H&E Equipment Services, Inc. (NASDAQ: HEES) (“H&E” or
the “Company”) today announced results for the third quarter ended
September 30, 2022, citing record results for its rental business
segment, meaningful fleet growth and further expansion of its
branch network. 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.
THIRD QUARTER 2022
SUMMARY
- Revenues increased 17.7% to $324.3 million compared to $275.4
million in the third quarter of 2021.
- Net income increased 55.2% to $38.4 million compared to $24.7
million in the third quarter of 2021. The effective income tax rate
was 25.2% compared to 24.7% in the third quarter of 2021.
- Adjusted EBITDA totaled $139.4 million, an increase of 24.1%
compared to $112.3 million in the third quarter of 2021, resulting
in a margin of 43.0% of revenues compared to 40.8% in the third
quarter of 2021.
- Total equipment rental revenues were $253.6 million, an
increase of $56.4 million, or 28.6%, compared to $197.2 million in
the third quarter of 2021. Rental revenues were $224.1 million, an
increase of $47.5 million, or 26.9%, compared to $176.7 million in
the third quarter of 2021.
- Used equipment sales decreased 34.7% to $20.3 million compared
to $31.1 million in the third quarter of 2021. Margins improved to
53.7% compared to 37.6% in the third quarter of 2021.
- New equipment sales totaled $23.5 million, an increase of 21.4%
when compared to $19.4 million in the third quarter of 2021.
- Gross margin improved to 46.8% compared to 41.4% in the third
quarter of 2021.
- Total equipment rental gross margins were 50.5% compared to
45.6% in the third quarter of 2021. Rental gross margins were 55.6%
compared to 50.9% over the same period of comparison.
- Average time utilization (based on original equipment cost) was
73.3% compared to 71.9% in the third quarter of 2021. The Company’s
rental fleet, based on original acquisition cost, closed the third
quarter of 2022 at approximately $2.1 billion, an increase of
$305.4 million, or 16.7%, compared to the third quarter of
2021.
- Average rental rates increased 10.1% when compared to the third
quarter of 2021, and 3.2% when compared to the second quarter of
2022.
- Dollar utilization improved to 42.7% compared to 38.9% in the
third quarter of 2021.
- Average rental fleet age on September 30, 2022, was 40.6 months
compared to an industry average age of 53.0 months.
- Paid regular quarterly cash dividend of $0.275 per share of
common stock.
"A combination of exceptional rental rate appreciation, robust
physical fleet utilization and further fleet growth resulted in
record performance for our equipment rental segment," stated Brad
Barber, chief executive officer of H&E. "We continue to lead
the industry in average rental rate improvement, with rates in the
third quarter advancing 10.1% when compared to the same quarter in
2021, and 3.2% on a sequential quarterly basis. I believe several
factors contribute to our consistent pricing success, including
outstanding operational execution and the use of our proprietary
“Smart Rates” platform, along with an advantageous mix of
equipment, and expanding geographic reach. Also, average physical
fleet utilization continued to rise, closing the quarter at 73.3%,
or 140 and 10 basis points ahead of the year-ago and sequential
quarters, respectively. Finally, our fleet, as measured by original
equipment cost (OEC), grew $305.4 million, or 16.7% from the
year-ago quarter and $277.0 million, or 14.9%, since the close of
2021. We ended the third quarter with record fleet OEC of more than
$2.1 billion while establishing record revenue, gross profit, and
gross margin in our equipment rental segment. On a consolidated
basis, records were set for adjusted earnings before interest,
taxes, depreciation and amortization (EBITDA) and adjusted EBITDA
margin."
Mr. Barber offered an encouraging perspective on the equipment
rental industry, explaining, "We expect favorable industry
fundamentals to prevail through the close of 2022 and into 2023.
This promising outlook is supported by a backlog of projects in the
non-residential construction and industrial end markets that
continue to sustain strong customer demand. In addition, global
supply chains continue to constrict the availability of rental
equipment. These factors reinforce a fundamentally sound business
environment, leading to solid fleet utilization and favorable
pricing trends. As early as 2023, we expect to benefit from the
onset of numerous infrastructure projects, as well as other
construction projects focused on the expansion of U.S.
manufacturing capabilities and renewable energy. Collectively,
these programs are expected to provide greater visibility to
emerging construction opportunities."
H&E has successfully demonstrated its ability to grow, with
2022 being a record year of expansion for the Company. Concluding,
Mr. Barber said, "Our strategic growth and expansion initiatives
made exceptional progress in the third quarter. The previously
announced acquisition of One Source Equipment Rentals Inc. (One
Source), which closed on October 1, 2022, increases our branch
network by 10 locations, including an initial presence in Illinois,
Indiana and Kentucky. In addition, the consistent progress of our
accelerated new location program was evident in the third quarter,
with four branches opened during the period. The latest branch
openings bring the total of new locations this year to eight. With
more openings expected in the fourth quarter, we are confident in
achieving our goal of no less than 10 new locations in 2022. In
less than two years, we have added 28 locations to our branch
network and now operate 120 branches across 29 states."
FINANCIAL DISCUSSION FOR THIRD QUARTER
2022
Revenue
Total revenues improved to $324.3 million, or 17.7%, in the
third quarter of 2022 from $275.4 million in the third quarter of
2021. Total equipment rental revenues of $253.6 million improved
28.6% compared to $197.2 million in the third quarter of 2021.
Rental revenues of $224.1 million increased 26.9% compared to
$176.7 million in the third quarter of 2021. Used equipment sales
of $20.3 million decreased 34.7% compared to $31.1 million in the
third quarter of 2021. New equipment sales of $23.5 million
increased 21.4% compared to $19.4 million in the same quarter of
2021. Parts sales of $16.7 million declined 4.3% when compared to
the third quarter of 2021, while service revenues of $8.6 million
were essentially unchanged over the same period of comparison.
Gross Profit
Gross profit of $151.9 million in the third quarter of 2022
increased 33.3% compared to $113.9 million in the third quarter of
2021. Gross margin improved to 46.8% for the third quarter of 2022
compared to 41.4% for the same quarter in 2021. On a segment basis,
gross margin on total equipment rentals was 50.5% in the third
quarter of 2022 compared to 45.6% in the third quarter of 2021.
Rental margins were 55.6% compared to 50.9% over the same period of
comparison. On average, rental rates in the third quarter of 2022
were 10.1% better than rates in the third quarter of 2021. Time
utilization (based on original equipment cost) was 73.3% in the
third quarter of 2022 compared to 71.9% in the third quarter of
2021. Gross margins on used equipment sales improved to 53.7% in
the third quarter of 2022 compared to 37.6% in the third quarter of
2021. Gross margins on new equipment sales were 13.8% in the third
quarter of 2022 compared to 12.4% over the same period of
comparison. Gross margins on parts sales were 29.0% in the third
quarter of 2022, compared to 24.5% in the third quarter of 2021,
while gross margins on service revenues were 63.2% compared to
65.2% over the same period of comparison.
Rental Fleet
The original acquisition cost of the Company’s rental fleet as
of September 30, 2022, was approximately $2.1 billion, representing
an increase of $305.4 million, or 16.7%, from the end of the third
quarter of 2021. Dollar utilization for the third quarter of 2022
improved to 42.7% compared to 38.9% in the third quarter of
2021.
Selling, General and Administrative
Expenses
Selling, General and Administrative (SG&A) expenses for the
third quarter of 2022 were $87.9 million, an increase of $13.5
million, or 18.1%, compared to $74.4 million in the third quarter
of 2021. The higher expenses were largely attributable to increased
employee salaries, wages, incentive compensation related to
increased profitability, headcount, payroll taxes and related
employee costs. Higher facilities expenses, costs associated with
liability insurance and professional fees also contributed to the
increase in costs. SG&A expenses in the third quarter of 2022
as a percentage of total revenues were 27.1% compared to 27.0% in
the third quarter of 2021. Approximately $3.3 million of SG&A
expenses in the third quarter of 2022 were attributable to nine new
branches opened since the third quarter of 2021.
Income from Operations
Income from operations for the third quarter of 2022 was $64.0
million, or 19.7% of revenues, compared to $45.7 million, or 16.6%
of revenues, in the third quarter of 2021.
Interest Expense
Interest expense was $13.5 million for the third quarter of
2022, essentially unchanged from the third quarter of 2021.
Net Income
Net income in the third quarter of 2022 was $38.4 million, or
$1.05 per diluted share, compared to net income in the third
quarter of 2021 of $24.7 million, or $0.68 per diluted share. The
effective income tax rate for the third quarter of 2022 was 25.2%
compared to an effective income tax rate of 24.7% in the same
quarter of 2021.
Adjusted EBITDA
Adjusted EBITDA in the third quarter of 2022 increased to $139.4
million, representing 43.0% of revenues, compared to $112.3
million, or 40.8% 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 October 27, 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
third quarter 2022 results today, October 27, 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 October 27, 2022, and will continue through
November 3, 2022, by dialing 877-344-7529 and entering the
confirmation code 6431956.
The live broadcast of H&E Equipment Services' quarterly
conference call will be available online at www.he-equipment.com on
October 27, 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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues:
Equipment rentals
$
253,564
$
197,184
$
680,366
$
526,014
Used equipment sales
20,300
31,071
60,659
105,746
New equipment sales
23,491
19,355
71,013
70,161
Parts sales
16,745
17,503
48,976
49,939
Services revenues
8,610
8,624
25,633
24,694
Other
1,570
1,699
4,754
4,991
Total revenues
324,280
275,436
891,401
781,545
Cost of revenues:
Rental depreciation
65,952
58,339
188,261
168,305
Rental expense
33,543
28,326
93,117
80,900
Rental other
25,989
20,510
70,775
55,394
125,484
107,175
352,153
304,599
Used equipment sales
9,396
19,383
31,815
68,426
New equipment sales
20,249
16,946
60,849
61,576
Parts sales
11,881
13,209
35,417
36,715
Services revenues
3,165
3,000
9,122
8,193
Other
2,222
1,815
6,248
4,896
Total cost of revenues
172,397
161,528
495,604
484,405
Gross profit
151,883
113,908
395,797
297,140
Selling, general and administrative
expenses
87,871
74,403
248,813
213,259
Merger and other
547
9
547
115
Gain on sales of property and equipment,
net
529
6,166
2,911
6,951
Income from operations
63,994
45,662
149,348
90,717
Other income (expense):
Interest expense
(13,548
)
(13,430
)
(40,495
)
(40,298
)
Other, net
883
615
2,656
2,026
Total other expense, net
(12,665
)
(12,815
)
(37,839
)
(38,272
)
Income from operations before provision
for income taxes
51,329
32,847
111,509
52,445
Provision for income taxes
12,953
8,119
28,967
13,611
Net income from continuing operations
$
38,376
$
24,728
$
82,542
$
38,834
Discontinued Operations:
Income (loss) from discontinued operations
before provision (benefit) for income taxes
$
—
$
6,411
$
(2,049
)
$
14,246
Provision (benefit) for income taxes
—
1,602
(525
)
3,626
Net income (loss) from discontinued
operations
$
—
$
4,809
$
(1,524
)
$
10,620
Net income
$
38,376
$
29,537
$
81,018
$
49,454
H&E EQUIPMENT SERVICES,
INC.
CONSOLIDATED STATEMENTS OF
INCOME (unaudited)
(Amounts in thousands, except
per share amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income from continuing operations per
common share:
Basic
$
1.05
$
0.68
$
2.27
$
1.07
Diluted
$
1.05
$
0.68
$
2.26
$
1.07
Net income (loss) from discontinued
operations per common share:
Basic
$
—
$
0.13
$
(0.04
)
$
0.29
Diluted
$
—
$
0.13
$
(0.04
)
$
0.29
Net income per common share:
Basic
$
1.05
$
0.81
$
2.23
$
1.36
Diluted
$
1.05
$
0.81
$
2.22
$
1.36
Weighted average common shares
outstanding:
Basic
36,462
36,296
36,402
36,232
Diluted
36,553
36,436
36,544
36,420
Dividends declared per common share
outstanding
$
0.275
$
0.275
$
0.825
$
0.825
H&E EQUIPMENT SERVICES,
INC.
SELECTED BALANCE SHEET DATA
(unaudited)
(Amounts in thousands)
September 30, 2022
December 31, 2021
Cash and cash equivalents
$
220,479
$
357,296
Rental equipment, net
1,280,123
1,116,456
Total assets
2,218,674
2,080,447
Total debt (1)
1,251,619
1,250,000
Total liabilities
1,860,948
1,777,065
Stockholders' equity
357,726
303,382
Total liabilities and stockholders'
equity
$
2,218,674
$
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net Income
$
38,376
$
29,537
$
81,018
$
49,454
Net Income (loss) from discontinued
operations
—
4,809
(1,524
)
10,620
Net Income from continuing operations
38,376
24,728
82,542
38,834
Interest Expense
13,548
13,430
40,495
40,298
Provision for income taxes
12,953
8,119
28,967
13,611
Depreciation
73,000
65,040
209,214
188,005
Amortization of intangibles
993
993
2,978
2,978
EBITDA from continuing operations
$
138,870
$
112,310
$
364,196
$
283,726
Merger and other
547
9
547
115
Adjusted EBITDA from continuing
operations
$
139,417
$
112,319
$
364,743
$
283,841
Net income (loss) from discontinued
operations
$
—
$
4,809
$
(1,524
)
$
10,620
Provision (benefit) for income taxes
—
1,602
(525
)
3,626
Depreciation
—
—
—
4,803
EBITDA from discontinued operations
$
—
$
6,411
$
(2,049
)
$
19,049
Merger and other
—
384
132
1,695
Loss on sale of discontinued
operations
—
—
1,917
—
Adjusted EBITDA from discontinued
operations
$
—
$
6,795
$
—
$
20,744
Adjusted EBITDA
$
139,417
$
119,114
$
364,743
$
304,585
H&E EQUIPMENT SERVICES,
INC.
UNAUDITED RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
RENTAL
Equipment rentals (1)
$
224,126
$
176,655
$
602,551
$
471,012
Rental other
29,438
20,529
77,815
55,002
Total equipment rentals
253,564
197,184
680,366
526,014
RENTAL COST OF SALES
Rental depreciation
65,952
58,339
188,261
168,305
Rental expense
33,543
28,326
93,117
80,900
Rental other
25,989
20,510
70,775
55,394
Total rental cost of sales
125,484
107,175
352,153
304,599
RENTAL REVENUES GROSS PROFIT
(LOSS)
Equipment rentals
124,631
89,990
321,173
221,807
Rentals other
3,449
19
7,040
(392
)
Total rental revenues gross profit
$
128,080
$
90,009
$
328,213
$
221,415
RENTAL REVENUES GROSS MARGIN
Equipment rentals
55.6
%
50.9
%
53.3
%
47.1
%
Rentals other
11.7
%
0.1
%
9.0
%
-0.7
%
Total rental revenues gross margin
50.5
%
45.6
%
48.2
%
42.1
%
(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/20221027005079/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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