H&E Equipment Services Q3 2024 Financial Performance

H&E Equipment Services (NASDAQ: HEES) had a mixed financial performance in Q3 2024, with total revenues decreasing by 4% year-over-year to $384.9 million, attributed mainly to a 47% drop in rental equipment sales.

Key Highlights
– Rental revenues increased by 2.8% to $288.1 million, aided by the opening of new locations.
– Net income fell to $31.1 million from $48.9 million a year ago.
– The company plans to open 12 to 18 new locations in 2025 and remains focused on long-term growth despite industry challenges.

Key Takeaways

• Total Revenues: Down 4% to $384.9 million in Q3 2024.
• Rental Revenues: Increased 2.8% to $288.1 million despite challenges.
• Net Income: Decreased to $31.1 million from last year’s $48.9 million.
• Branch Expansion: Opened 27 new locations since Q3 2023.
• 2025 Outlook: Positive growth expected via Dodge Momentum Index and easing interest rates.

Company Outlook

• H&E Equipment expects a favorable 2025 driven by the Dodge Momentum Index.
• Continues expanding with plans for 12 to 18 new locations in 2025.
• Focused on replacement capital expenditures influenced by economic conditions.

Challenges and Opportunities

Bearish Points

• 47% drop in rental equipment sales impacted revenues significantly.
• Physical utilization decreased to 67.6%, down 240 basis points from last year.
• Rental gross margins fell to 51.2% due to lower utilization.

Bullish Points

• Rental revenues up by 2.8% year-over-year to $288.1 million.
• Expansion strategy exceeded expectations with 16 new locations opened in 2024.
• Management expects rental rates to stabilize by the second half of 2025.

Financial Summary

• Net Income: $31.1 million ($0.85/share), down from $48.9 million ($1.35/share) in Q3 2023.
• Adjusted EBITDA: Decreased by 8.4% to $175.3 million.
• Capital Expenditures: $327.8 million for 2024 is down 45% from the previous year.

In summary, despite facing challenges such as decreasing rental equipment sales and utilization, H&E Equipment Services shows resilience and adaptability with a strategic outlook towards growth, highlighted by branch expansion and a focus on long-term recovery in 2025.

Full Transcript of Q3 2024 Earnings Call

Operator: Good morning, and welcome to H&E Equipment Services Third Quarter 2024 Earnings Conference Call. Today’s call is being recorded. I’d like to turn the call over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead.

Jeff Chastain: Thank you, operator. Good morning, and welcome to our review of Q3 2024 financial performance. A press release detailing our results was issued earlier today and is available on our website.

Brad Barber: Thank you, Jeff. As always, I appreciate everyone’s continued interest in H&E. Moving to our financial metrics, total revenues have declined 4% from the year-ago quarter due primarily to a significant reduction in rental equipment sales.

Leslie Magee: Revenue in Q3 totaled $384.9 million, a decrease compared to last year, primarily because of declining sales of rental equipment. Gross profit fell by 9% to $171.5 million.

Q&A Section
– Positive discussions with analysts highlight improved opportunities in mega projects and local markets.
– Analysts seek clarifications on strategies regarding fleet management and rental rates in the current environment.

Jeff Chastain: Thank you for joining us today. We look forward to speaking with you again soon.