H&E Equipment Services reported rental revenues of $224.1 million in the third quarter of 2022 compared to $176.7 million in the third quarter of 2021, a 26.9-percent increase. Total equipment rental revenues were $253.6 million compared to $197.2 million a year ago, a 28.6-percent jump.
Total third quarter revenues were $324.3 million compared to $275.4 million in the third quarter of 2021, a 17.7-percent hike. Net income increased 55.2 percent to $38.4 million, compared to $24.7 million in the third quarter of 2021. Adjusted EBITDA totaled $139.4 million, compared to $112.3 million in the third quarter of 2021, a 24.1-percent hike, resulting in a margin of 43 percent of revenues compared to 40.8 percent of revenues a year ago.
As expected, used equipment sales decreased 34.7 percent to $20.3 million, compared to $31.1 million in the third quarter a year ago. Margins improved to 53.7 percent compared to 37.6 percent in the third quarter of 2021.
New equipment sales totaled $23.5 million, a 21.4-percent increase compared to $19.4 million in the third quarter of 2021.
Average time utilization (based on original equipment cost) was 73.3 percent compared to 71.9 percent in the year-ago quarter. The company’s rental fleet, based on OEC, closed the third quarter of 2022 at about $2.1 billion an increase of $305.4 million or 16.7 person compared to the year-ago quarter.
Rental rates jump 10.1 percent
Average rental rates increased 10.1 percent compared to the third quarter of 2021, and 3.2 percent compared to the second quarter of 2022. Dollar utilization improved to 42.7 percent compared to 38.9 percent in the third quarter of 2021. Average rental fleet age on Sept. 30, 2022 was 40.6 months compared to an industry average of 53 months.
"A combination of exceptional rental rate appreciation, robust physical fleet utilization and further fleet growth resulted in record performance for our equipment rental segment," said Brad Barber, CEO of H&E. "We continue to lead the industry in average rental rate improvement, with rates in the third quarter advancing 10.1 percent when compared to the same quarter in 2021, and 3.2 percent 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 percent, or 140 and 10 basis points ahead of the year-ago and sequential quarters, respectively. Finally, our fleet, as measured by original equipment cost, grew $305.4 million, or 16.7 percent from the year-ago quarter and $277.0 million, or 14.9 percent, 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."
Barber offered an encouraging perspective on the equipment rental industry.
"We expect favorable industry fundamentals to prevail through the close of 2022 and into 2023,” he said. “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 demonstrated its ability to grow, with 2022 being a record year of expansion for the company.
"Our strategic growth and expansion initiatives made exceptional progress in the third quarter,” Barber added. “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."
For the first nine months of 2022, equipment rental revenue was $680.4 million compared to $526 million in the first nine months of 2021, a 29.3-percent leap. Total revenue was $891.4 million compared to $781.5 million in the first six months of 2021, a 14.1-percent jump.
H&E Equipment Services, based in Baton Rouge, La., is No. 7 on the RER 100.
