Executive Summary

Q1 2025 was seasonally softer with local-market demand weakness and merger-related disruption; revenues fell 14.0% YoY to $319.5M, with a net loss of $6.2M (adjusted net income $1.2M; adjusted EBITDA $131.2M, 41.1% margin) .
Equipment rental revenues declined 7.2% YoY to $274.0M on lower utilization and modest rate pressure; dollar utilization dropped to 33.1% and time utilization to 60.3% .
Management did not host a Q1 call; commentary emphasized resilience from the pending merger with Herc and continued (but measured) branch expansion (four openings in Q1; one in Q2 to date), with an expected mid‑year 2025 close .
The board later elected not to declare the regular June dividend (previously $0.275/share), citing progress toward closing the Herc transaction, a potential catalyst for the stock around deal timing .
Consensus estimates from S&P Global were unavailable for Q1 2025; comparisons to Street expectations cannot be made (values unavailable from S&P Global).

What Went Well and What Went Wrong

What Went Well

Adjusted profitability remained positive despite demand headwinds: adjusted net income of $1.2M ($0.03 diluted) and adjusted EBITDA of $131.2M (41.1% margin) demonstrated rental model resilience .
Fleet quality remained an advantage: rental fleet OEC ~$2.9B with average age 43.2 months, younger than industry average 49.3 months, supporting competitive positioning on mega projects and yields .
Strategic expansion continued prudently (four new branches opened in Q1; one in Q2 to date), positioning for future demand and mega-project exposure while managing near-term softness .

What Went Wrong

Top-line and margin compression: revenues down 14.0% YoY, total gross margin declined to 38.7% (from 44.4%), with rental gross margin at 43.6% (down from 48.5%) due to lower utilization and rate pressure .
Utilization and rates: average time utilization fell to 60.3% (63.6% prior year), dollar utilization to 33.1% (37.0% prior year); average rental rates declined 2.0% YoY and 1.3% sequentially (ex-acquisitions) .
Used equipment volumes dropped: sales of rental equipment fell 50.3% YoY to $23.9M, magnifying revenue decline and leveraging fewer fleet dispositions versus prior periods .

Financial Results

Quarterly Trend (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$384.9	$384.1	$319.5
Net Income ($USD Millions)	$31.1	$32.8	$(6.2)
Diluted EPS ($USD)	$0.85	$0.90	$(0.17)
Adjusted EBITDA ($USD Millions)	$175.3	$174.9	$131.2
Adjusted EBITDA Margin (%)	45.6%	45.5%	41.1%
Equipment Rental Revenues ($USD Millions)	$326.2	$319.4	$274.0

YoY Comparison – Q1 2025 vs Q1 2024

Metric	Q1 2024	Q1 2025	YoY Change
Revenue ($USD Millions)	$371.4	$319.5	−14.0%
Net Income ($USD Millions)	$25.9	$(6.2)	n/a
Diluted EPS ($USD)	$0.71	$(0.17)	n/a
Adjusted EBITDA ($USD Millions)	$161.7	$131.2	−18.9%
Adjusted EBITDA Margin (%)	43.6%	41.1%	−250 bps
Equipment Rental Revenues ($USD Millions)	$295.3	$274.0	−7.2%
Rental Revenues ($USD Millions)	$261.7	$242.9	−7.2%
Sales of Rental Equipment ($USD Millions)	$48.1	$23.9	−50.3%
Sales of New Equipment ($USD Millions)	$10.4	$7.4	−28.7%
Parts, Service & Other ($USD Millions)	$17.5	$14.1	−19.5%
Total Gross Margin (%)	44.4%	38.7%	−570 bps
Equipment Rental Gross Margin (%)	43.3%	38.2%	−510 bps
Rental Gross Margin (%)	48.5%	43.6%	−490 bps

Segment Breakdown (oldest → newest)

Segment ($USD Millions)	Q1 2024	Q4 2024	Q1 2025
Equipment Rentals	$295.3	$319.4	$274.0
Sales of Rental Equipment	$48.1	$28.4	$23.9
Sales of New Equipment	$10.4	$20.5	$7.4
Parts, Service & Other	$17.5	$15.8	$14.1
Total Revenues	$371.4	$384.1	$319.5

KPIs and Operating Metrics (oldest → newest)

KPI	Q3 2024	Q4 2024	Q1 2025
Time Utilization (%)	67.6%	66.4%	60.3%
Dollar Utilization (%)	39.4%	38.2%	33.1%
Avg Rental Rate YoY Change	−0.1%	−1.1%	−2.0%
Avg Rental Rate Seq Change	−0.6%	−0.3%	−1.3%
Rental Fleet OEC ($USD Billions)	~$3.0	~$2.9	~$2.9
Avg Rental Fleet Age (months)	40.8	41.7	43.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quarterly Dividend	Q1 2025 (paid Feb 24)	$0.275/share	—	Paid
Quarterly Dividend	Q2 2025 (June)	$0.275/share historical	Not declared (June 2025)	Lowered/Paused
Merger Close Timing	2025	“Expected mid-year 2025” close with Herc	“Expected early-June 2025” (updated)	Narrowed window
Earnings Call	Q1 2025	Historically hosted	No call for Q1 2025	Maintained decision (no call)

No formal revenue, margin, OpEx, OI&E, or tax-rate guidance ranges were provided for Q1 2025; commentary focused on merger status and operational expansion .

Earnings Call Themes & Trends

Note: No Q1 2025 call; themes reference Q3 2024 call and Q4 2024/Q1 2025 releases.

Topic	Previous Mentions (Q3 2024 and Q4 2024)	Current Period (Q1 2025)	Trend
Local-market demand	Mixed/slowing; utilization down 240 bps YoY; rates resilient in small/medium customers	“Demand from local markets remained weak”	Deteriorating
Mega projects	Strategic focus; positive yield; selective participation; $537B addressable in regions	Belief merger with Herc will elevate resiliency; continued exposure	Stable/Positive
Rental rates	Slight YoY declines; sequential down; small/medium customers stable; mega mix drives declines	−2.0% YoY; −1.3% seq (ex-acq)	Slightly negative
Utilization	Q3: 67.6%; Q4: 66.4%	Q1: 60.3% (seasonal + demand)	Down seasonally/structurally
Branch expansion	16 added in 2024; plan 12–18 in 2025 (pre-merger commentary)	4 opened in Q1, 1 in Q2 to date	Continuing but measured
Used equipment margins	>60% sustained; may normalize toward 50%+	Sales volume −50.3% YoY	Volume down; margins stable context
Macro/interest rates	Anticipated easing to aid local projects in 2H’25	Not reiterated; focus on merger	Watch for improvement later

Management Commentary

“In the seasonally softer first quarter… demand from local markets remained weak. In addition… merger announcements in the quarter created pressure on the performance of the business.”
“We believe the merger with Herc Rentals will further elevate operating resiliency across a broader network… advantageous when managing the slower phases of the business cycle… expected mid-year 2025 close.”
Expansion remained disciplined: “only those openings that were already planned and underway… including four openings in the first quarter, followed by one opening so far in the second quarter.”

Q&A Highlights

No Q1 2025 call was held . For context from Q3 2024:

Rental rates and mix: Rate declines were driven by mix shift to mega projects; small/medium customers saw stable to minimal gains, implying resilience in core pricing .
Expansion pace: Despite sluggish local markets, management planned 12–18 new branches in 2025, treating openings as long-term investments in durable markets .
CapEx outlook: Replacement-focused in Q4 2024; 2025 CapEx commentary deferred to year-end budgeting; improved OEM pricing in select cases .
Product trends: Earthmoving showed YoY improvement and remains a higher dollar-utilization category .
Supply/used equipment: Slight oversupply across various categories; auction values softening; aim to sustain >50% gross margins on used equipment over time .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2025 EPS, revenue, and EBITDA was unavailable due to missing CIQ mapping; we attempted retrieval but could not obtain values (values unavailable from S&P Global).
As a result, we cannot formally assess beats/misses vs consensus for Q1 2025.

Key Takeaways for Investors

Q1 weakness was broad-based: revenue −14.0% YoY, rental revenues −7.2%, with gross margin compression driven by lower utilization and modest rate declines tied to mix; profitability remained positive on an adjusted basis, indicating rental-model resilience .
Utilization metrics bear close monitoring: time utilization dropped to 60.3% and dollar utilization to 33.1%, historically sensitive to local-market cycles and rate discipline; improvement hinges on macro/interest-rate easing and project starts .
Strategic expansion continues, but measured, to preserve optionality ahead of the Herc merger; younger fleet age versus industry supports competitive yields on mega projects .
Deal path is the near-term catalyst: URI pact (Jan 14) was superseded by Herc’s superior proposal (Feb 18); URI withdrew (Feb 18); dividend paused for June with “expected early-June” close signal—deal timing and terms drive sentiment .
No Q1 call and no formal guidance: lack of quantitative outlook increases reliance on macro indicators and merger integration expectations; monitor any pre-close operational constraints noted in interim covenants .
Used equipment volumes down sharply (−50.3% YoY) reduced sales contribution; margin discipline remains key as auction values soften, with management aiming for >50% gross margins over time .
Actionable: focus on merger close risk/timing, potential synergy narrative with Herc, trajectory of utilization/rates into 2H 2025, and any updates on branch expansion cadence and CapEx normalization .

Note: Consensus estimates from S&P Global were unavailable for Q1 2025; therefore, estimate comparisons are not provided.

Appendix: Transaction and Dividend-Related Releases

United Rentals tender offer commenced Jan 28, 2025 .
HSR withdrawal and refiling to extend review (Feb 3) .
H&E determined Herc’s offer a “Superior Proposal” (Feb 18) .
URI will not pursue acquisition; termination fee framework noted (Feb 18) .
Q4 2024 results; no call; transaction-related expenses disclosed .
Dividend declared for Feb 24, 2025 ($0.275/share); later board elected not to declare June 2025 dividend due to expected close in early-June .

H&E Equipment Services, Inc. (HEES)·Q1 2025 Earnings Summary