H&E Equipment Services, Inc. has announced results for the third quarter ended September 30, 2018.
Third quarter 2018 summary
- Revenues increased 24.3% to $322.1 million versus $259.2 million a year ago.
- Net income was $21.3 million in the third quarter compared to net income of $8.5 million and adjusted net income of $27.1 million a year ago.1 The effective income tax rate was 26.4% in the third quarter of 2018 and (11.7)% in the third quarter of 2017.
- Adjusted EBITDA increased 22.2% to $108.2 million in the third quarter compared to $88.5 million a year ago, yielding a margin of 33.6% of revenues compared to 34.2% a year ago.
- Rental revenues increased 24.2% to $156.0 million in the third quarter compared to $125.6
- New equipment sales increased 39.4% to $68.2 million in the third quarter compared to $48.9 milliona year ago.
- Used equipment sales increased 36.2% to $30.3 million in the third quarter compared to $22.3 milliona year ago.
- Gross margin was 35.6% compared to 36.3% a year ago. The decrease in gross margin was primarily a result of a shift in revenue mix to lower margin new equipment sales revenue.
- Rental gross margins were 50.0% in the third quarter of 2018 compared to 49.7% a year ago.
- Average time utilization (based on original equipment cost) was 71.0% compared to 73.3% a year ago. The size of the Company’s rental fleet based on original acquisition cost increased 25.3% from a year ago, to $1.8 billion.
- Average rental rates increased 2.2% compared to a year ago and 0.8% sequentially.
- Dollar utilization was 35.9% in the third quarter compared to 36.0% a year ago.
- Average rental fleet age at September 30, 2018, was 33.8 months compared to an industry average age of 44.5 months.
John Engquist, H&E Equipment Services’ chief executive officer, said, “Our business performed well during the third quarter as we took advantage of the strength in the non-residential construction markets. Ongoing rental rate improvement as well as solid broad-based demand throughout our geographic footprint drove a 24.2% increase in rental revenues.
Despite organically growing our fleet by $236.6 million year-to-date, physical utilization remained strong and we achieved our expected year-over-year and sequential rental rate increases. Now that this significant fleet investment has been absorbed into the business, our utilization has returned to industry leading levels during the fourth quarter. A year ago, our utilization was at unsustainable levels and resulted in missed opportunities in our end markets. We believe our fleet investment has positioned us well for the rest of this year and for 2019.
The momentum in our distribution business continued during the quarter with new equipment sales increasing 39.4%, largely due to an increase in new crane sales of 51.2% from a year ago. Demand for new earthmoving equipment was also solid, increasing 39.3%. Overall, it was a good quarter for our business.”
Engquist concluded, “As we move into the fourth quarter, project activity remains strong resulting in healthy demand for rental equipment and is consistent with the ongoing strength in the non-residential construction markets, which is forecast to continue into 2019. Lastly, our stated growth strategy including both acquisitions and organic expansion remains on track.”