In its first-quarter financial report, Neff Corporation showed a 7.3 percent increase in rental revenues over the same period one year ago.
Graham Hood, chief executive officer of Neff Corporation, commented, “We are pleased to announce record first quarter results for rental revenue and EBITDA in the first quarter of 2015. Despite challenging winter weather conditions and the headwinds from oil and gas, we grew our rental revenues by 7.3 percent and Adjusted EBITDA by 12.2 percent, compared to the first quarter of 2014. Overall conditions in our construction markets remain solid and we are not seeing any impact related to oil prices outside of locations that have significant oil and gas exposure. We remain highly focused on managing our fleet and executing our strategy as we move into our seasonally strong period.
First Quarter 2015 Highlights
- Revenues increased 8.2% to $84.1 million in the quarter from $77.7 million in the first quarter of 2014.
- Adjusted EBITDA grew 12.2% to $39.0 million in the first quarter of 2015 from $34.8 million in the prior-year quarter. Adjusted EBITDA as a percentage of revenues was 46.4% compared to 44.7% in the first quarter of 2014.
- Rental revenues increased 7.3%, or $5.0 million, to $74.1 million in the first quarter of 2015.
- The average original equipment cost ("OEC") of our rental fleet increased by 14.6% to $722.2 million in first quarter of 2015.
- Rental rate growth was 3.8% in the quarter compared to 7.2% in the first quarter of 2014.
- Time utilization was 63.7% in the first quarter of 2015 compared to 68.3% in the prior-year period.
First Quarter 2015 Financial Results
Total revenues increased 8.2% to $84.1 million from $77.7 million in the first quarter of 2014. Rental revenues increased 7.3% to $74.1 million compared to $69.1 million in the first quarter of 2014. Equipment sales increased to $6.8 million from $5.3 million in the first quarter of 2014. Parts and service revenues decreased to $3.2 million in the first quarter of 2015 from $3.3 million in the prior-year period.
Adjusted EBITDA, a non-US GAAP ("US GAAP" means accounting principles generally accepted in the United States) financial measure that includes the adjustments noted in the reconciliation below, in the first quarter of 2015 increased 12.2% to $39.0 million from $34.8 million in the first quarter of 2014. Adjusted EBITDA, as a percentage of revenues, was 46.4% compared to 44.7% in the first quarter of 2014.
Net income for the quarter decreased to $3.3 million for the first quarter of 2015 from $5.5 million in the first quarter of 2014. Net income decreased primarily due to increased interest expense which resulted from the Company's June 2014 refinancing, in which the Company repaid its Senior Secured Notes with proceeds from its Second Lien Loan. Net income also decreased due to an unrealized loss of $0.9 million on an interest rate swap the Company entered into in March of 2015, as well as an adjustment of $0.5 million to the tax receivable agreement liability which was due to changes in estimated future payments.
Return on Invested Capital ("ROIC")
Return on invested capital was 13.3% for the quarter ended March 31, 2015, an increase of 300 basis points from the quarter ended March 31, 2014. The Company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by average stockholders’ equity (deficit) and debt, net of average cash. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, the federal statutory tax rate of 35% is used to calculate after-tax operating income.
The size of the rental fleet was $740.8 million of OEC at March 31, 2015 , compared to $657.6 million at March 31, 2014.
2015 Financial Outlook
The Company has updated its 2015 full year outlook as follows:
- Total revenue is forecast to be in the range of $390 million to $400 million, compared to the prior guidance of $390.0 million to $410.0 million.
- Adjusted EBITDA is forecast to be in a range of $200 million to $205 million, compared to the prior guidance range of$200 million to $210 million.
- Year-over-year rental rate increase is expected to be approximately 4.5%, unchanged from prior guidance.
- Time utilization is expected to be approximately 66%, down from prior guidance of approximately 69%.
- Net capital expenditures are expected to be in the range of $125 million to $135 million, unchanged from prior guidance.