H&E Equipment Services, Inc.

Good morning and welcome to the H&E Equipment Services second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning. Welcome to everyone on today's call to review our second quarter 2024 financial performance. A press release following our results for the quarter was issued earlier today and can be found along with all supporting statements and schedules on the H&E website, that's www.he-equipment.com. A slide presentation will accompany today's discussion and is also posted on our website under the Investor Relations tab in Events and Presentations. On slide two, you'll see joining me on today's call is Brad Barber, Chief Executive Officer, John Inquist, President and Chief Operating Officer, and Leslie McGee, Chief Financial Officer and Corporate Secretary. Brad will begin this morning's review, but before I turn the call over to him, please proceed to slide three as I remind you that today's call contains forward-looking statements within the meaning of the federal securities laws. Statements about our beliefs and expectations and statements containing words such as may, could, believe, expect, anticipate, and other 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 slide presentation for today's call. and includes the risks described in the risk factors in the company's 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. Also, we are referencing non-GAAP financial measures during today's call. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation as supporting schedules to our press release and in the appendix to today's presentation materials. With the initial details of our call complete, I'll now turn the call over to Brad Barber, Chief Executive Officer of H&E Equipment.

Thank you, Jeff. Good morning. Welcome to our review of second quarter 2024 financial results. As always, we appreciate your continued interest in H&E. Proceed to slide four. The further expansion of our branch network was a highlight in the second quarter as we demonstrated significant year-over-year growth in our branch count and increased our U.S. penetration to 31 states. The expansion served as an important catalyst for growth in the quarter. helping to offset a more challenging business environment as lower non-residential spending led to declines in key fundamentals. We experienced growth across most financial measures, but at a decreased rate of improvement compared to the second quarter of 2023. I'll expand my comments on key financial metrics and offer some observations on the performance of our rental business. Also, an update on the industry developments and opportunities is in order, given the transitory state of construction markets. I will close with a quick review of our progress to date on our expansion objectives and what lies ahead as we continue to demonstrate one of the industry's most successful growth profiles. Lastly, we'll follow with a more detailed review of our second quarter financial performance, and then we'll be happy to address any questions. Slide six, please. Second quarter results were generally mixed. Of note, total revenues increased 4.5%, with the improvement partially offset by an 11.9% decline in the sale of rental equipment. Margin on the sale of our rental equipment in the quarter remained near record levels. Total equipment rental revenues increased 7.2%, reflecting a modest rise in rental rates, with a more impactful support from expansion initiatives, which I'll discuss in greater detail in a moment. On a trailing 12-month basis, our equipment rental revenues improved 14.6% compared to the trailing 12 months ending June 30, 2023. Margins for both the second quarter and trailing 12 months were slightly lower. Finally, our fleet size, as measured by original equipment costs, increased 10.7%, representing the lowest reported year-over-year growth since the fourth quarter of 2021, a two-and-a-half-year period when we expanded our fleet by more than 55%. Slide 7, please. Turning to highlights from our rental operations, revenues in the second quarter improved 6.5% compared to the year-ago quarter, with margins of 51% compared to 51.8% over the same period of comparison. On a trailing 12-month basis ending June 30, 2024, rental revenues were 14.4% higher. The growth in revenues demonstrated the significant expansion of our branch network and continued gains from rental rates. Since the close of the second quarter in 2023, we opened 15 new locations through our accelerated new location program, including seven openings through the first six months of 2024. An eighth location was opened following the close of the second quarter. Also, since November 2023, eight additional branches were added, resulting from three separate acquisitions. Our focus on expansion is an ongoing multi-year effort positioning our company in attractive geographic regions with excellent opportunity for long-term growth. Rental rates in the quarter improved 1.9% compared to the year-ago quarter, with a decline of 0.1% on a sequential quarterly basis. Although year-over-year comparisons are becoming increasingly difficult, rate appreciation over the preceding 24 months ending June 30, 2024 was 7.1%. Physical fleet utilization in the second quarter averaged 66.4%, a decline of 290 basis points compared to the year-ago quarter. The decline largely related to a reduction in small and medium-sized construction projects and a slower pace of new project starts. The second quarter measure represents a 280 basis point improvement from physical utilization recorded in the first quarter of 2024. Finally, dollar utilization in the second quarter was 38.6% compared to 40.6% in the second quarter of 2023, with the lower outcome due largely to a decline in physical utilization. Next, I want to address our view of current industry conditions and growing opportunities as we navigate the second half of 2024. Slide eight, please. We maintain our view of a more moderate pace for construction spending and projected starts. The shift in the business cycle, which we addressed during our last quarterly update, is indicative of an industry that is transitioning to a more normalized business environment compared to the years of 2022 and 2023. Recall, during those years, we observed a period of exceptionally strong growth in construction spending resulting in elevated industry fundamentals. The sharp acceleration in spending occurred during a period of extremely tight equipment availability, aggravated by material disruption in supply chains. In 2024, supply chains have recovered, leading to an ample supply of most equipment lines, while persistently elevated interest rates and more stringent lending standards continue to have an adverse effect on project activity, especially smaller projects, which are a component of local project opportunities. Despite this industry backdrop, we are encouraged by the continued expansion of megaproject activity across numerous locations in the U.S., representing a source of protracted demand for our equipment. Our participation in these multi-year projects continues to grow as our branch expansion efforts lead to increased density and scale. According to Dodd Construction Network, in fact, 342 projects with a projected value of $400 million or greater are planned or in progress in our 31-state branch network. Approximately 68% of these projects fall within our Gulf Coast, Southeast, and Mid-Atlantic regions, which together represent 65% of our current branch count. Megaprojects are a meaningful growth opportunity for H&E and our industry, and given their size and long duration, they provide a more stable base of demand in support of key fundamentals. key industry fundamentals. In addition to growth in megaprojects, further support is expected from infrastructure spending, with increased funding expected to lead greater project activity. With project expansion expected from both of these major sources of spending, you can see why the latest forecast of 2024 construction spending from Dodge Construction Data concludes an increased level of spending compared to the year-ago levels. Also, the DMI, which is Dodge's measure, of the value of non-residential projects going into planning has been flat or increased for the first six months of 2024, an encouraging indication for growth in project activity for 2025 and beyond. We are confident in the prospects for our industry and therefore remain committed to our growth objectives. Slide 9, please. We continued to successfully execute our growth strategy with near-record achievement in the second quarter. We opened six branch locations during the quarter, which followed a single branch opening in the first quarter, enhancing our presence in the Southeast, Gulf Coast, and Mid-Atlantic regions of the U.S. These areas represent attractive geographies with increased construction activity and excellent long-term potential. Also, the completion of our latest acquisition in May 2024 resulted in the addition of four branches in northern and central Montana, increasing our presence in the state to six locations while improving our exposure to a diverse set of project opportunities. We concluded the second quarter of 2024 with 149 branches across 31 states, representing a growth of approximately 45% in the last 36 months, ending June 30th, 2024. Our targeted goal of 12 to 15 new branch openings, excluding acquired branches, is well within reach as we move into the second half of the year. Since the close of the second quarter, we announced the opening of a location in Idaho Falls, Idaho, adding to our presence in the Internet Mountain region and increasing our total number of new locations year-to-date to eight. Our 2024 growth fleet expenditures, which we revised last quarter, remain in a range of $350 million to $400 million, as we leverage our record 2023 expenditures and our young fleet age to meet prevailing market demand. In closing, H&E has made tremendous strides over the last three years, growing our presence across the U.S. while establishing a solid record of achievement in supporting improving financial performance and value creation. We are a pure play rental company that has achieved an industry-leading 45% increase in branch growth since mid-2021, establishing a growing geographic presence in established and emerging regions of opportunity. With this expanded presence comes improving access to the rising megaproject activity, encompassing data centers, solar farm installations, advanced manufacturing projects, and LNG export facilities, to name a few. Our young fleet age and outstanding mix of equipment are important attributes of our company, as is our strong execution at the operating level. including advanced IT systems that cover the rental lifecycle while facilitating the needs of our customers. Expanding these other elements of our operating profile remains a core focus of our management as we position H&E to succeed in today's business environment, as well as for the next leg of the construction cycle. Now on to slide 10, and I'm going to turn the call over to Leslie, who will discuss our second quarter financial performance in greater detail. Leslie. Leslie.