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HE

H&E Equipment Services, Inc. (HEES)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $384.1M (-0.4% YoY), diluted EPS was $0.90 (vs $1.47 YoY), and adjusted EBITDA was $174.9M (-5.6% YoY) with margin compression from lower utilization, modest rate declines, and higher SG&A including $4.4M in transaction costs .
  • Rental revenues grew slightly (+0.9% YoY to $283.0M) but gross margin fell to 43.6% (vs 48.3% YoY), reflecting weaker utilization (66.4% vs 68.4% YoY) and mix shift away from used fleet sales .
  • Management did not host a Q4 call; the period was dominated by M&A developments: initial URI agreement ($92/share) followed by a superior proposal from Herc (~$104.59/share cash/stock), with URI waiving match and exiting; HEES recorded transaction expenses in Q4 .
  • No forward guidance was issued; capex guidance for 2024 was maintained earlier at $350–$400M, and the quarterly dividend of $0.275/share was paid in Q4, reiterated again post-Q4 .

What Went Well and What Went Wrong

  • What Went Well

    • Rental revenues increased 0.9% YoY to $283.0M despite weaker industry fundamentals, supported by network expansion .
    • Sales of new equipment rose 109% YoY to $20.5M with improved margin to 17.8% (vs 15.3% YoY), aiding top-line stability .
    • Management maintained discipline on fleet sales and showed strong used equipment margins through the year; Q3 used margins were >60% due to older equipment disposition and mix .

  • What Went Wrong

    • Net income fell to $32.8M (from $53.5M YoY); adjusted EBITDA fell to $174.9M with margin down to 45.5% (from 48.0%), driven by lower utilization and rate pressure .
    • SG&A increased 9.7% YoY to $117.0M in Q4 (30.5% of revenue), including ~$10.5M expansion-related costs and ~$4.4M transaction expenses tied to M&A, compressing operating margin .
    • Average time utilization slipped to 66.4% (vs 68.4% YoY) and dollar utilization to 38.2% (vs 40.3% YoY), reflecting local market softness and modest oversupply in certain equipment categories .

Financial Results

Quarterly progression (sequential comparison)

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$376.3 $384.9 $384.1
Diluted EPS ($)$0.91 $0.85 $0.90
Adjusted EBITDA ($USD Millions)$173.2 $175.3 $174.9
Adjusted EBITDA Margin (%)46.0% 45.6% 45.5%
Gross Margin (%)45.5% 44.5% 43.6%
Income from Operations Margin (%)16.7% 15.8% 14.0% (15.2% adj)

Year-over-year comparison (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024
Total Revenue ($USD Millions)$385.8 $384.1
Diluted EPS ($)$1.47 $0.90 (Adj $0.99)
Adjusted EBITDA ($USD Millions)$185.2 $174.9
Adjusted EBITDA Margin (%)48.0% 45.5%
Gross Margin (%)48.3% 43.6%
Income from Operations Margin (%)21.1% 14.0% (15.2% adj)

Segment and mix

Segment/MetricQ4 2023Q3 2024Q4 2024
Equipment Rentals Revenue ($MM)$316.9 $326.2 $319.4
Rental Revenues Component ($MM)$280.6 $288.1 $283.0
Rental Other ($MM)$36.3 $38.1 $36.5
Sales of Rental Equipment ($MM)$40.6 $27.8 $28.4
Sales of New Equipment ($MM)$9.8 $14.1 $20.5
Parts, Service & Other ($MM)$18.5 $16.8 $15.8
Rental Gross Margin (%)54.2% 51.2% 50.9%
Total Equipment Rental Margin (%)48.2% 45.3% 44.9%
Used Equipment Gross Margin (%)66.0% 60.2% 58.9%
New Equipment Gross Margin (%)15.3% 19.8% 17.8%

KPIs and operations

KPIQ2 2024Q3 2024Q4 2024
Avg Time Utilization (%)66.4% 67.6% 66.4%
Dollar Utilization (%)38.6% 39.4% 38.2%
Rental Rates YoY+1.9% -0.1% -1.1%
Rental Rates Seq.-0.1% -0.6% -0.3%
Fleet OEC (End of Period)~$2.9B Just below $3.0B ~$2.9B (+5.5% YoY)
Avg Fleet Age (months)40.0 40.8 41.7
Quarterly Dividend ($/share)$0.275 $0.275 $0.275

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Fleet Expenditures (Capex)FY 2024$350–$400M $350–$400M Maintained
DividendQuarterly$0.275/share $0.275/share Maintained

Note: No Q4 2024 earnings call was held; no new financial guidance ranges were provided in Q4 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Mega projects exposureEmphasis on growing participation; drivers include data centers, renewables, LNG; supports demand despite local softness Larger exposure; bidding favorable; noted $537B of addressable projects in regions, with ~35% commenced Continued shift of fleet supports rentals; rates down modestly YoY; no call commentary in Q4 Expanding exposure; supportive multi-year demand
Rental rates disciplineExpected flat to slight sequential declines due to mega project mix; no broad local market discounting Slight sequential declines likely; small/mid customers still stable to up; potential stabilization late 2025 -1.1% YoY and -0.3% seq. in Q4 (mix/mega projects) Mild pressure; mix-driven
UtilizationQ2 average 66.4%; improvement from Q1; local softness noted Q3 average 67.6%; still below YoY; local accounts muted Q4 average 66.4% (YoY down); dollar utilization 38.2% Stabilizing but below YoY
CapexFY24 capex reduced/maintained at $350–$400M; discipline emphasized Maintained; growth capex mostly deployed by Q4; 2025 too early to comment No new guidance; focus on fleet growth +5.5% YoY OEC Disciplined
Supply/macroTransition to normalized environment; tighter financing affects small/mid local jobs Local muted; modest oversupply in certain types; industry discipline persists Q4 margins reflect softer rates/utilization; SG&A elevated Normalizing; selective oversupply
Technology/customer portalHighlighted as competitive differentiator for mega projects participation Reinforced as table stakes for large projects Not addressed in Q4 PRStructural advantage (ongoing)
M&A backdropN/AN/AURI agreement then Herc superior proposal; transaction costs recorded Strategic overhang, pricing uplift potential

Management Commentary

  • “Rental rates performed basically as expected… I expect rates to come under more pressure… due to the weighting… with megaprojects… [but] no grand rate decreases…” — CEO (Q2 call) .
  • “Mega projects… provide a more stable base of demand… our participation… continues to grow as our branch expansion efforts lead to increase density and scale.” — CEO (Q2 call) .
  • “We believe a trend of moderating activity will persist through the remainder of the year, with physical fleet utilization and rental rates below year-ago measures… beyond the fourth quarter, the developing outlook… is more encouraging into 2025.” — CEO (Q3 call) .
  • “Our target range for 2024 gross fleet expenditures remains $350 million to $400 million.” — CEO (Q3 call) .
  • Q4 PR: Income from operations included pre-tax transaction expenses of $4.4M; adjusted op income was $58.2M (15.2% margin) after excluding these expenses .

Q&A Highlights

  • Rates and mix: Management reiterated slight sequential rate pressure from mega project mix, with no declines for small/mid local customers; potential stabilization back half of 2025 if local work improves with lower rates .
  • Capex: FY24 capex maintained ($350–$400M); most growth capex spent by Q4; 2025 capex too early to guide; expecting some OEM pricing tailwinds .
  • Fleet management: Active reallocation to higher-demand regions/mega projects; reduced fleet sales in back half to optimize utilization .
  • Free cash flow: Company expects stronger FCF generation through the cycle; 2024 adjusted FCF positive excluding acquisitions .
  • Used equipment: Auction values softening, but retail/wholesale steady; aiming to maintain >50% margins going forward (recent >60% driven by age mix) .

Estimates Context

  • Wall Street consensus estimates for Q4 2024 EPS and revenue via S&P Global were unavailable due to a Capital IQ mapping issue for HEES; estimate comparisons are therefore not provided [SpgiEstimatesError].

Key Takeaways for Investors

  • Q4 showed resilient top-line ($384.1M) and rental growth (+0.9% YoY) but margin pressure from utilization softness, mix (lower used sales), and higher SG&A including $4.4M transaction costs; adj EBITDA margin held at 45.5% .
  • Sequential performance was broadly stable vs Q3 (revenue ~$384M; adj EBITDA ~$175M), with gross margin trending down slightly as rates/utilization remained below YoY .
  • The M&A process (URI then Herc superior proposal) created a near-term overhang but also a valuation catalyst; HEES recorded transaction-related expenses in Q4 and noted no Q4 call .
  • Structural drivers (mega projects, infrastructure) continue to underpin medium-term demand; expect mild ongoing rate pressure from mega mix but stable pricing in local markets; utilization improvement hinges on local project recovery and industry supply discipline .
  • Capex discipline persists (FY24 $350–$400M maintained), with most growth capex deployed by Q4; near-term focus on optimizing fleet utilization and mix rather than expansionary spend .
  • Dividend policy remains intact ($0.275/share), providing incremental return while the strategic process unfolds .
  • Actionable: Monitor resolution of the Herc transaction and any integration/timing updates; track early-2025 utilization and rate trajectory on mega projects vs local recovery; assess used equipment pricing trends and fleet sales cadence for margin support .

Appendix: Additional Q4 Press Releases

  • Dividend declaration: $0.275 per share, paid Feb 24, 2025 .
  • URI acquisition agreement announcement (Jan 14, 2025): $92/share cash; EV ~$4.8B; strategic and financial rationale outlined .
  • Superior proposal from Herc (Feb 18, 2025): ~$104.59/share cash/stock based on Herc’s price; termination mechanics detailed .
  • URI will not pursue: URI waived match period; termination fee mechanics; repurchase program restart .