H&E Rentals Q1 2025 Earnings Summary

H&E Equipment Services reported a challenging first quarter for 2025, reflecting lower demand, merger-related pressures, and a continued soft rental market environment. The company is moving forward with its planned merger with Herc Rentals, expected to close mid-2025.

Key highlights:

- Total revenues fell 14.0% to $319.5 million from $371.4 million in Q1 2024.
- Net loss was $6.2 million, or $0.17 per diluted share, compared to net income of $25.9 million, or $0.71 per diluted share, last year.
- Excluding $9.8 million in transaction expenses related to the merger, adjusted net income was $1.2 million, or $0.03 per diluted share.
- Adjusted EBITDA dropped 18.9% to $131.2 million versus $161.7 million in Q1 2024, with a margin of 41.1% of revenues (down from 43.6%).

Segment performance:

- Equipment rental revenue declined 7.2% year-over-year to $274.0 million, including rental revenue of $242.9 million.
- Sales of rental equipment dropped 50.3% to $23.9 million, while sales of new equipment fell 28.7% to $7.4 million.
- Parts, service, and other revenues also declined to $14.1 million from $17.5 million.

Margins and utilization:

- Total gross margin decreased to 38.7% from 44.4%.
- Rental gross margin fell to 38.2% from 43.3%; core rental margin was 43.6% versus 48.5%.
- Time utilization declined to 60.3% (from 63.6%), and dollar utilization dropped to 33.1% (from 37.0%).
- Rental fleet age averaged 43.2 months, younger than the industry average of 49.3 months.
- The fleet's original equipment cost totaled approximately $2.9 billion, up 3.8% year-over-year.

Operating metrics:

- SG&A expenses declined slightly to $111.6 million (34.9% of revenues), helped by lower compensation and promotional costs.
- Income from operations was a loss of $5.8 million, but adjusted for merger-related transaction costs, it was $15.6 million (4.9% margin).

Balance sheet:

- Cash balance was $10.3 million as of March 31, 2025.
- Total debt stood at $1.37 billion; stockholders' equity was $603.9 million.

Outlook:

- The company is optimistic about the benefits of the Herc Rentals merger, expecting it to enhance resilience and scale.
- No earnings call will be held for this quarter.

H&E Equipment Services, Inc. (H&E Rentals) reported its financial results for the fourth quarter and full year of 2024, along with the announcement of its acquisition agreement with Herc Holdings Inc.

In the fourth quarter of 2024, total revenues decreased slightly by 0.4% to $384.1 million, with equipment rental revenues increasing by 0.8% to $319.4 million. However, net income dropped to $32.8 million from $53.5 million in the same quarter of 2023. Adjusted EBITDA also declined by 5.6% to $174.9 million, with a margin of 45.5%.

Equipment rental revenue growth was modest, with rental revenues up 0.9% to $283.0 million. Meanwhile, sales of rental equipment saw a significant decline of 30.1% to $28.4 million, while sales of new equipment more than doubled to $20.5 million. Gross profit declined by 10.1% to $167.6 million, with overall gross margins dropping to 43.6% from 48.3% in the previous year.

Operational performance saw a slight decline, with average time utilization decreasing to 66.4% from 68.4%, and average rental rates falling 1.1% compared to the previous year. The rental fleet grew 5.5% in value to approximately $2.9 billion, with an average fleet age of 41.7 months.

SG&A expenses rose 9.7% to $117.0 million, driven by higher professional fees, expansion costs, and increased depreciation and amortization. Income from operations fell to $53.8 million from $81.2 million in the prior year, with a decline in margin to 14.0% from 21.1%.

Net income per diluted share was $0.90, down from $1.47 in the prior-year quarter. Excluding transaction expenses, adjusted net income was $36.1 million, or $0.99 per diluted share. The company paid a regular quarterly dividend of $0.275 per share.

Despite revenue stability in the rental segment, declining rental rates, lower utilization, and higher costs impacted overall profitability. The company’s pending acquisition by Herc Holdings is expected to enhance industry positioning and operational efficiencies.

Herc Holdings Inc. and H&E Equipment Services, Inc. announced that H&E has terminated its previous merger agreement with United Rentals, Inc. and entered into a definitive merger agreement with Herc Holdings. The acquisition will bring H&E under Herc Holdings' ownership. The companies issued a joint press release on February 19, 2025, confirming the agreement.

H&E Equipment Services, Inc. (Nasdaq: HEES) has entered into a definitive merger agreement with Herc Holdings Inc. (NYSE: HRI) under which Herc will acquire H&E Equipment Services in a cash and stock transaction. The agreement was unanimously approved by the boards of both companies.

Under the terms of the merger, H&E shareholders will receive $78.75 in cash and 0.1287 shares of Herc common stock per H&E share. The transaction will be conducted through a tender offer followed by a merger. Upon completion, H&E will become a wholly owned subsidiary of Herc.

H&E had previously entered into a merger agreement with United Rentals but has now terminated that agreement, with Herc covering the termination fee.

The deal is expected to close following regulatory approvals and customary closing conditions.

UBD downgrades HEES from buy to hold