H&E Equipment Services, Inc.

Good morning, and welcome to H&E Equipment Services' fourth quarter 2020 earnings conference call. Today's call is being recorded. At this time, I would like to turn the conference 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 for the fourth quarter and year ended December 31, 2020, which were released earlier this morning. The format for today's call includes a slide presentation, which is posted on our website at 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 Leslie McGee, Chief Financial Officer and Secretary. Please proceed to slide three. During today's call, we'll 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 the 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. Some of these uncertainties is included in the safe harbor statement contained in the company's slide presentation for today's call, and is also included in the risk described in the risk factors of 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 Barker.

Thank you, Kevin. Good morning, everyone. Welcome to H&E Equipment Services' fourth 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. I will begin my presentation on slide four. I will briefly discuss our fourth quarter performance, provide some color on our end-user markets and growth strategy, and then Leslie will review our financial results for the quarter end year in more detail. After, we will take your questions. Slide six, please. I'm optimistic that 2021 will be better for H&E and our industry. During the fourth quarter, demand in our end-user rental markets remained good and physical utilization increased sequentially from the third quarter. Our distribution business also performed well. Overall, our fourth quarter performance reaffirmed our beliefs regarding the ongoing improvement in our business. In terms of our financial highlights for the quarter, total revenues were down 9.3% or 32.5 million compared to a year ago. Adjusted EBITDA declined 19.8% or 25.2 million from a year ago, and margins were down 420 basis points to 32.2%, primarily due to increased sales volume from low margin new equipment sales and lower rental gross margins. While revenues remained below pre-pandemic levels, We were pleased that the year-over-year declines improved. We also generated significant free cash flow again this quarter. On to slide seven, please. Let me now address our rental business. Physical utilization for the fourth quarter was 65.4%, a 160 basis point improvement from the third quarter. Rates remain negative. However, our sequential rate trend has stabilized. as we also mentioned last quarter. We continue to focus on adjusting the rental fleet size and mix as we prepare for what we believe will be a growth year for our business. As I stated earlier, demand in our non-residential construction markets is continuing to improve, albeit activity is still below pre-pandemic levels. We expect this recovery to continue as we move further into 2021. Activity on data centers, warehouses, distribution, and wind and solar farms Healthcare and other verticals are strong. We expect industrial plants will also resume maintenance work, which was significantly postponed last year. The passing of a major infrastructure or highway bill would also be very positive for the industry. Lastly, both visibility and sentiment from our larger contractor customers continue to improve. Slide 8. Let me conclude by reaffirming our commitment to accelerate our growth strategy this year as we're pursuing multiple ways to accomplish this goal. First, this includes significant increase in the number of warm starts in 2021. Last year, we added four new locations. Our plan is to add eight to 10 new locations this year. We will spread these branches out across our footprint, primarily in our existing geographies where we believe we would like to increase our service density in stable and high growth markets. Second, we will continue to explore additional growth opportunities from tuck-in acquisitions of general rental businesses. Entering the specialty rental business is also part of our focus. Any specialty acquisition or new location openings would be synergistic with our current lines of business and fleet mix. This includes opportunities in both inside and outside of our existing geographies. Our 60 years in business have always been about equipment solutions. strategically grow in our product lines, and our ability to serve our increasing base of customers. We're ramping up this commitment in 2021. Leslie will elaborate more in her comments, but with our successful upsizing and notes offered in the fourth quarter, our balance sheet is strong and will support our growth initiatives. I'll now turn the call out of Leslie to discuss our fourth quarter and full year 2020 financial results in more detail. Leslie?