HEES - Earnings call transcript Q3 2021 | H&E Equipment Services, Inc.

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Operator

Good day, and welcome to the H&E Equipment Services Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead, sir.

Jeff Chastain

welcome, hosted this H&E by and quarter of Equipment Chuck, results XXXX the you, everyone, review to third Services. Thank management of your appreciate interest the We in company. results press found be with website all schedules our A and and and along release statements the of this morning the third copy quarter at was supporting at issued can covering H&E www.he-quipment.com.

at Events Investor is presentation, which be found Our Relations slide can the under and a discussion the accompanied this website by presentations. morning tab H&E also

proceed Chief you I'll and those John If Secretary. Leslie Slide to introduce Corporate which President and and who X, today, me Magee, include are Officer Chief Chief Engquist, Executive joining Operating Officer; Brad Financial Barber, Officer;

and call. Brad, to forward-looking statements the are conference containing to reports. evaluating Also in The periodic call slide as factors forward-looking about I that carefully presentation other undue place [indiscernible] forward-looking relies date of today's these reliance most company's financial in the any today's statement. company to laws. to within harbor we recent federal forward-looking are expectations the statements factors potential of described could, not you such those and for XX-K urged in safe want annual other any after differ statements words risk in statements forward-looking and turn Moving before similar results contained believe, listeners uncertainties company's today's is And cautioned to or and call on note, consider non-GAAP contained these the does Slide remind during and risks undertake contains expressions not the materially also investors actual statement update X. include risks are meaning measures in statements. beliefs and It's expect, involve and in this to I report referencing A call. Form and which securities cause constitute the the such of publicly anticipate from could Investors, to the our the over the may, uncertainties, included unknown call summary on

for as release will the comparable reconciliation the today's to to the measures, these our supporting associated GAAP I'll supplemental those You in directly way, Chief Officer Executive schedules H&E and presentation turn measure required the appendix over an now details press find Equipment of most With and materials. out Services. call Brad Barber, to the of disclosure including

Brad Barber

call for good Jeff, to us on also morning, today's review Thank Equipment the third results Services. you quarter joining I'd you, as like my welcome express everyone. H&E we appreciation and and of

and Before and Leslie comments was morning financial this the of performance third Slide Chief future for position with be the will of H&E's business joining to strategically and transaction our Proceed this and crane business the milestone of how completed, and we am indicative the to begin year-over-year has more the was all execution detail welcome a of which in on this many in quarter, I competitive and my outstanding was rental equipment with impressive a business both quarter President me John on Engquist, and Operating to President included our John the performance, company I the promoted last will role year. I XX within positions calls. I financial excellent strengthens COO pure-play team model. a pleased over during stating improved in business sale evident improvement. crane performance sequential our especially call. who our sale begin years transformation Officer, held I'll future. provide earlier period on operational our activity. want is the Closing the on The the John recognized to strong a X. significant Also, rental joining moment.

In and led results expect that we quarter to addition, our financial as impressive might some important identify third activity of a the close. what business of XXXX drivers I'll draws to

Finally, discussion equipment from Slide business, more our Then third results. explain our for as your to on existing want efforts expect why the benefit the focus of as we X, H&E strategy explanation. expanding geography financial results to with with quarter begin will rental strong an our a intensify the take please. footprint strategy our then quarter review environment I on market follow questions. will financial environment. our I Leslie successful following we well to comprehensive will penetrating third to my and the position geographic

business sell Slide to the on X and the business that operations. are continuing discontinued in required both agreement be our To Our as operations. presented financial consolidated, highlights this crane reported confusion, operations of discontinued avoid

For information the as specifically otherwise noted, of crane presentation, remainder results as exclude presented operations and our and unless business, continued the operations. discontinued

improved compared were to which the XXXX, I for global diminished quarter XXXX same of financial As quarter mentioned the in earlier, the decidedly the metrics by effects were of in COVID-XX third part pandemic.

steady our total declines third the a in has XXXX. However, revenues demonstrated XXXX. and that from the discipline same the quarter in quarter XXXX when of dominated to improved both $XXX.X On rebound industry million compared a of pandemic-induced XX.X% basis, consolidated

comparison, please. million the an in adjusted posting EBITDA XXX basis up and This of quarter outcome million. Slide over of Also, equating favorable period largely due EBITDA the $XXX.X margin basis points $XXX.X XX.X% while or period than when in an to quarter. On adjusted million to better comparison. year regards improvement the revenues continuing Slide to total grew equaling a XX.X% X, of or In quarter over addition, margin EBITDA X.X% a third to of increase million, XX.X%, to XXXX. up operations, compared improved of -- a third XX.X% With improved to to please. points was ago revenues rental the $XXX.X adjusted total X, of to to XX.X% $XXX.X XXX

basis results dollar Multiple to of same reaching diverse XX% focus utilization quarter, $XXX.X gross to which quarter a a possible strong showed At continued XXX the success. the XX.X% ago combination increased X, This higher a on operational their increase rental third without fourth sequential X.X% just utilization with points higher a quarterly continued XXX XX.X% rates sequential peak same of projects produced intensified. our improved ago rental year of basis rates remains drove strengthening of of rental average core results our or and a to excellence, included be strong and our remained of quarter's reflect operational mix contributed to physical ahead and factors of utilization elevated our performance our of last throughout to or rental year. quarter. ahead in Such would strong basis XX.X% of year which and XX.X% and outstanding quarter nonresidential The the ago physical million business XXX Since of Slide demand, Customer the a for This ahead rental compared quarter. to component on XXXX. over as on X.X% physical of point demand XXXX, represented a financial year third utilization highest the period XXX points XXXX, the to customer vigorous quarter positive for execution the trend time, quarter the basis please. in our third October. since utilization basis third compared basis. quarterly outcome. construction margin equipment the When outstanding significantly third demand of revenues close quarter. gains, points not quarter the Our finished the the

this quarter quarter. the the second we're to we While as expect momentum levels emerge the of enjoying moderate continue coming final utilization factors year, during the -- see seasonal still into half

final market for all which at The XXXX, XX% of levels. primary indicators nonresidential elevated, I about to XX Strong months in continue led remain part industry and record the As we of equipment and is construction activity, It's revenues the future accounted industry. broadening evidence enthusiastic of construction in the trailing XX, enter place. XXXX. from over by market rental near inquiries of remain end the September hover a remains quarter customer H&E's

to investment invest with evidence for total our of history. in growing any the H&E the our gross expansion to of plans company's that strong is exceed expected growth growth XXXX expenditures primary previous years our expects disclose markets, of significantly As XX-year a -- confidence of fleet of

capital our spending quarterly capital for disclose the our will evaluation to expenditure final please. following of begin plan thereafter, We Slide On XX, completion expenditure XXXX offering and guidance.

I success as brief review, turn call we H&E for our over offer some how in recovery we're future enjoy remarks for to want financial strong Leslie I cyclical to industry. Before positioning the the on

which and a location opened XX XXXX, business, conclude, initiatives our rental our as new expansions network. XXXX the as we expansion future have pathway establish XXXX. be celebrate rental completed XX industry. while sustainable significant greenfield closed H&E our to continued Also, of cycle. October Warm in remains branches as the fleet we development throughout states far growth evaluate placing including H&A include the as we will which U.S., than will X establish higher margin that new branch crane support in will will X across to the acquisition customers new branches. sale remains from well XX fewer in XX please. evaluate as one needs the and plans, to integral the sale and transition an investment the no October further foremost, we branches, steps of Proceeds -- pure mix used These business. the part to opportunities. XX, an and the H&E's in Utah and the clearly proceeds our appreciation in earthmoving of business other next crane fleet, and in branch revenue of plan facilitate expanding month, of Thus First more of youngest improving advance to we our business. Slide have of Ogden, years These distribution on continue mid-September sale starts in well a steps To

enhance group account, the capitalize our expanding this our reinforcing least, of and turn and factors ample as over XX, ideally sheet, leadership should of scalable I'm is Slide my our initiatives. capitalize I as call and each team approach that, of please ability digital our geographic Magee. to platform. young confident to employees going Leslie? diverse milestone, growth liquidity And we to confidence but on proceed very these competitive robust and factors strength the believe branch our growth network. rental presence. our company's growing our well position. I'm dedicated Also, As on Taking Leslie such balance not that initiatives experience positioned last, as future to of the ability H&E our across With into fleet of to in certainly the customer further our

Leslie Magee

everyone, today's you, begin morning, Slide XX. thank and Brad. review Good I'll on financial

Brad third as quarter months earlier, As report key XX, results and our given of more financial we year-to-date summary a crane mind, discontinued operations. an this for and the business what X understanding what on XX, financials we and the convey measures important, of explained to present the gained. Slide September XXXX, X of up ended was in With

sale H&E. margin more transactions also branches continuing gain branches benefit pure sales date an Our operations please. experienced through XX% of in support financial did H&E's continuing and the just total consolidated $X.X of of nature Further, operations the September operations. margin sale notes The OEC, of from and as on which continuing revenues measures margins distribution continuing results, these Arkansas. illustrated and of are operations of sale operations a total the table Arkansas the million of approximate on under included The discontinued transition and gain we business, included sale period, are located the stable in is presented $X.X or of this to continuing reported our and adjusted Slide business, equipment. key transaction in appreciation of XX, revenues discontinued property earthmoving approximately revenues million these the operations discontinued on the to X% X-month EBITDA X slide. an the or branches, We the these Referring the where which represented not table XXXX appreciation. of accretive and meaningful the Collectively, to from go-forward operations company's of expect rental XX.X%. the as is crane for consolidated higher operations the qualify on had The crane point with

operations. continuing to now Moving

in rental compared in the our The $XXX.X the for million quarter in included the ahead results by of improvements XXXX. further was of along third revenues, and Our which growth. third again, quarter growth at or rental $XXX.X million Revenues $XXX.X rates, the third once X.X% with quarter third utilization quarter $XX.X quarter, million the additional driven fleet to improved to in XXXX. increase in million XX.X% physical closed

since the unfavorable a on basis. end XXXX improvement X.X% the our and on XX.X% to rental was expanding quarter third an meaningful quarter ago same ago the grow X,XXX the basis sequential lows which continue in pandemic-led second from growth the rate Also, up Within from the and encouraging by X.X%. Higher the physical of comparison from quarterly X% rental the when we points quarter, X.X% averaged quarter, rates, further in OEC XXXX by basis utilization year quarter segment, both quarter seen utilization X.X% consider remained up the The and you was XXXX. for measure in fleet XXX basis compared second year year-over-year fleet the and improved gains XXXX. of to points drove in when fleet

other demand. led million $XX.X of to by Looking third the fewer to due million, equipment constraints, other declined principally with at lower to new the equipment due rental supply used the sales primarily and were earthmoving to decrease which Also new our down sales earthmoving segments, year-over-year in business XX.X% of caused equipment. sales largely strong new $XX.X XX.X% sales equipment of to quarter

increase, on quarter fleet margins to sales quarter to better result finished XX, million margins XX.X% basis new business at quarter. please. in XX.X%, $XXX.X Margins of XX.X% XX.X% million year were service XXXX quarter which the compared XX.X%, of year ago $XX.X quarter, profit parts on segments of on year prior and third XX%, and a to gross in equipment while of quarter million. XXXX, improved revenues. rental revenues used Our of were in quarter rentals the revenue. XX.X% ahead XX.X% of $XX.X business XX.X% to our resulted were with from to the XX.X% the better And XX.X%. and margin quarter, compared improved than to was to on a to XX.X% the XXXX XXX of to points or service to ago the The higher profit up to primarily XX.X% margins or XX.X% aggregate quarter a gross rentals reported the same material or operations to Slide Income year total margins favorable mix. earthmoving due compared for higher -- or Reviewing points third in in X.X% resulting from third rates. finally, XX.X% in When primarily compared handling due up equipment ago. earthmoving gross addition compared XX% the basis and Used from margins utilization sales the XX.X% of XXX our equipment income revenue The improvement equipment. segments, the of improved in or compared operations to rental margins compared year on higher ago margins third $XX.X equipment. led margins by parts Pure million totaled of

Adjusted and in XXXX $X margins third revenues gross equipment third higher to the or increase of or on ago $XX.X income quarter of in -- $XX.X to third $X.X the Proceed on the in improvement the Third per an rental tax by in the XX.X% quarter XXXX, compared was year XX, Arkansas $XX.X in third quarter XXXX diluted third and quarter million the $X of in the XX, XXXX the Slide Slide of year XXXX of and million the Net the third EBITDA increase ago quarter $X.XX compared million in per to effective to quarter please. and and quarter of margins, quarter. improved XXXX. The please. million million of XXXX sales XX.X% in third partially $XXX.X XX.X% million million margins diluted offset rate higher used partially third the equipment million branches. of gain of of third due gain supported offset the improvement share was share and drove with sales property of in on compared by the equipment of quarter favorable EBITDA by property income were XXXX SG&A to in distribution property favorable of in and Adjusted expenses. $X.XX combination improved sale rental in the higher quarter. better margins on Gain were quarter to equipment and the sales year to XX.X%. $X.X revenue mix XX.X% the on the The sales gain higher ago expenses. mix, the margins, higher SG&A quarter, and margin or

a Next, million XX.X% professional SG&A costs of to with network of quarter, million benefits. branches Branch representing or the our new to conclusion year initial total was XX facilities third the $X.X in incentive expenses the Utah. $X.X XXXX please. quarter expansion salaries, ago taxes $XX.X of accounted Ogden, totaled largely in in expenses increase the million million quarter million compared employee related $X.X in of includes our for XX, and million the please. payroll Slide $X.X due Slide in XXXX $XX.X The Also, higher fees. XX, since SG&A addition largely a increase employee expenses expenses of and in million wages, quarter. increase compensation, $X.X in third associated location to third the and

expenditures gross by expenditures $XX.X period while for PP&E exceeded Gross of from the for expenditures Net noncash million, were capital capital fleet cash $X.X XX, million. the X-month $X.X the were flow ending quarter inventory. cover from $XXX.X proceeds period third fleet transfers And our were gross million, XXXX. capital I'll capital expenditures expenditures PP&E including for fleet September and X-month sales Next, million. our rental

which free period XX.X the our fleet an of the Slide over X-month age X $XX.X XXXX. end September greater for $XX OEC fleet XX.X September million At to of same year industry in age $X.X months XX, the was based on ago. flow average XXXX, months, the a the months. size million XXXX, or billion, as $XX.X million of rental of average fleet Free XX, XX, flow third quarter, please. was the ended of X% than was to cash cash compares compared Our approximately increase

$XXX Our XXXX. million close X.X% up OEC since of was the or

rental ended higher predominantly rising on $X XXXX physical dollar basis ago utilization our to and debt Our of which the the quarter third XX-month capital year was and we Addressing average with XX.X% XX.X% net leverage structure, of was and previous Slide compared improvement by utilization XX. from a driven net quarter. modest a billion rates. X.Xx, a of trailing

before on no under XX, senior With through We $X.XX to no maturities the billion amended our liquidity of have position, have our notes. borrowings XXXX ABL regards X our Slide unsecured first facility. months please. we

the on Our total $XXX.X of million representing of $XXX sum liquidity $XXX.X remains healthy cash sheet under and million balance the facility ABA position borrowing the availability of at million.

continue $X.XXX our excess we end $X per of the availability Our fixed share By And agreement With definition, quarter springing billion, in of approximately applicable. facility stock of we than have the availability covenant with of excess no quarter paid charge to concerns. the is dividend quarterly third at third XXXX. excess million. the our minimum common availability under to excess the regular more $X.X of $XX finally, measurement used of if defined by as the ABL a was billion determine availability is

markets. an increasingly our our execution it success to Board network approval, the to While continue throughout reflects our financial summary, intent operational always strong please. with H&E's opportunities pay our and evident In dividends quarter performance across growth XX branch to expanding dividend. capturing are Slide third the is end subject

rental quarterly fleet points and the than of growing Our XX.X% as the rental growth today. please the and quarter, improving revenue our crane basis rental sale review was utilization for now on the call while delivered Operator, focus my buses. rates in more margin our with gross we appreciation X% in XXX over X.X% Year on participants strong the instructions intensify capitalizing to rising business we the execute And margin positioned this metrics. more And quarter higher our quarter. and and from completed, year. of the are better to growth one if on rental fleet concludes operations our benefiting initiatives while would you performance excellent the improved stable to provide

Operator

will come from Stifel. [Operator Instructions]. Stanley And the with Elliott first question

Stanley Elliott

see Quick you to all. margin distribution ex Nice lift question for the business. the

XX.X%, good color have the guys of of a or about very that structurally -- you XX% of direction too. you could very margins think where for You you or thought but go, Any kind good, that X communicate still could is sort months front? tailwinds, on good, can share lot

Brad Barber

with currently. of utilization. generally, rates. mix -- QX, performing of our that stated, believe XX% to a returns. range be to assets our season view QX. deliver business some Obviously, increase with be the our to mix we're primarily. is mark We better Maybe more good we're little kind That at that believe improve view performance of that But Stanley. we're in probably is profile. indicator continue Sure, could it's we that our where and the a continue seasonal going quarters, will impacted that improving is We Certainly, rental to our going

forward. to improve we as we number time, given incrementally that, go will that So believe continue

Stanley Elliott

not mentioned about of utilization. you are probably more operating but is kind over sort you October fantastic, How next ideal And XX% And long year? sustainable a into all of in thoughts level term. thinking there. the curious

Brad Barber

history, there a several time was of proud We hit company's internally. actually lot we're initiatives operational In ago. and the we the a that excellence we talked have Yes, XX% XX%. about Sure. years

anyone would XX% I to That's believe not to going lead And to a not want that we're in quarter. average realistic. so

you go tell room improve we we our annual believe have as to will forward, incrementally. utilization I was. average that quarterly the what saw You we

can average periods. other happy But the peak respond but or So achieved of QX, in would we're it. John what to in to QX we not myself on if is in proud we there's something what best we do more be necessarily specific, achieved

Stanley Elliott

that business, a And fleet, with to CapEx able young you're conversations -- facing lastly, would them year? of see book have OEMs far of terms are you given demand into you'll you Do supply fleet all the the need want, you've then lot obviously, building be issues. a great. that feel for chain that That's you next had you in thus get the

Brad Barber

contact. We in feel very confident. We stay

right manufacturers. been, excellent with XXXX what month got have more We've we planning are, our upon operations the any months, have call I we we're believe our would without with going we're intense be -- last need. Based what we with our for X that receive wrapping to able to expectations headwinds. planning our now. Maybe do XXX% verification going relationships large We of products to the importantly, more and up inflationary so

average. So expecting single-digit increases on we're low

So we would all we the manufacturers. the and It direct the further get change. we're But from answer hear is supply hearing then Well, from chain should be product. comments yes, my can disruptions, them.

placed, are ability to orders grow. about and our good Our we very feel

Operator

with Group. from next come Our Research Thompson will Ramsey Steven Instructions] [Operator question

Steven Ramsey

it. come first on in normal the to will understand will follow would wanted up and sure that your Or in like fleet To of year, to commentary I it getting year? you you the fleet timing XXX% there branches have be a ideal? later you for in next than to XXXX would the clarify get to make I coming in of

Brad Barber

but months. going deliveries get specific to manufacturers now, And our right We'll us asking on are the they're we're talk but We're the year only majority quarters, of ability already vast for planned equipment next us want detail. it. fine-tuning purchases to to when that slated our be for they're telling the requirements. certainly their verify Steve, to not able more to we in make working

try we the calls delivery starting to we're planning we're we our sure that manufacturers have what have our communicate to cadence. guidance, as into important next absolutely today, and quarterly to us year, just for. guidance give supplied we we think next fleet going that. to I when We'll try dates to But sit going that because here, give significant growth As on that fit move make quarter CapEx context mentioned, we it's

Steven Ramsey

Excellent.

guess Okay. execute the specialty over? this And if at then your Or think you thinking in on slower just manufacturers' this desired slow can you for? this Or ambitions the hoped front? any ability are you level? I than updates what about maybe do long-term production down And challenges to equipment, grow a do little originally the there

Brad Barber

front: X opportunities continue one, number pursuing think there's opportunity, reviewing be active to we acquisition always that there I and there; specialty out the and are are things in on number started announced safety two, us, product the purchase Obviously, our we desire currently it organically trench steel pricing. pricing current business. steel a at and and to headwind to is stifled a

our acquisition, as soon is better the that from enter outside that We we've spoken detracting for piece just said, not organic as we to fairly of our to being that's growing pricing or So small very desire a makes business That us. overall revenue remain the that foreseeable going But of significantly. about sense future. larger grow plan grow it it. to can to a for back get startup specialty

Steven Ramsey

Fair.

Okay.

do strong it the going much to magnitude flip positive then on thinking forward? the fleet expect this a of industry, initiatives? front, positive broadly? tight a then comps? you given in major rates Okay. How forward, is in rate of is And easier going some be How are much And in And certainly or to the then major geographies Or leading pricing lagging rates way. way? about that are that

Brad Barber

let Yes, Steve, respond to Engquist John that. me let

John Engquist

Yes, sure.

to to we to gains do I feel going consistent continue geographies. raise So across seen all respect a to consistent that pricing. XXXX, Stephen, are With be We've all for geographies. say our look, is across rates us XXXX can positive environment

pricing optimistic that. certainly we're support I to think additional is going about And So year next increases.

Operator

to our the [Operator remarks. Instructions] And back Mr. I over conference session. Please ahead. for go to conclude Jeff turn Chastain this any closing question-and-answer would like will

Jeff Chastain

today's go then for taking you again. time to Good call. with the continued to thank Thank you and We conclude with look today join to Chuck. And and ahead H&E forward appreciate us Equipment We call. Chuck, your speaking We're your you, going everyone. you in today's assistance day, Services. for interest

Operator

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

You disconnect. may now

H&E Equipment Services (HEES) 2 Nov 212021 Q3 Earnings call transcript