H&E Equipment Services posted $262 million in equipment rental revenue in the first quarter of 2023 compared to $199.2 million in the first quarter of 2022, a 31.5-percent increase. Total revenue for the quarter was $322.5 million compared to $272.5 million in the year-ago quarter, an 18.4-percent increase. Used equipment sales increased from $21.5 million to $32.1 million, a 49.1-percent jump. However, new equipment sales dropped from $26 million in Q122 to $7.8 million this year, a 70-percent decline.
Net income increased 57.5 percent to $25.7 million compared to $16.3 million a year ago. EBITDA totaled $140.1 million compared to $103.4 million in the year-ago quarter, a 35.4-percent leap. Average time utilization, based on OEC, was 67.3 percent, compared to 70.4 percent a year ago. The company’s rental fleet, based on OEC, increased $533.8 million, or 28.1 percent to approximately $2.4 billion.
Average rental rates, excluding One Source, increased 9.5 percent on an annual basis, and 0.7 percent compared to the fourth quarter of 2022. Dollar utilization improved to 38.6 percent compared to 37.6 percent.
“Further rental rate improvement, continued fleet growth, and expansion across our branch network combined to produce a 31.5-percent improvement in total rental revenues compared to the same quarter in 2022,” said H&E CEO Brad Barber. “First quarter rental rates, excluding One Source, were 9.5-percent better than the same quarter in 2022 and improved 0.7-percent on a sequential quarterly basis. This encouraging improvement in rates contributed to a 100-basis point increase in dollar utilization to 38.6 percent 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, our rental fleet was in excess of $2.4 billion as of March 31, 2023, or approximately 28-percent larger than the year-ago measure, while we benefitted from a 13-percent 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 percent in the quarter, or 1,690 basis points better than the previous quarter in 2022.”
Barber noted several influential catalysts affecting demand.
An abundance of projects
“Non-residential and industrial backlogs remain strong, leading to an abundance of projects entering various stages of execution,” he said. “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.”
Barber was bullish in discussing H&E’s plans for the coming year.
“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.”
H&E Equipment Services is headquartered in Baton Rouge, La.