HEES - Earnings call transcript Q4 2020 | H&E Equipment Services, Inc.

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Operator

Good morning, and welcome to H&E Equipment Services Fourth Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead.

Kevin Inda

were welcome company’s Equipment quarter results December XXXX, and to conference and Sara, morning. XX, the this review for which you, to Services H&E call year-ended Thank earlier released the fourth The format slide is on posted includes website www.he-equipment.com. presentation, at which our today’s for call a Slide proceed to Please X. Secretary. Brad be Magee, Officer Executive and and Leslie today Conducting Executive of Chief the will call the Barber, Chairman Financial Officer and Chief Engquist, John Board 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 website. the these figures which financial our presentation, each appendix to measures on and our earnings in

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

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

Brad Barber

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

On markets Leslie our are Financial John Engquist, I on I’ll the Chairman; Kevin some today Inda, President for review quarter X. call strategy performance, Leslie and Vice Investor presentation Executive H&E will discuss on be quarter Chief Relations. our year the Slide and color for I'm briefly and my our XXXX questions. detail. industry. will please. Magee, of with our fourth results me provide will will After, better take Officer; begin financial in our growth and more optimistic end-user Slide X and our that your we

remained quarter, sequentially good fourth quarter. from increased the third During demand and our rental markets physical end-user the utilization in

well. distribution performance in the business. business Overall, improvement reaffirmed regarding our Our performed also our quarter our ongoing fourth belief

million our revenues compared financial million, for due were a XX.X and gross were EBITDA rental sales to volume the margins X.X% lower declined or from Adjusted XX.X% terms highlights In to or a points ago, increased down year margin equipment XX.X margins. new XXX and down quarter, primarily basis ago. XX.X%, from year low of total to sales

the pleased below declines improved. levels, remain revenues While were that pre-pandemic we year-over-year

to Slide On please. generated cash X, quarter. flow again also free We this significant

with Let physical remain our basis for XX.X%, from address fourth improvement me the XXX Rates negative. third now quarter point quarter. utilization the rental business, a

trend mentioned stabilized quarter. we rate last has sequential as our However, also

the our rental and will be business. growth focus we we for to continue prepare for believe as what adjusting We on fleet a size mix year

albeit construction below to in has markets is I improve, activity levels. pre-pandemic continued earlier, stated our non-residential As demand still

distribution, and and on to We expect and further centers, this recovery are healthcare warehouses farms, to data other move verticals solar XXXX. wind strong. into continue Activity

last highway industry. The a for year. also resume major the We was expect which industrial or of plants infrastructure positive be will work, maintenance would postponed bill also very passing significantly

to improve. sentiment both and continue from larger our Lastly, contract X. customers visibility Slide

our year accelerate to Let as ways me accomplish pursuing multiple we're strategy this our to conclude goal. reaffirming commitment growth this by

four the includes Last in significant starts number in added we year, this XXXX. increase warm locations. new of First,

to XX is plan add Our X to year. new this locations

We in density geographies existing will would we increase in out we to our believe high service our markets. spread our like across where footprint, stable branches growth primarily these and

Second, we location will lines includes our or specialty existing inside rental both of the and geographies. continue our would growth and our fleet current general synergistic also openings mix. opportunities rental This businesses. acquisitions in tuck-in to of from Entering focus. outside explore Any additional specialty of is business with be acquisition opportunities of business part new

notes upsized successful Leslie and balance turn quarter, full-year fourth sheet will ability the I'll growth base with strong Our to detail. fourth quarter XX commitment offered our our support our will years about customers. is product XXXX. her increasing results to in business in our over ramping in have in lines to our in more but growing financial this our and Leslie We're elaborate our always of equipment and comments, strategically serve more initiatives. solutions, now the been discuss XXXX call up

Leslie Magee

everyone Good and Brad. morning, you thank

proceed Let's financial for XX results. Slide to our

that and non-recurring old repurchase costs. of related results. the the with During eight million the of and billion company premium to and its year and quarter move fourth transaction to our repurchase new of successful X.XX note offering redemption item write-off this notes quarter discount, unamortized include unaccreted redeem the X.XXX% a previously deferred outstanding fourth operating its the for The more I'll about of senior With quarter associated senior completed on notes. XX.X the results X.XXX% of pay premium XXXX, company's notes and

X.X% decreased a year ago. period or of comparable compared Our The million period. X.X% XXX.X total revenues prior the XXX.X million, XX.X from Rental rates XXX.X million, only quarter the our a X.X% million to down were to year however XX.X sequentially. million year decreased fleet declined with XXX.X or same million by revenues or ago. size decreased X.X% XX.X% to Rental compared rates this year-over-year,

of stabilization. mentioned, were quarter continued As these and results Brad with third the consistent indicative

quarter. year but a ago, in to XX% to increased XXX compared the compared points, XX.X%, was utilization time basis Our third XX.X%

our basis in XX.X% to declined basis dollar lower returns the XXX points yet third rates, by utilization quarter. compared from dollar sequentially Given XX.X% last points to in increasing year, improved returns physical XXX

New XX.X% XX.X equipment and earthmoving still million earthmoving, from equipment material XX.X% primarily equipment. of offsetting to our the new and XX.X% XX.X and though new sales sales comprised sales levels, rental handling, of to a X.X decrease to was of year. year used year decline to ago. was quarter this in AWP the below better result XX.X than of down result or sales. million million The equipment XX.X% ago crane primarily higher fleet with partially other or XX% increased total our last million, decline sales Used expectations, higher X.X compared sales, the million new a Sales compared were

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

ago, decreased because Moving gross million XX.X% of Margins year on also of to to from revenue and margins, and were a gross primary margins a profit XX.X% other margins consolidated lower were impacted discussion XXX ago, to XX.X%, business our gross segments. lower compared margins rental mix. and profit primarily in year a by

combined material to rates ago, XXXX XX.X%, the decreased compared XX.X% rental Margins rental compared gross to detail on year XX.X Slide only in to pressure and or pure gross Margins million compared For during sales on service due compared the to Included time from a were basis to or to non-cash equipment and parts ago. during quarter, decreased the and were were quarter goodwill new and on segment, impairment of utilization. compared on by Income play operations equipment a XX.X% was gross quarter, a XX.X% XX.X% XX% decreased XX continued year margins million charge. margins sales margin XX.X% in all year sales exception to of XX.X used XX.X% for lower as major a year, in last in XX.X% the gross year the please. XX.X%, primarily with margins XX.X%, income due fourth for from prior XX.X% margins product gross handling year revenues the ago, all margins. to lower except a of quarter revenues lines, other new Used fourth operations a from ago were margins. period. equipment XXXX XX.X%, of XX.X% gross to of categories margins

share of million ago. diluted the a compared in and fourth was diluted $X.XX $X.XX XX, a year On or cost. move fourth per basis was XX.X result a a Slide year to to quarter in diluted ago. margins of ago revenue XXXX, XX.X% in operations XX% of XX.X% reasons declines from XX.X compared income or income share share of net points year mix, primarily The declined fourth in higher compared to of an XX.X to quarter in the compared from the million revenues, EBITDA net quarter, a per to and a income charge, or margins of from tax XXXX, or Proceed XX.X%. quarter income Slide was in slightly XXX.X or I on same of and XXXX. Adjusted in a to XX.X% EBITDA XXX.X basis, $X.XX to XX. to fourth share, rate Net the revenues Adjusted a despite in was was the gross year per million the SG&A a The a Slide Please as operations. quarter, adjusted please. XX.X% diluted rate fourth margins, XX ago, year XX.X this effective Adjusted quarter decline revenues, X.X% XX.X loss income for $X.XX of million million ago. this Excluding XX.X% per were XXX effective as tax of the discussed million income lower quarter SG&A X.X% decrease fourth compared XXXX was operations of in the XXXX. percentage decline

X.X and with as as fourth XX. compared expense of million. Slide million. expenses million, decreased increase Offsetting increased branch compared expense a and decreased decrease Employee primarily pay taxes, year liability related year salaries, million a payroll expenses lower in X.X% a X.X XX.X%, reductions. X.X million, Next X.X of XX.X the and to related to wages, revenues SG&A for XX.X% fourth expenses quarter percentage was SG&A of of X.X other insurance, the ago. decreased a benefit incentive cost by expansion promotional to result XXXX and X headcount were a the employee or this Greenfield total debt employee Bad million to XXXX combined commissions expenses in ago. decreased quarter million

for including for non-cash million. fourth million Next Net was CapEx XX, XX-month transfers fourth X.X fleet XX.X cash and and million. was rental the XXXX December million, XX. you'll quarter period slide, negative for quarter the CapEx in Growth quarter rental] X.X inventory. PP&E [gross X.X the CapEx on On our fourth find CapEx the Slide was and ending this from negative flow net was

XXXX was flow for XX.X months. XXXX XX, million, December Our was ago. average of XX.X Free to fleet quarter of year age XXX.X as compared the fourth cash a million

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

refinancing notes our and sheet and strengthened recent capital upsizing Our balance structure. further

borrowing amended letters we December operate million net decrease And continue under a We maturities. near-term fourth of million is at since outstanding this end of cash quarter, our balance XXX.X facility. and to XX, zero had X.XX with no outstanding of of had XXXX. of quarter At ample end, We credit. liquidity XXX.X the availability the ABL

with Our is the of if our determine almost concerns. of used end availability no $X a measurement we charge availability the springing which applicable quarter, excess have million fixed is to at was excess covenant XXX.X billion fourth

Brad cash at the We Proceed very also XXX support to of we earlier. million than have on Slide plan solid balance had discussed year-end. Therefore sheet more to XX a please. hand growth

charge of with quickly goodwill review include all the our of impairment interim connection necessitated me goodwill identified quarter from XXXX fourth an a during with identification million non-cash quarter first Let the COVID-XX XXXX results, by also or impairment include was XX a which or business in full-year the in impairment equipment our in test, that X.X% premiums to impact. X.X billion paid item associated triggering XX.X with certain in associated with XXXX declines XXX.X million The results Gross excluding our and sales, Beginning the used non-recurring to impact segments, company's business XX.X [oldness] from decreased events write-off or of transaction XX.X% unamortized deferred line, million. XX.X% XXX.X and redeem decreased billion revenues top profit premium XXXX. million repurchase to XX.X increased to X.X discount, from which in million of the XXX.X and costs. the million total with million XXXX unaccredited related

Our ago. gross in largely as equipment than rental percentage to margin down lower sales and revenue a due with versus were shift positive in to year a XXXX. ago. XX.X%, business fully EBITDA margin new lower XXXX for basis in points to XXX.X by compared decreased Adjusted offset segments in profit Margins million margins all a as XXX year of XXXX. was XXX.X XX.X% XX.X% revenues declined from XX.X% a EBITDA comparison XXXX Adjusted XX.X%, to decreased was million in mix,

the impairment with of was Our net December XXXX, of flow was XXXX XX.X%. use effective share a our above to of the to to ending or cash tax million charges, quarter excluding mentioned in and net diluted XX, Difficulty] income compared was goodwill tax fourth XX.X $X.XX million, X.X item charge rate flow net The $X.XX XX-month or or Net of non-recurring impairment of the million] been rate million repurchase XXXX [Technical XXX.X year lower $X.XX loss cash XXXX. income XX.X have [XX.X for or associated free Free one impact completed share redemption in million million XXXX in compared compared goodwill improvement ago. XXXX a would the in cash lower XXXX, excluding in fourth XXX.X million expenditures of largely per quarter. flow no a of was XXXX, in in net the acquisition [XXXX], We excluding share XX.X per per X.XXX% for of the capital million to of investment acquisitions diluted share, XXXX the acquisition in notes completion XXXX XXXX. charge. free to XX.X per income diluted compared during income and the in in quarter $X.XX diluted first old compared effective the The and was the result period

to lastly, CapEx our net million common XXX.X in Our XXXX is our intent And per into continued directors, And that, share $X.XX it declined Q&A compared with XXXX. to negative quarter of move let's while for paid each XXXX. Operator, payment to policy. by the continue the dividends board dividends With dividend provide always the to during in session. X.X our total subject dividend are million, also now instructions of we approval questions. a please

Operator

Please Thompson comes Steven ahead. question go Ramsey first Our Instructions] [Operator you. Thank from with Research Group.

Steven Ramsey

on coming new improving much can and Good morning. for We'll visibility thoughts down, CapEx will increased number CapEx the an this and any size be of curious to devoted with to for year? hear opening fleet year, and more branches the XXXX, just fleet how you be on share

Brad Barber

morning you. Good Steven. Sure to

comments, mode. we're into I growth As know, a prepared said my back moving you

Nice sell rental year. We out young fleet continue in very continued healthy to a margins last of age. fleet maintained the

expectation. we as to X move locations is we know, You forward, said our XX

slated for really So we'll comfortable many X, of about got those that announcing. be QX the we've openings

to frame think fleet the the guidance, last we said, As in single-digits, best we we're about our year, we way year think to This that would X.X%. maybe I mid-to-upper would be you – thinking growth. CapEx mid-single-digit reduce probably I more for pertains know, total reduced it you

million Greenfields We’re higher, being, talked of is be going visibility. is as know, go It [indiscernible] as would rule lower. concerned, PPE. always to the $XX little the far about higher a in numbers $X breakout thumb we've CapEx our on a know, probably you current of little those million And side you fleet

on those you about be of we'll short here very we So, out, happy I in comfortable know, to it'll start feel the number punch be of order. announcing eight many dependent how and, we those very, think

Steven Ramsey

the that specialty thinking on believe about I I certain to to fleet types. will focus be branches how increased project discussed, share has geographies, dispersed and more add devoted as guess And more that be specialty or partnership a fleet, the the you in could can fleet, invest share if on CapEx on you that certain and been maybe maybe will you on on fleet partnership to Great. the specialty to maybe

Brad Barber

broadened Sure. to we and looking that, Look, focus opportunities. announcement for know specialty you we're absolutely is consider I have our think the bigger actively

you we've you're that with Anything complements be earthmoving have. enter our high anything specialty at synergistic, quality in well As regarded, ground obviously, investment this point would fleet be at XX% relatively we that highly we know said, will of, trench product, works speaking we do small, to compared very overall time.

would opportunity to for acquisitions certainly it So, move customer we're going considering business. specialty mix synergistic also our be opportunities. with existing Again, those and base. into product We're and slowly

a be process we've some more with know, revenue it's segments opportunities slow But and can and of to overlap realized the So, certain little resilient, business. you that we specialty allow as bit also enter they be going existing a customers. additional specialty

Steven Ramsey

very driving our and for has from philosophically, sales you – this it maybe being to guess, Excellent. But anything had this And in that? markets? maybe channel in just think the of heard this challenging to Do different seems your you rental sales year, would quarter, curious view to any what this we this hear opposition that I new take increased into one then legs shift on thoughts on secular new me to last more in your equipment? this is strong contacts tell does be secular about shift checks,

Brad Barber

good very don't And it's in opposition question. to Yeah, that's a increasing. I believe penetration

familiar we majority large to doesn't currently. the oil said, where a know, those has nice standpoint, just know, recovery it's crude had whether that a a being you started, everyone's take up from maybe you dollars. add crane were many is and, of stabilization, it cranes That QX of relative pricing know, You but sales, amount or

and opportunity. specifically point; I year. course, of a drives in all it's about been very think Energy broadly, highest crane

what and we're in of two Outside and say I sales markets. that do think Arkansas. then and oil I Louisiana we be pretty would that that, stabilize energy we're states, Komatsu increase, a think within to energy are increase. to to the going tied So, If they continue in our mind our likely if crane not, in directly to distributor see business, keep distribution I

– So the in marketplace consistent crane a that's of always is you volatility what more some moving earth the markets. is of see than much been

years. smaller a is we a be it'll revenue it now piece piece. of it's think And been couple our more steady as So, has consistent for

Steven Ramsey

thanks. Excellent,

Operator

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

Steven Fisher

Thanks. wanted or there the region at end-market where about the ask guys. particular to just stood and pricing Good pricing, business X.X% quarters in reflection broadly? was minus any morning, of I out the a

Brad Barber

It's of business broadly, the a reflection Steven.

As over but incrementally to likely decrease. that for of to And position start last our you has know, to said, year-over-year being year-over-year stabilized we a and into into and that indicator, the in referred COVID that good have a fact, in the moved later we move you, in to degradation to so, call, actually and as not don't to views where rates opportunity our we out the stabilizing, we likely you not as our I you rates helped number see times, saw that in with That view rates That's measurement. us sequentially. improve. and we said, know, on down further our slightly continue into not further getting we December. like are would were, think share get we I were should were rates flat we as we support is [months], QX, January, were

Steven Fisher

helpful. that's Okay,

the to question. beat next You me

on expecting your So, or you that know, if thinking after rates going you like it you I are rates basis, same a of just trying will are growing terms you overall it QX, the anticipate, about fleet add anticipating How talked and branch? about you CapEx do said, are growth, in out you you to just grow you makes like then, declining figure of expectations, it sales said, are fleets that? the support your each because if grow are store actually kind to to guess sense fleet to at how are fleet still

Brad Barber

never and absolutely We're to continue improved soft spending when us in same we're that to plan It to achieve for or continued a allow Sure. decline capital going is our anticipation utilization. to think growth. have planning we improve is rates store facing It's pricing. and utilization

pretty is So, our outlook positive.

year said, seasonality and I you around that in to being seasonal QX. particularly little the New the QX, of Every started going low Christmas January we're improved. think as challenged know, Now, here always point. just week holidays, under We of the utilized, Year the a you XX% be are utilization know,

two winter that locations few weeks our we've news improved months if first watching few impacted over more January. the today, last you stones we've years matter. had about The than few February for approximately closed been XX% anyone we severely national the can been the to last know, have for Actually, weather. by due of see of And days, or last

into to know, rates is So, notwithstanding trend January, turn are like our forward. week-and-a-half severe going that combined consistently right utilization recent, should flattish rates you is which week, this to with weather, up that harsh positive of that view continue in incrementally now going that last are is was basically it

Steven Fisher

we helpful. and folks your are warm. safe And do staying That's hope

you function there? there's debate companies, holding an actually seems one a at those of kind and rental You today eventually year general later just backlogs around yourself mentioned of out doing? or Are last positive how economic with are what's question, is sense anticipation but the a economy? optimism it Because other just backlogs it eventual moment? it turn declining? backlogs happening this in that will least Are reopening optimism of amongst and maybe is that much this have the or in curious at like construction flat of I think some is a your sentiment lot there the customers growing because they what of investors they Just do that

Brad Barber

footprint, issue right, our It's think bit geographies. due an Broadly, most a is opportunity challenges going geographical demand forward. of bit of lockdown, today. people other they in being issue. going further is maintenance think maybe work our across Sure. more the XXXX. know, you the of marketplace performed. some non-res work I in A the I would timing work jobs construction majority shut add commercial Well, turnaround little more around industrial or there's There's is the particularly And or sector, California sentiment then last there's know, certainly high suppressed be have COVID hand. believe little you in I there, type to That's because to down not it's a performed – comment than and

know, where ago. cash, You most of to postponed we possibly knowing know, bit every they not maintenance going, facilities, you were could preserve months basically Xmonths, XX

So, going as we come believe here I sit today, to work back. that is

some I think there's of demand. pent-up level maintenance

the So, the should for industrial on opportunity be head really I rental side going of competitors that's be been on it’s oil will the And think better. the all nice the a us to sector particularly in of continue our to sector, business. and on trajectory

Steven Fisher

much. you. Thank Perfect. Thanks very

Operator

[Operator comes Stanley with Stifel. next Elliott Instructions] Our question from ahead. Please go

Stanley Elliott

last with because of guidance comment kind looking good SG&A here coming like such had that levels everyone. of second the kind with on? Hey, there any in us? then question. share unusual morning, you year in and growth, meaningfully that year reaccelerate pretty or all could anything taking quarter the Thank for you the Is Can to really on year, you an you

Leslie Magee

Sure, This good Leslie. morning. is

that about. we talked plan has going is by would And Brad for a be the as say driven XX of warm to full-year some X% XXXX, start XXXX we that SG&A So, revenues. expect I some on slight of pressure ended growth percentage the of of revenue would and at

Stanley Elliott

postponed, we've makes projects and comments improved that I sentiment? book, relates larger heard some of other sense. then, And seeing kind you about that been was you and that about Perfect, the when think are had – visibility resuming your curious, that how around in to companies from all

Brad Barber

Yeah, are seeing business. of we certainly our book in that

additional to or opportunities, Gulf around You we've of have seen also addition postponed reignited as early know, expected, in pause, start project, particularly as seeing get Coast. the been in kind restart in jobs that or conversation

but it's improvement been really area. all So, in a the it's that general above,

Stanley Elliott

phase of wanted be things plaguing see actually of U.S. just that's business a looking to terms case the I a in starting to boost that, overall now, to lastly, the are then that's was weather historically, right when or that much could not? fall-out, recovery would And during back assume that if the the or

Brad Barber

it's Sure. a January. more utilization trends I about be level boost. every I demand. could spoke week of think to pent-up going improving viewed It Listen, some as be our of

improving over we've February our and of weeks two in high January, paused points been a now just first The bit.

to back work as is [this going that come soon So, immediately as fall].

As far trees from we are notwithstanding [ice as to continuing we you power very work that, be or see down], that falling it's quarter. to the improve additional roll but utilization our going as incremental, know, lines through first

Stanley Elliott

Thank you very much appreciate it.

Operator

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

Brad Barber

our next look Thank scheduled taking for time speaking you Sure. forward full-year to regularly We’d everyone thank we and our to call. quarterly get on like to the on fourth you. and quarter today, to XXXX call

Operator

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

disconnect. You now may

H&E Equipment Services (HEES) 17 Feb 212020 Q4 Earnings call transcript