H&E Equipment Services posted $319.4 million in revenue in the third quarter compared to $289.3 million in the third quarter of 2020, a 10.4 percent increase. For continuing operations in the third quarter, H&E reported $275.4 million compared to $251.9 million in the third quarter of 2020, a 9.3-percent hike.
Total equipment rental revenues for the quarter were $197.2 million, compared to $161.5 million in the third quarter a year ago, a 22.1-percent jump. Rental revenues for the third quarter of 2021 were $176.7 million compared to $145.3 million a year ago, a 21.6-climb.
Used equipment sales decreased 14.2 percent from $36.2 million last year to $31.1 million in this third quarter. Adjusted EBITDA increased 24.1 percent in the third quarter of 2021 to $112.3 million compared to $90.5 million in the third quarter of 2020, yielding a margin of 40.8 percent of revenues compared to 35.9 percent over the same period of comparison.
Total equipment rental gross margins from continuing operations were 45.6 percent in the third quarter of 2021 compared to 39.6 percent in the same quarter of 2020. Rental gross margins were 50.9 percent compared to 44.3 percent over the same period of comparison.
Average time utilization (based on original equipment cost) was 71.9 percent compared to 63.5 percent a year ago. The size of the company’s rental fleet based on original acquisition cost increased 5.0 percent from the third quarter in 2020, to approximately $1.8 billion. On a sequential basis, the rental fleet grew 2.9 percent when compared to the second quarter of 2021. Dollar utilization improved to 38.9 percent in the third quarter of 2021 compared to 32.9 percent in the third quarter of 2020.
Average rental rates improved 2.9 percent in the third quarter of 2021 compared to a year ago and 2.6 percent compared to the second quarter of 2021. Average rental fleet age on September 30, 2021, was 39.6 months compared to an industry average age of 52.7 months, H&E said.
At the end of the third quarter of 2021, the original acquisition cost of the company’s rental fleet was approximately $1.8 billion, which represented a 5 percent, or $87.7 million, increase from the end of the third quarter of 2020.
“Customer demand for our diverse mix of rental equipment remained vigorous throughout the third quarter as the recovery in non-residential construction intensified, and the increased activity led to another quarter of strong financial performance,” said Brad Barber, CEO of H&E Equipment Services. “Among our key metrics, average physical utilization improved to 71.9 percent in the third quarter, decidedly better than average, when stated on a continuing operations basis, of 63.5 percent and 68.7 percent in the third quarter of 2020 and the second quarter of 2021, respectively. Also, as equipment utilization increased, rental rates posted another quarter of sequential improvement, up 2.6 percent from the second quarter while rates advanced 2.9 percent when compared to the third quarter in 2020. By the conclusion of the third quarter, rental rates had improved approximately 450 basis points from the pandemic-induced lows experienced in early 2021. Finally, in the face of global supply chain challenges, we grew our equipment rental fleet by 2.9 percent sequentially and 8.4 percent since the conclusion of 2020.”
Barber remained enthusiastic about the equipment rental industry, saying, “A broadening industrial recovery led by an abundance of non-residential construction activity serves as the underpinning of a truly robust business environment. Across our rental fleet, physical utilization during October peaked at 75 percent, our best measure since 2018. The strong measure is indicative of outstanding operational execution and continued strong demand as we entered the final quarter of 2021. Industry indicators continue to signal the likelihood for further non-residential project expansion in 2022.”
Barber also explained the benefits of divesting H&E’s crane business to focus more on growth in equipment rental.
“Our exit from the crane distribution business, as well as the sale of two earthmoving distribution branches, represent significant steps we are taking to advance H&E’s strategic transition to a pure equipment rental business,” Barber said. “These measures are helping to establish a pathway to higher and more sustainable revenue growth as well as margin appreciation through the business cycle. Proceeds from these transactions will facilitate continued investment in our rental fleet and support further development of our national branch network. Our warm start and greenfield branch expansion strategy remain an integral part of our future growth plans. In fact, following the addition of 10 branches in 2021, including most recently a new facility in Ogden, Utah, we expect to establish no fewer than 10 new branches in 2022.
“Next month, H&E will celebrate its 60th year in business. As we approach this milestone, I am very confident in the company’s ability to capitalize on future growth initiatives that should enhance our competitive position. Reinforcing my confidence are factors such as our young rental fleet, our diverse geographic presence, the strength of our balance sheet and ample liquidity, our robust and scalable digital customer platform, and the ability and experience of our leadership team. Collectively, these attributes will serve us well as we address the numerous opportunities generated by a strong business cycle.”
For the first nine months of the year, equipment rental revenue was $526 million compared to $481.6 million for the first nine months of 2020, a 9.2-percent increase. Total revenue for the period was $781.5 million compared to $739.3 million for the first nine months of 2020, a 5.7-percent increase.
H&E Equipment Services, based in Baton Rouge, La., is No. 8 on the RER 100.