H&E Equipment Services’ Total Revenues Climb 15.2 Percent in First Quarter

H&E Equipment Services posted $371.4 million in total revenue in the first quarter of 2024 compared to $322.5 million in the first quarter of 2023, a 15.2-percent increase. Total equipment rental revenues increased to $295.3 million compared to $262 million in the first quarter of 2023, a 12.7-percent hike. Rental revenue was $261.7 million compared to $232.1 million a year ago, a 12.8-percent incline. Sales of rental equipment increased 49.8 percent to $48.1 million compared to $32.1 million a year ago. Sales of new equipment was $10.4 million compared to $7.8 million in the year-ago quarter, a 33.2-percent increase.

Gross profit increased 16.6 percent in the first quarter of 2024 to $164.9 million compared to $141.4 million in the first quarter of 2023. Gross margin of 44.4 percent for the first quarter of 2024 compared to 43.8 percent over the same period of comparison. On a segment basis, gross margin on total equipment rentals was 43.3 percent in the first quarter of 2024 compared to 43.6 percent in the first quarter of 2023. Rental margins were 48.5 percent compared to 48.4 percent. Adjusted EBITDA in the first quarter of 2024 increased 13.1 percent to $161.7 million compared to $143.0 million in the first quarter of 2023.  

On average, rental rates in the first quarter of 2024 improved 2.9 percent when compared to rates in the first quarter of 2023. Time utilization (based on original equipment cost) was 63.6 percent in the first quarter of 2024 compared to 67.3 percent in the year-ago quarter. Gross margins on sales of rental equipment were 62.9 percent, up from 58.6 percent, while gross margins on sales of new equipment improved to 17.0 percent compared to 13.3 percent.

At the end of the first quarter of 2024, the original equipment cost of the company’s rental fleet was just over $2.8 billion, representing a 15.7 percent, or $383.0 million increase from the end of the first quarter of 2023.

“Rental revenues grew 12.8 percent on a year-over-year basis, supported by a modest improvement in rental rates and successful growth activities,” said Brad Barber, CEO of H&E. “Rental rates advanced 2.9 percent when compared to the year-ago quarter, while on a sequential quarterly basis, rates experienced a negligible decrease of 0.2 percent. Average physical utilization in the quarter was 63.6 percent compared to 67.3 percent in the year-ago quarter, with the decline due to lower than anticipated construction activity, as well as project delays resulting from recurring unfavorable weather conditions, with the work interruptions most pronounced across our western operations. Our continued focus on branch expansion and fleet growth led to further financial gain in the quarter. On a year-over-year basis, our branch network grew 17 percent, including 15 locations resulting from our accelerated branch expansion program and five other locations added through acquisitions. Our rental fleet closed the first quarter with an original equipment cost (OEC) in excess of $2.8 billion, or 15.7 percent larger than our OEC on March 31, 2023.”

Industry expectations

Barber provided an updated overview on industry prospects. “Our current outlook for the equipment rental industry indicates a transitioning business environment, with moderating growth levels compared to the exceptional rate of growth in construction spending and strong business dynamics experienced over the past 24 months. We believe the easing in the progression of construction spending is in part the result of a 'higher for longer' interest rate environment and generally tighter lending standards, which have contributed to a greater supply of rental equipment. Even though non-residential and industrial project backlogs remain solid, the rate of new project starts has slowed in early 2024.

“We note several factors that are expected to be instrumental in maintaining, or possibly improving upon an environment currently exhibiting moderate growth and steady industry fundamentals. These factors include the continued escalation of mega projects, an expected increase in infrastructure projects, favorable trends in rental penetration and the steady growth in construction employment. These critical factors reinforce non-residential construction and industrial project activity and serve as the foundation in support of elevated long-term industry growth.”

As far as planned capital expenditures and branch expansion objectives, Barber said: “We have reduced our 2024 guidance for gross fleet investment, with the steadying of industry fundamentals justifying a more balanced approach to capital spending over the year. Capital investment in our fleet is now expected to range from $350 million to $400 million, down from our initial guidance for 2024 of $450 million to $500 million. With the availability of equipment from manufacturers returning to normal, we could quickly increase our spending range should industry demand accelerate. The revised spending range will adequately address the planned growth in 2024 across our branch network, which remains at 12 to 15 new locations as we continue to demonstrate strong execution of our accelerated branch expansion strategy. Also, additional branch growth in 2024 could be achieved through the acquisition of attractive rental operations, as demonstrated by the acquisition of Precision Rental, which closed in the first week of 2024, and the recently announced pending acquisition of four locations in the state of Montana. Following the expected close of this latest transaction in the second quarter of 2024, H&E will operate 145 branches across 30 states, including eight branch additions since the close of 2023.”

H&E Equipment Services, also doing business as H&E Rentals, is based in Baton Rouge, and is No. 5 on the RER 100.