H&E Equipment Services, Inc. (NASDAQ: HEES) (“H&E” or
the “Company”) today announced results for the first quarter ended
March 31, 2023, disclosing another period of strong financial
performance led by successful growth initiatives and the
continuation of fundamentally sound industry conditions.
FIRST QUARTER 2023 SUMMARY WITH A
COMPARISON TO FIRST QUARTER 2022
- Revenues increased 18.4% to $322.5 million compared to $272.5
million.
- Net income increased 57.5% to $25.7 million compared to $16.3
million. The effective income tax rate was 26.1% compared to
26.3%.
- EBITDA (earnings before interest, taxes, depreciation, and
amortization) totaled $140.1 million, an increase of 35.4%,
compared to $103.4 million, resulting in a margin of 43.4% of
revenues compared to 38.0%.
- Total equipment rental revenues were $262.0 million, an
increase of $62.8 million, or 31.5%, compared to $199.2 million.
Rental revenues were $232.1 million, an increase of $54.9 million,
or 31.0%, compared to $177.2 million.
- Used equipment sales increased 49.2% to $32.1 million compared
to $21.5 million. Margins improved to 58.6% compared to 41.7%.
- New equipment sales totaled $7.8 million, a decrease of 70.0%,
compared to $26.0 million.
- Total gross margin improved to 43.8% compared to 41.0%.
- Total equipment rental gross margins were 43.6% compared to
44.9%. Rental gross margins were 48.4% compared to 49.9%.
- Average time utilization (based on original equipment cost) was
67.3% compared to 70.4%. The Company’s rental fleet, based on
original equipment cost, increased $533.8 million, or 28.1%, to
approximately $2.4 billion.
- Average rental rates, excluding One Source, increased 9.5% on
an annual basis, and 0.7% when compared to the fourth quarter of
2022.
- Dollar utilization improved to 38.6% compared to 37.6%.
- Average rental fleet age on March 31, 2023, was 43.7 months
compared to an industry average age of 51.9 months.
- Paid regular quarterly cash dividend of $0.275 per share of
common stock.
Summarizing the strong first quarter results, Brad Barber, chief
executive officer of H&E, said, “Further rental rate
improvement, continued fleet growth, and expansion across our
branch network combined to produce a 31.5% improvement in total
rental revenues compared to the same quarter in 2022. First quarter
rental rates, excluding One Source, were 9.5% better than the same
quarter in 2022 and improved 0.7% on a sequential quarterly basis.
This encouraging improvement in rates contributed to a 100-basis
point increase in dollar utilization to 38.6% compared to the
year-ago outcome. Also, the rate improvement was realized despite
an expected decline in fleet utilization, due to a continuous
disruptive weather pattern across some geographies, and rapid
growth in our rental fleet and branch network. When measured as
original equipment cost (“OEC”), our rental fleet was in excess of
$2.4 billion as of March 31, 2023, or approximately 28% larger than
the year-ago measure, while we benefitted from a 13% expansion in
our branch count compared to the number of branches operating at
the conclusion of the first quarter of 2022. Finally, margins on
used equipment sales improved to 58.6% in the quarter, or 1,690
basis points better than the previous quarter in 2022.”
Emphasizing the Company’s constructive view of the equipment
rental industry, Mr. Barber noted several influential catalysts of
demand. He said, “Non-residential and industrial backlogs remain
strong, leading to an abundance of projects entering various stages
of execution. This active project environment is expected to
support favorable business conditions, including higher physical
fleet utilization and modest sequential rental rate improvement as
the year proceeds. Also, large private and federally funded
construction projects addressing a variety of manufacturing and
infrastructure build programs are increasingly apparent across our
operating footprint. Our participation in these opportunities is
expected to increase throughout the year. Lastly, a continuing
equipment supply imbalance and the likelihood of further
improvement in rental penetration represent favorable dynamics that
reinforce a positive industry outlook.”
In closing, Mr. Barber provided an update on progress toward the
Company’s 2023 growth objectives, stating, “Significant investment
in our rental fleet and continued expansion of our branch network
remain principal components of our growth strategy in 2023. Our
gross fleet expenditure in the first quarter totaled approximately
$128 million, and our expected full year expenditure remains $500
million to $550 million. This sizable first quarter capital outlay
attractively positions our existing branches with the equipment
needed to address escalating customer demand as the seasonal
expansion in construction activity begins, while ensuring that we
have the optimal fleet mix required to seamlessly execute our new
location strategy. Our previously reported goal in 2023 of no less
than 10 new branch locations, and possibly as many as 15, remains
unchanged. We currently expect to open as many as six new branches
during the second quarter.”
FINANCIAL DISCUSSION FOR FIRST QUARTER
2023
Revenue Total revenues
improved to $322.5 million, or 18.4%, in the first quarter of 2023
from $272.5 million in the first quarter of 2022. Total equipment
rental revenues of $262.0 million improved 31.5% compared to $199.2
million in the first quarter of 2022. Rental revenues of $232.1
million increased 31.0% compared to $177.2 million in the first
quarter of 2022. Used equipment sales of $32.1 million increased
49.2% compared to $21.5 million in the first quarter of 2022. New
equipment sales of $7.8 million decreased 70.0% compared to $26.0
million in the same quarter of 2022. Parts sales of $12.2 million
declined 24.3% when compared to the first quarter of 2022, while
service revenues of $7.2 million decreased 11.7% over the same
period of comparison.
Gross Profit Gross profit of
$141.4 million in the first quarter of 2023 increased 26.7%
compared to $111.6 million in the first quarter of 2022. Gross
margin improved to 43.8% for the first quarter of 2023 compared to
41.0% for the same quarter in 2022. On a segment basis, gross
margin on total equipment rentals was 43.6% in the first quarter of
2023 compared to 44.9% in the first quarter of 2022. Rental margins
were 48.4% compared to 49.9% over the same period of comparison. On
average, rental rates in the first quarter of 2023 were 9.5% better
than rates in the first quarter of 2022. Time utilization (based on
original equipment cost) was 67.3% in the first quarter of 2023
compared to 70.4% in the first quarter of 2022. Gross margins on
used equipment sales improved to 58.6% in the first quarter of 2023
compared to 41.7% in the first quarter of 2022. Gross margins on
new equipment sales were 13.3% in the first quarter of 2023
compared to 14.2% over the same period of comparison. Gross margins
on parts sales were 28.8% in the first quarter of 2023, compared to
27.1% in the first quarter of 2022, while gross margins on service
revenues were 64.0% compared to 65.4% over the same period of
comparison.
Rental Fleet The original
equipment cost of the Company’s rental fleet as of March 31, 2023,
was approximately $2.4 billion, representing an increase of $533.8
million, or 28.1%, from the end of the first quarter of 2022.
Dollar utilization for the first quarter of 2023 improved to 38.6%
compared to 37.6% in the first quarter of 2022.
Selling, General and Administrative
Expenses Selling, General and Administrative
("SG&A") expenses for the first quarter of 2023 were $95.3
million, an increase of $17.1 million, or 21.8%, compared to $78.3
million in the first quarter of 2022. The higher expenses were
largely attributable to increased employee salaries, wages, payroll
taxes and other related employee expenses. Also, higher
professional fees and facilities expenses contributed to the
increase in costs. SG&A expenses in the first quarter of 2023
as a percentage of total revenues were 29.6% compared to 28.7% in
the first quarter of 2022. Approximately $7.2 million of SG&A
expenses in the first quarter of 2023 were attributable to the
Company's expansion efforts, including $3.5 million relating to new
branch additions and $3.7 million resulting from the acquisition of
One Source.
Income from Operations
Income from operations for the first quarter of 2023 was $46.7
million, or 14.5% of revenues, compared to $34.7 million, or 12.7%
of revenues, in the first quarter of 2022.
Interest Expense Interest
expense was $13.7 million for the first quarter of 2023, up
slightly from $13.4 million in the first quarter of 2022.
Net Income Net income in the
first quarter of 2023 was $25.7 million, or $0.71 per diluted
share, compared to net income in the first quarter of 2022 of $16.3
million, or $0.45 per diluted share. The effective income tax rate
for the first quarter of 2023 was 26.1% compared to an effective
income tax rate of 26.3% in the same quarter of 2022.
EBITDA EBITDA in the first
quarter of 2023 increased to $140.1 million, or 43.4% of revenues,
compared to $103.4 million, or 38.0% of revenues, in the same
quarter of 2022.
Non-GAAP Financial Measures This press release contains
certain non-Generally Accepted Accounting Principles ("GAAP")
measures (EBITDA, and the disaggregation of equipment rental
revenues and cost of sales numbers) detailed below. EBITDA is a
non-GAAP measure as defined under the rules of the Securities and
Exchange Commission ("SEC").
We use EBITDA in our business operations to, among other things,
evaluate the performance of our business, develop budgets and
measure our performance against those budgets. We also believe that
analysts and investors use EBITDA as supplemental measures to
evaluate a company’s overall operating performance. However, EBITDA
has material limitations as an analytical tool and you should not
consider the measure in isolation, or as a substitute for analysis
of our results as reported under GAAP. We consider EBITDA a useful
tool to assist us in evaluating performance because it eliminates
items related to components of our capital structure, taxes and
non-cash charges. The items that we have eliminated in determining
EBITDA for the periods presented are interest expense, income
taxes, depreciation of fixed assets (which includes rental
equipment and property and equipment) and amortization of
intangible assets. However, some of these eliminated items are
significant to our business. For example, (i) interest expense is a
necessary element of our costs and ability to generate revenue
because we incur a significant amount of interest expense related
to our outstanding indebtedness; (ii) payment of income taxes is a
necessary element of our costs; and (iii) depreciation is a
necessary element of our costs and ability to generate revenue
because rental equipment is the single largest component of our
total assets and we recognize a significant amount of depreciation
expense over the estimated useful life of this equipment. Any
measure that eliminates components of our capital structure and
costs associated with carrying significant amounts of fixed assets
on our consolidated balance sheet has material limitations as a
performance measure. In light of the foregoing limitations, we do
not rely solely on EBITDA as a performance measure and also
consider our GAAP results. EBITDA is not a measurement of our
financial performance or liquidity under GAAP and, accordingly,
should not be considered an alternative to net income, operating
income or any other measures derived in accordance with GAAP.
Because EBITDA may not be calculated in the same manner by all
companies, the measure may not be comparable to other similarly
titled measures used by other companies.
Conference Call The Company’s management will hold a
conference call to discuss first quarter 2023 results today, April
27, 2023, 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 April 27, 2023, and
will continue through May 4, 2023, by dialing 877-344-7529 and
entering the confirmation code 8927475.
The live broadcast of H&E Equipment Services' quarterly
conference call will be available online at www.he-equipment.com on
April 27, 2023, 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 a global pandemic,
including COVID-19, and similar health concerns, 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 on 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 increased interest rates) and
their effect on construction spending and the economy in general;
(5) trends in oil and natural gas which could adversely affect the
demand for our services and products; (6) inability to obtain
equipment and other supplies for our business from our key
suppliers on acceptable terms or at all, as a result of supply
chain disruptions, insolvency, financial difficulties, supplier
relationships or other factors; (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, cybersecurity attacks, failure to protect
personal information, compliance with data protection laws and
other disruptions in our information technology systems; (13)
adverse weather events or natural disasters; (14) risks related to
climate change and climate change regulation; (15) 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 (16) 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 SEC, 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended March
31,
2023
2022
Revenues:
Equipment rentals
$
262,008
$
199,225
Used equipment sales
32,115
21,526
New equipment sales
7,818
26,036
Parts sales
12,157
16,059
Services revenues
7,186
8,134
Other
1,198
1,470
Total revenues
322,482
272,450
Cost of revenues:
Rental depreciation
81,872
60,021
Rental expense
37,867
28,759
Rental other
27,975
20,913
147,714
109,693
Used equipment sales
13,288
12,548
New equipment sales
6,781
22,329
Parts sales
8,652
11,704
Services revenues
2,590
2,814
Other
2,079
1,782
Total cost of revenues
181,104
160,870
Gross profit
141,378
111,580
Selling, general and administrative
expenses
95,335
78,278
Gain on sales of property and equipment,
net
667
1,386
Income from operations
46,710
34,688
Other income (expense):
Interest expense
(13,697
)
(13,447
)
Other, net
1,716
880
Total other expense, net
(11,981
)
(12,567
)
Income before provision for income
taxes
34,729
22,121
Provision for income taxes
9,055
5,825
Net income
$
25,674
$
16,296
Net income per common share:
Basic
$
0.71
$
0.45
Diluted
$
0.71
$
0.45
Weighted average common shares
outstanding:
Basic
36,025
36,363
Diluted
36,352
36,539
Dividends declared per common share
outstanding
$
0.275
$
0.275
H&E EQUIPMENT SERVICES,
INC. SELECTED BALANCE SHEET DATA (unaudited) (Amounts in
thousands)
March 31,
2023
December 31,
2022
Cash
$
89,945
$
81,330
Rental equipment, net
1,451,795
1,418,951
Total assets
2,422,964
2,291,699
Total debt (1)
1,291,569
1,251,594
Total liabilities
2,006,277
1,890,657
Stockholders' equity
416,687
401,042
Total liabilities and stockholders'
equity
$
2,422,964
$
2,291,699
(1)
Total debt consists of the aggregate
amounts on the senior unsecured notes, senior secured credit
facility, and finance lease obligations.
H&E EQUIPMENT SERVICES,
INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended March
31,
2023
2022
Net Income
$
25,674
$
16,296
Interest Expense
13,697
13,447
Provision for income taxes
9,055
5,825
Depreciation
89,945
66,878
Amortization of intangibles
1,683
993
EBITDA
$
140,054
$
103,439
H&E EQUIPMENT SERVICES,
INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
Three Months Ended March
31,
2023
2022
RENTAL
Equipment rentals (1)
$
232,076
$
177,182
Rental other
29,932
22,043
Total equipment rentals
262,008
199,225
RENTAL COST OF SALES
Rental depreciation
81,872
60,021
Rental expense
37,867
28,759
Rental other
27,975
20,913
Total rental cost of sales
147,714
109,693
RENTAL REVENUES GROSS PROFIT
Equipment rentals
112,337
88,402
Rentals other
1,957
1,130
Total rental revenues gross profit
$
114,294
$
89,532
RENTAL REVENUES GROSS MARGIN
Equipment rentals
48.4
%
49.9
%
Rentals other
6.5
%
5.1
%
Total rental revenues gross margin
43.6
%
44.9
%
(1)
Pursuant to SEC Regulation S-X, the
Company's equipment rental revenues are aggregated and presented in
our unaudited condensed consolidated statements of operations in
this press release as a single line item, “Equipment Rentals.” The
above table disaggregates the Company's equipment rental revenues
for discussion and analysis purposes only..
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230427005044/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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