H&E Equipment Services, Inc. (NASDAQ: HEES) (“H&E”, the
“Company”) today announced results for the second quarter ended
June 30, 2022, including records for rental revenue and gross
profit, consolidated gross profit and margin, and earnings before
interest, taxes depreciation and amortization ("EBITDA") margin. On
October 1, 2021, the Company sold its crane business, (the “Crane
Sale”). All results and comparisons for the periods reported are
presented on a continuing operations basis with the Crane Sale
reported as discontinued operations in certain statements and
schedules accompanying this report.
SECOND QUARTER 2022
SUMMARY
- Revenues increased 10.9% to $294.7 million compared to $265.7
million in the second quarter of 2021.
- Net income was $27.9 million compared to $12.3 million in the
second quarter of 2021. The effective income tax rate was 26.8%
compared to 28.2% in the second quarter of 2021.
- Adjusted EBITDA totaled $121.9 million, an increase of 28.8%
compared to $94.6 million in the second quarter of 2021, resulting
in a margin of 41.4% of revenues compared to 35.6% in the second
quarter of 2021.
- Total equipment rental revenues were $227.6 million, an
increase of $52.0 million, or 29.6%, compared to $175.6 million in
the second quarter of 2021. Rental revenues were $201.2 million, an
increase of $44.0 million, or 28.0%, compared to $157.2 million in
the second quarter of 2021.
- Used equipment sales decreased 47.4% to $18.8 million compared
to $35.8 million in the second quarter of 2021. Margins improved to
47.6% compared to 36.7% in the second quarter of 2021.
- New equipment sales totaled $21.5 million, a decrease of 22.2%
when compared to $27.6 million in the second quarter of 2021.
- Gross margin improved to 44.9% compared to 37.6% in the second
quarter of 2021.
- Total equipment rental gross margins were 48.6% compared to
41.7% in the second quarter of 2021. Rental gross margins were
53.7% compared to 46.6% over the same period of comparison.
- Average time utilization (based on original equipment cost) was
73.2% compared to 68.7% in the second quarter of 2021. The
Company’s rental fleet, based on original acquisition cost, closed
the second quarter of 2022 at just over $2.0 billion, an increase
of $228.2 million, or 12.8%, compared to the second quarter of
2021.
- Average rental rates increased 9.4% when compared to the second
quarter of 2021, and 3.5% when compared to the first quarter of
2022.
- Dollar utilization improved to 40.9% compared to 35.9% in the
second quarter of 2021.
- Average rental fleet age on June 30, 2022, was 41.2 months
compared to an industry average age of 53.6 months.
- Paid regular quarterly cash dividend of $0.275 per share of
common stock.
"Our excellent second quarter financial performance showed the
continuation of robust fundamental activity across our industry and
significant progress toward our 2022 growth initiatives," noted
Brad Barber, Chief Executive Officer of H&E Equipment Services,
Inc. Mr. Barber continued, "Rental revenues were 28.0% better than
the same quarter in 2021 and improved 13.6% on a sequential
quarterly basis. This strong growth led to further appreciation in
our rental gross margin, to 53.7%, or 380 basis points ahead of the
previous quarter in 2022. This improvement in financial metrics was
driven by enhanced contribution from both rental rates and
utilization. Rental rates closed the quarter at an impressive 9.4%
better than the year-ago quarter and showed a 3.5% gain over the
first quarter of 2022. In addition, with high demand for our rental
fleet, average physical utilization closed the quarter at 73.2%, or
450 and 280 basis points better when compared to the second quarter
of 2021 and the previous quarter in 2022, respectively. We also
grew our fleet, closing the quarter with a fleet original equipment
cost ("OEC") of just over $2.0 billion, representing a record level
for H&E. These results included a gross investment of $215.6
million since the close of 2021. Finally, the combination of
excellent industry conditions and strong operational and strategic
execution contributed to record Adjusted EBITDA in the quarter of
$121.9 million, while our Adjusted EBITDA margin improved to 41.4%,
or 580 basis points better than the same quarter in 2021 and 340
basis points ahead on a sequential quarterly basis."
Commenting on current business conditions for the equipment
rental industry, Mr. Barber stated, "Non-residential construction
opportunities are plentiful across our regions of operation with no
visible trends that suggest construction project delays or
cancellations. Demand for our rental fleet remains strong, and
current customer feedback suggests favorable conditions should
persist as we address the seasonal strength of our business cycle.
Also, it is encouraging to see key leading indicators of
construction activity remaining at levels that support expansion.
Under the prevailing business conditions, healthy utilization
levels should continue for the balance of the year with additional
improvement in rental rates expected."
Mr. Barber closed with an update on the Company's 2022 strategic
growth initiatives, saying, "In a business environment
characterized by exceptional equipment demand, supply chain
disruptions remain an inconvenient but temporary reality of our
industry and continue to hinder the timely delivery of a portion of
our equipment orders. Due to the inability of certain manufacturing
partners to meet their commitments to our fleet investment for the
year, we will reduce our planned capital expenditures by continuing
to slow our fleet sales over the balance of 2022. Following this
action, which is expected to result in a revised gross fleet
expenditure of approximately $465 million to $500 million, we
anticipate no change in our year-end OEC when compared to our
initial internal expectation for the year. With regards to our
branch expansion initiative, we remain confident in achieving our
goal of no fewer than 10 additions in 2022. Four new branches were
added through the first six months of the year, including our
latest operation in Lakeland, Florida, which represents our ninth
location in the state."
FINANCIAL DISCUSSION FOR SECOND QUARTER
2022
Revenue
Total revenues improved to $294.7 million, or 10.9%, in the
second quarter of 2022 from $265.7 million in the second quarter of
2021. Total equipment rental revenues of $227.6 million improved
29.6% compared to $175.6 million in the second quarter of 2021.
Rental revenues of $201.2 million increased 28.0% compared to
$157.2 million in the second quarter of 2021. Used equipment sales
of $18.8 million decreased 47.4% compared to $35.8 million in the
second quarter of 2021. New equipment sales of $21.5 million
declined 22.2% compared to $27.6 million in the same quarter of
2021. Parts sales of $16.2 million declined 4.2% when compared to
the second quarter of 2021, while service revenues of $8.9 million
improved 10.3% over the same period of comparison.
Gross Profit
Gross profit of $132.3 million in the second quarter of 2022
increased 32.6% compared to $99.8 million in the second quarter of
2021. Gross margin improved to 44.9% for the second quarter of 2022
compared to 37.6% for the same quarter in 2021. On a segment basis,
gross margin on total equipment rentals was 48.6% in the second
quarter of 2022 compared to 41.7% in the second quarter of 2021.
Rental margins were 53.7% compared to 46.6% over the same period of
comparison. On average, rental rates in the second quarter of 2022
were 9.4% better than rates in the second quarter of 2021. Time
utilization (based on original equipment cost) was 73.2% in the
second quarter of 2022 compared to 68.7% in the second quarter of
2021. Gross margins on used equipment sales improved to 47.6% in
the second quarter of 2022 compared to 36.7% in second quarter of
2021. Gross margins on new equipment sales were 15.0% in the second
quarter of 2022 compared to 12.3% over the same period of
comparison. Gross margins on parts sales were 26.8% in the second
quarter of 2022, unchanged from the second quarter of 2021, while
gross margins on service revenues were 64.6% compared to 68.0% over
the same period of comparison.
Rental Fleet
The original acquisition cost of the Company’s rental fleet as
of June 30, 2022, was just over $2.0 billion, representing an
increase of $228.2 million, or 12.8%, from the end of the second
quarter of 2021. Dollar utilization for the second quarter of 2022
improved to 40.9% compared to 35.9% in the second quarter of
2021.
Selling, General and Administrative
Expenses
Selling, General, and Administrative ("SG&A") expenses for
the second quarter of 2022 were $82.7 million, an increase of $12.0
million, or 16.9%, compared to $70.7 million in the second quarter
of 2021. The higher expenses were primarily due to an increase in
employee salaries, wages, and incentive compensation related to
increased profitability, and headcount, payroll taxes and related
employee costs. In addition, higher facilities expenses and
professional fees contributed to the rise in costs. SG&A
expenses in the second quarter of 2022 as a percentage of total
revenues were 28.1% compared to 26.6% in the second quarter of
2021. Approximately $2.2 million of SG&A expenses in the second
quarter of 2022 were attributable to new branches opened since the
second quarter of 2021.
Income from Operations
Income from operations for the second quarter of 2022 was $50.7
million, or 17.2% of revenues, compared to $29.7 million, or 11.2%
of revenues, in the second quarter of 2021.
Interest Expense
Interest expense was $13.5 million for the second quarter of
2022, essentially unchanged from the second quarter of 2021.
Net Income
Net income in the second quarter of 2022 was $27.9 million, or
$0.76 per diluted share, compared to net income in the second
quarter of 2021 of $12.3 million, or $0.34 per diluted share. The
effective income tax rate for the second quarter of 2022 was 26.8%
compared to an effective income tax rate of 28.2% in the same
quarter of 2021.
Adjusted EBITDA
Adjusted EBITDA in the second quarter of 2022 increased to
$121.9 million, representing 41.4% of revenues, compared to $94.6
million, or 35.6% of revenues, in the same quarter of 2021.
Non-GAAP Financial Measures
This press release contains certain non-GAAP measures (EBITDA,
Adjusted EBITDA, and the disaggregation of equipment rental
revenues and cost of sales numbers) detailed below. Please refer to
our Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 28, 2022, for a description of these
measures and of our use of these measures. These measures as
calculated by the Company are not necessarily comparable to
similarly titled measures reported by other companies.
Additionally, these non-GAAP measures are not a measurement of
financial performance or liquidity under GAAP and should not be
considered as alternatives to the Company's other financial
information determined under GAAP.
Conference Call
The Company’s management will hold a conference call to discuss
second quarter 2022 results today, July 28, 2022, at 10:00 a.m.
(Eastern Time). To listen to the call, participants should dial
844-887-9400 approximately 10 minutes prior to the start of the
call. A telephonic replay will become available after 1:00 p.m.
(Eastern Time) on July 28, 2022, and will continue through August
4, 2022, by dialing 877-344-7529 and entering the confirmation code
7606055.
The live broadcast of H&E Equipment Services' quarterly
conference call will be available online at www.he-equipment.com on
July 28, 2022, beginning at 10:00 a.m. (Eastern Time) and will
remain available for 30 days. Related presentation materials will
be posted to the “Investor Relations” section of the Company’s web
site at www.he-equipment.com prior to the call. The presentation
materials will be in Adobe Acrobat format.
About H&E Equipment Services, Inc.
Founded in 1961, H&E Equipment Services, Inc. is one of the
largest rental equipment companies in the nation. The Company’s
fleet is among the industry’s youngest and most versatile with a
superior equipment mix comprised of aerial work platforms,
earthmoving, material handling, and other general and specialty
lines. H&E serves a diverse set of end markets in many
high-growth geographies including branches throughout the Pacific
Northwest, West Coast, Intermountain, Southwest, Gulf Coast,
Southeast, Midwest, and Mid-Atlantic regions.
Forward-Looking Statements
Statements contained in this press release that are not
historical facts, including statements about H&E’s beliefs and
expectations, are “forward-looking statements” within the meaning
of the federal securities laws. Statements containing the words
“may”, “could”, “would”, “should”, “believe”, “expect”,
“anticipate”, “plan”, “estimate”, “target”, “project”, “intend”,
“foresee” 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.
Such factors include, but are not limited to, the following: (1)
risks related to the impact of the COVID-19 global pandemic, such
as the scope and duration of the outbreak, government actions and
restrictive measures implemented in response to the pandemic,
material delays and cancellations of construction or infrastructure
projects, labor shortages, supply chain disruptions and other
impacts to the business; (2) general economic conditions and
construction and industrial activity in the markets where we
operate in North America; (3) our ability to forecast trends in our
business accurately, and the impact of economic downturns and
economic uncertainty in the markets we serve (including as a result
of current uncertainty due to COVID-19 and inflation); (4) the
impact of conditions in the global credit and commodity markets
(including as a result of current volatility and uncertainty in
credit and commodity markets due to COVID-19) and their effect on
construction spending and the economy in general; (5) trends in oil
and natural gas could adversely affect the demand for our services
and products; (6) relationships with equipment suppliers; (7)
increased maintenance and repair costs as we age our fleet and
decreases in our equipment’s residual value; (8) our indebtedness;
(9) risks associated with the expansion of our business and any
potential acquisitions we may make, including any related capital
expenditures, or our inability to consummate such acquisitions;
(10) our possible inability to integrate any businesses we acquire;
(11) competitive pressures; (12) security breaches and other
disruptions in our information technology systems; (13) adverse
weather events or natural disasters; (14) compliance with laws and
regulations, including those relating to environmental matters,
corporate governance matters and tax matters, as well as any future
changes to such laws and regulations; and (15) other factors
discussed in our public filings, including the risk factors
included in the Company’s most recent Annual Report on Form 10-K.
Investors, potential investors and other readers 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. Except as required by applicable law,
including the securities laws of the United States and the rules
and regulations of the Securities and Exchange Commission, we are
under no obligation to publicly update or revise any
forward-looking statements after the date of this release, whether
as a result of any new information, future events or otherwise.
These statements are based on the current beliefs and assumptions
of H&E’s management, which in turn are based on currently
available information and important, underlying assumptions.
Investors, potential investors, security holders and other readers
are urged to consider the above-mentioned factors carefully in
evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements.
H&E EQUIPMENT SERVICES,
INC.
CONSOLIDATED STATEMENTS OF
INCOME (unaudited)
(Amounts in thousands, except
per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Revenues:
Equipment rentals
$
227,577
$
175,611
$
426,802
$
328,830
Used equipment sales
18,833
35,821
40,359
74,675
New equipment sales
21,486
27,633
47,522
50,806
Parts sales
16,172
16,880
32,231
32,436
Services revenues
8,889
8,059
17,023
16,070
Other
1,714
1,673
3,184
3,292
Total revenues
294,671
265,677
567,121
506,109
Cost of revenues:
Rental depreciation
62,288
56,513
122,309
109,966
Rental expense
30,815
27,509
59,574
52,574
Rental other
23,873
18,390
44,786
34,884
116,976
102,412
226,669
197,424
Used equipment sales
9,871
22,683
22,419
49,043
New equipment sales
18,271
24,231
40,600
44,630
Parts sales
11,832
12,353
23,536
23,506
Services revenues
3,143
2,578
5,957
5,193
Other
2,244
1,600
4,026
3,081
Total cost of revenues
162,337
165,857
323,207
322,877
Gross profit
132,334
99,820
243,914
183,232
Selling, general and administrative
expenses
82,664
70,711
160,942
138,856
Merger and other
—
6
—
106
Gain on sales of property and equipment,
net
996
631
2,382
785
Income from operations
50,666
29,734
85,354
45,055
Other income (expense):
Interest expense
(13,500
)
(13,425
)
(26,947
)
(26,868
)
Other, net
893
750
1,773
1,411
Total other expense, net
(12,607
)
(12,675
)
(25,174
)
(25,457
)
Income before provision for income
taxes
38,059
17,059
60,180
19,598
Provision for income taxes
10,189
4,808
16,014
5,492
Net income from continuing operations
$
27,870
$
12,251
$
44,166
$
14,106
Discontinued Operations:
Income (loss) from discontinued operations
before provision (benefit) for income taxes
$
(2,049
)
$
4,683
$
(2,049
)
$
7,835
Provision (benefit) for income taxes
(525
)
1,168
(525
)
2,024
Net income (loss) from discontinued
operations
$
(1,524
)
$
3,515
$
(1,524
)
$
5,811
Net income
$
26,346
$
15,766
$
42,642
$
19,917
H&E EQUIPMENT SERVICES,
INC.
CONSOLIDATED STATEMENTS OF
INCOME (unaudited)
(Amounts in thousands, except
per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Net income from continuing operations per
common share:
Basic
$
0.77
$
0.34
$
1.21
$
0.39
Diluted
$
0.76
$
0.34
$
1.21
$
0.39
Net income (loss) from discontinued
operations per common share:
Basic
$
(0.04
)
$
0.10
$
(0.04
)
$
0.16
Diluted
$
(0.04
)
$
0.10
$
(0.04
)
$
0.16
Net income per common share:
Basic
$
0.72
$
0.44
$
1.17
$
0.55
Diluted
$
0.72
$
0.43
$
1.17
$
0.55
Weighted average common shares
outstanding:
Basic
36,382
36,216
36,373
36,200
Diluted
36,541
36,437
36,540
36,412
Dividends declared per common share
outstanding
$
0.275
$
0.275
$
0.550
$
0.550
H&E EQUIPMENT SERVICES,
INC.
SELECTED BALANCE SHEET DATA
(unaudited)
(Amounts in thousands)
June 30, 2022
December 31, 2021
Cash
$
278,831
$
357,296
Rental equipment, net
1,190,778
1,116,456
Total assets
2,172,422
2,080,447
Total debt (1)
1,251,626
1,250,000
Total liabilities
1,843,567
1,777,065
Stockholders' equity
328,855
303,382
Total liabilities and stockholders'
equity
$
2,172,422
$
2,080,447
(1)
Total debt consists of the aggregate
amounts on the senior unsecured notes and finance lease
obligations.
H&E EQUIPMENT SERVICES,
INC.
UNAUDITED RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Net Income
$
26,346
$
15,766
$
42,642
$
19,917
Net income (loss) from discontinued
operations
(1,524
)
3,515
(1,524
)
5,811
Net Income from continuing operations
27,870
12,251
44,166
14,106
Interest Expense
13,500
13,425
26,947
26,868
Provision for income taxes
10,189
4,808
16,014
5,492
Depreciation
69,336
63,115
136,214
122,965
Amortization of intangibles
992
992
1,985
1,985
EBITDA from continuing operations
$
121,887
$
94,591
$
225,326
$
171,416
Merger and other
—
6
—
106
Adjusted EBITDA from continuing
operations
$
121,887
$
94,597
$
225,326
$
171,522
Net income (loss) from discontinued
operations
$
(1,524
)
$
3,515
$
(1,524
)
$
5,811
Provision (benefit) for income taxes
(525
)
1,168
(525
)
2,024
Loss on sale of discontinued
operations
1,917
—
1,917
—
Depreciation
—
2,359
—
4,803
EBITDA from discontinued operations
$
(132
)
$
7,042
$
(132
)
$
12,638
Merger and other
132
674
132
1,311
Adjusted EBITDA from discontinued
operations
$
—
$
7,716
$
—
$
13,949
Adjusted EBITDA
$
121,887
$
102,313
$
225,326
$
185,471
H&E EQUIPMENT SERVICES,
INC.
UNAUDITED RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
RENTAL
Equipment rentals (1)
$
201,243
$
157,211
$
378,425
$
294,357
Rental other
26,334
18,400
48,377
34,473
Total equipment rentals
227,577
175,611
426,802
328,830
RENTAL COST OF SALES
Rental depreciation
62,288
56,513
122,309
109,966
Rental expense
30,815
27,509
59,574
52,574
Rental other
23,873
18,390
44,786
34,884
Total rental cost of sales
116,976
102,412
226,669
197,424
RENTAL REVENUES GROSS PROFIT
(LOSS)
Equipment rentals
108,140
73,189
196,542
131,817
Rentals other
2,461
10
3,591
(411
)
Total rental revenues gross profit
$
110,601
$
73,199
$
200,133
$
131,406
RENTAL REVENUES GROSS MARGIN
Equipment rentals
53.7
%
46.6
%
51.9
%
44.8
%
Rentals other
9.3
%
0.1
%
7.4
%
-1.2
%
Total rental revenues gross margin
48.6
%
41.7
%
46.9
%
40.0
%
(1)
Pursuant to SEC Regulation S-X, our
equipment rental revenues are aggregated and presented in our
unaudited consolidated statements of operations in this press
release as a single line item, “Equipment Rentals.” The above table
disaggregates our equipment rental revenues for discussion and
analysis purposes only.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220728005076/en/
Leslie S. Magee Chief Financial Officer 225-298-5261
lmagee@he-equipment.com
Jeffrey L. Chastain Vice President of Investor Relations
225-952-2308 jchastain@he-equipment.com
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