipation full talking from with we they that infrastructure the it's will told right? postponed we've do go limited specific names. scope work, it's I an the decided

really about, projects. when But that, variety. So been not a say larger small speaking, I it's I'm talking projects, generally

Stanley Elliott

And then to decision wouldn't can are about around just if discussion get there, or specialty? requesting? something more Is little kind term? your you Would you migrating the you more see love talk a this little of the way bit market longer customers color the mind. a Is the this

Brad Barber

Sure, We've of happy provide got earthmoving. to color. It's significant a amount both.

little a to in We to a serve than certain itself That our fleet enter see have want customers for may kind types array other grow customers. of for and we existing the we needs. within products continued that to faster look to provide our that to continuing earthmoving itself And profile. of can wider equipment lends their better product products of sources

we're customers. projects. And on punchline so We know the these is, these

looking to are. their of have and We good relationships, we're facilitate what requests working more

achieving and our I couple customer three base, our products footprint that part there existing rental of existing types offering. our well we're on So or that well aligned our existing focused are for becoming are think and specialty two a business, of

Stanley Elliott

And XX% kind the really smaller the is you're your out this of then anything this with is that expansion store sort new some pandemic competitors is encouraging is and gain there in that so of that seeing see. you me, side? the Are to to leaves, nice growth on impaired lastly more has a of business, of tea Or seeing share forth more push what their for opportunity?

Brad Barber

it's the lot to for I now. smaller I think struggling get a going them. it's three right easier think don't things. really Number I And are think one, operators

And right, for I as So I the will themselves add, H&E. continue I the an out. they these warm to for we've these we are, And to expand. think, us doing do advantage within opportunity about is few third years. level thing for XXXX, Really, believe now other did than we've just we see punching location, we that been the think some a about I of that last that four markets I only XXXX, of starts XX one but year. years been, think, that

done, XXXX I as complete in that announced think five got the other with we year. to and capital, at these got of that do and acquisition we've starts. we've many as really But a four think done to we I or We've as just analysis locations, we've year. and performance, in compare look organically locations you, performed we this I grown XXXX well looking tell on acquisitions return have or will them opportunities, warm these

just so We're can -- stick to and there's we reasons very they're And to hurt We're just do year for provide we opportunity history it of they dividend. up. a lot eight that returns. or are got going growth like safe is for us not going XX going to us with tells our And H&E. going feel of good these to with a our capital it. sheet. the adds stick structure We've And balance We're leverage. this our good

doing And so at the gotten along starts warm we've better also way.

Operator

[Operator Instructions].

Weber Our ahead. come Capital Seth Please from RBC next question go Markets. from

Unidentified Analyst

to on you kind going averages? for about you're when for forward, guess, as percent location This increased to SG&A the is the get what's put you focus. up to at company the your that given quarter. timeline do a particularly as of drove thinking in in And growth the I increase greenfield how operating typical Thank on a that I'm curious color in Brendan what revenue Seth. of new

Brad Barber

more timeline company as at short and on months average. XX be these getting X averages with So like as can XX the months associated probably to

metrics looking range So more having I typical as as far and within the a them there's throughout that a like location mean, P&L. mature

early they to on. SG&A have the as impact obviously, to far negative a impact As SG&A,

been yet need do before run hire numbers. there ramped with in will to you a we and not to start forward generally, those, associated called we're multiple do frontload, thing times that's business these to have And I same we've going you going the up. since the You out staff think costs the likely

Not impact ramp as giving some a warm information be short up we the and XXXX. run, So in it's our helpful negative these longer will in starts certainly. view, in we

Unidentified Analyst

And maybe your seeing might more see can service sequentially. and thoughts color then pots when you on of give flat of And you're rebuild was we roughly on activity? sort what sort there? Any then an uptick in

Brad Barber

we're cranes we're be activity. take going service When an similar uptick the think off, Until going that do, future. to they fixed in foreseeable I levels to very probably see at for

Operator

question session. like conference concludes remarks. I would to over our the answer Mr. Barber any This closing turn back for to and

Brad Barber

We call thank to updating everyone on as look today time our results you. taking forward join we our Sure. move the for everyone and year Thank to forward.

Operator

The conference presentation. today's for is attending you now concluded. Thank

You disconnect. may now

H&E Equipment Services (HEES) 28 Oct 202020 Q3 Earnings call transcript