H&E Equipment Services posted $400.7 million in total revenue in the third quarter of 2023, compared to $324.3 million in the third quarter of 2022, a 23.6-percent year-over-year increase. In equipment rental revenue, H&E brought in $315.8 million, compared to $253.6 million last year, a 24.5-percent jump. Used equipment sales more than doubled, going from $20.3 million a year ago to $52.7 million this year, while sales of new equipment nearly cut in half, plunging from $23.5 million to $12.6 million. Parts sales and services revenues also declined, by 28 percent and 21.y percent respectively.
Adjusted EBITDA totaled $189.1 million, an increase of $36.2 million compared to $138.9 million in the year-ago period. Adjusted EBITDA margins improved to 47.2 percent of revenues compared to 42.8 percent in last year’s third quarter.
Average time utilization (based on original equipment cost) was 70 percent compared to 73.3 percent a year ago. The company’s rental fleet, based on OEC, closed the third quarter of 2022 at just more than $2.7 billion, an increase of $589.9 million, or 27.6 percent. Average rental rates, excluding One Source, increased 4.9 percent compared to the third quarter of 2022, and 1.2 percent compared to the second quarter of 2023. Through the nine months ended September 30, rental rates increased 7 percent year over year.
Average rental fleet age on Sept. 30 was 41.1 months.
"As expected, continued strength in non-residential construction led to strong fleet growth, healthy physical fleet utilization and further rental rate appreciation,” said Brad Barber, CEO of H&E Equipment Services. “These components of a fundamentally sound industry, combined with growth in mega projects and further expansion of our branch network, delivered another quarter of outstanding financial results. Total revenues improved 23.6 percent compared to the same quarter in 2022, while rental revenues were 25 percent better over the same period. Our 2023 growth initiatives were a modest burden on dollar utilization, which finished the quarter at 41.5 percent compared to the year-ago result of 42.7 percent.
“The measure improved 90 basis points on a sequential basis. Also, improvement in equipment supply chains presented an opportunity to capitalize on the sustained strength in the used equipment market, where margins on used equipment sales reached 58.5 percent. With a gross fleet investment of $220.1 million in the quarter, our disciplined approach to fleet management resulted in a decline in average fleet age to 41.1 months, remaining among the youngest fleets in the industry. Finally, adjusted EBITDA totaled a record $189.1 million, with a margin of 47.2 percent.”
Branch expansion and fleet growth drives H&E
Branch expansion and fleet growth once again proved significant drivers of H&E’s improved quarterly financial performance. “We added greater branch density in the Mid-Atlantic, Southeast, Gulf Coast and Midwest regions following the addition of five new locations in the quarter and a sixth in October,” said Barber. “With 12 branch additions through October 2023, we are comfortably within our stated range of 12 to 15 new locations for the year and we anticipate more openings during the fourth quarter. Also, our gross fleet expenditures in the third quarter contributed to a record fleet investment through the first nine months of 2023 of $595.2 million, resulting in a fleet size, as measured by original equipment cost, in excess of $2.7 billion. In view of our gross expenditures at the close of the third quarter, we are adjusting our expected range for 2023 gross fleet investment for the second time in consecutive quarters as customer demand remains elevated and availability among certain highly utilized equipment lines continues to improve. Our new range is $650 million to $700 million compared to a previously revised range of $600 million to $650 million.”
H&E believes a robust business environment will persist through the final quarter of 2023 and into 2024. Barber identified several factors in support of that view.
“Non-residential construction activity remains resilient, and we expect to benefit from an expansion in project opportunities,” Barber said. “Mega projects should meaningfully contribute to the enhanced U.S. construction activity, which we define as possessing a construction value of $500 million and greater. These projects continue to populate our geographic footprint and have substantial equipment requirements and lengthy project completion schedules. Additionally, the value proposition of rental compared with equipment ownership is expected to lead to further growth in rental penetration. Modest rental rate improvement and favorable utilization trends are likely to continue in this attractive business environment and we intend to maintain our focus on branch expansion and fleet growth as we finalize our 2024 strategic initiatives.”
For the first nine months of 2023, H&E reported total revenues of $1,083.4 million, compared to $891.4 million in the first nine months of 2022, for a 21.5 year-over-year hike. Rental revenue was $869.3 for the first nine months of 2023, compared to $680.4 for the same period in 2022, a 27.8 leap in rentals.
Based in Baton Rouge, La., H&E Equipment Services is No. 5 on the RER 100.