H&E Equipment Services, Inc.

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

Thank you, Sarah, and welcome to H&E Equipment Services Conference Call to review the company's results. The third quarter ended September 30, 2020, which were released earlier this morning. The format for today's call includes a slide presentation, which is posted on our website, www.he-equipment.com. Please proceed to slide two. Conducting the call today will be John Inquist, Executive Chairman of the Board of Directors, Brad Barber, Chief Executive Officer and President, and Leslie McGee, Chief Financial Officer and Secretary. Please proceed to slide three. During today's call, we will refer to certain non-GAAP financial measures. And we've reconciled these measures to gap figures in our earnings release and in the appendix to this presentation, each of which is available on our website. Before we start, let me offer the cautionary note that this call contains forward-looking statements within the meanings of federal securities laws, statements about our beliefs and expectations, and statements containing words such as may, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. A summary of these uncertainties is included in the safe harbor statement contained in the company's slide presentation for today's call, and also include the risks described in the risk factors in the company's most recent annual report on Form 10-K and other periodic reports. Investors, potential investors, and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call. With that stated, I'll now turn the call over to Brad Barber.

Thank you, Kevin, and good morning, everyone. Welcome to H&E Equipment Services' third quarter 2020 earnings call. On the call with me today are John Inquist, Executive Chairman, Leslie McGee, our Chief Financial Officer, and Kevin Enda, our Vice President of Investor Relations. Slide four, please. I will briefly discuss our third quarter performance and current market trends, and then Leslie will review our financial results for the quarter in more detail. After, we will take your question. Slide six, please. I'm pleased to begin today's call by saying the operational environment has progressed from what I would characterize as stable to expansion. I will provide some additional color on the positive trends we're experiencing in our end-user rental markets and physical utilization in a moment, but let me first quickly review our top-line financial highlights. While we continue to see meaningful improvement in the rental business, our financial results remain below year-ago levels. Total revenues were down 18.1%, or 63.7 million compared to a year ago. This was largely the result of an 18.8 or 38.3 million decline in total rental revenues and 42.7 or 27.8 million decline in new equipment sales from a year ago. Adjusted EBITDA declined 22.5% or 28.7 million from a year ago and margins decreased 200 basis points to 34.1%. Let me now address the improvements in our rental business. I stated during our second quarter call that I expect that utilization could be flattish through the balance of this year. Instead, during the third quarter, we experienced a solid increase in equipment on rent while we continued to adjust our fleet by selling our older assets. Even though oil field and industrial rental opportunities remain far below historical levels, demand has improved within our non-residential construction markets. Physical utilization for the quarter was 63.8%, a 430 basis point improvement from the second quarter. As of September 30, 2020, physical utilization was running just over 67%. Keep in mind, demand historically begins to decrease around the holidays, and seasonality becomes a greater headwind, but we are very pleased with the positive cadence in our physical utilization. Rates are still negative. However, our sequential rate trend improved. As Leslie will detail, we remain focused on managing our balance sheet and maintaining the appropriate size rental fleet and inventories. Our ongoing activities to reduce capital expenditures and operating costs resulted in significant free cash flow for the quarter. We have also continued to improve our leverage and liquidity. In conclusion, the momentum in our rental business is encouraging. We believe the current environment could further increase the secular shift towards renting versus owning equipment, creating opportunities greater opportunities for H&E. Based on our improving visibility, we plan to accelerate our growth strategy. This includes significantly increasing the number of warm starts next year. We also remain focused on pursuing acquisition opportunities in both the general rental and the specialty rental businesses. I'll now turn the call of Leslie to discuss our third quarter financial results in more detail. Leslie?