Q2 2023 H&E Equipment Services Inc Earnings Call
The press release reporting our second quarter results wasn't issued earlier today and can be found along with all supporting statements and schedules at the H any website, that's www dot H E dash equipment dotcom.
Aren't discussion. This morning is accompanied by a slide presentation, which can also be found at the H and the website under the Investor relations tab and events and presentations.
On slide too you will see a list of senior managers joining me today. They are Bryan Barber, Chief Executive Officer, John Engquist, President and Chief operating Officer.
And lastly, Mcgee Chief Financial Officer, and corporate Secretary.
Before I turn the call over to Brad I'll call your attention to slide three and remind you that today's call contains forward looking statements within the meaning of the federal securities laws statements about our beliefs and expectations and statements containing words, such as may could.
Believe expect.
Anticipate and similar expressions constitute forward looking statements.
Forward looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward looking statement.
A summary of these uncertainties is included in the Safe Harbor statement contained in the company's slide presentation important today's call and includes the risks described and the risk factors in the company's annual report on Form 10-K, and other periodic reports.
Investors potential investors and other listeners are urged to consider these factors carefully and evaluating the forward looking statements and are cautioned not the place undue reliance on such forward looking statements. The company does not undertake to publicly updated or revised any forward looking statements. After the date of this conference call.
Also we are referencing non-GAAP financial measures. During the day is call you will find the required supplemental disclosure for these measures, including the most directly comparable gap measure and an associated reconciliation is supporting schedules to our press release and in the attendance too.
Today's presentation materials.
I will now turn the call over to Brad Barber, Chief Executive Officer of H and the equipment services.
Thank you, Jeff and good morning, and welcome to our review of second quarter of 2023 financial results. We appreciate your participation on today's call.
Received a sly for blinks.
I'll begin this morning with quarterly financial highlights at a high level review of a strong financial progress achieved in the second quarter I was in transition to our rental business in touch upon the major drivers with performance.
Next I want to discuss our perspective on equipment railway industry offering observations in identifying recent developments that have served to reinforce our optimism regarding the outlook for the remainder of 2023 and end of 2024 lashes.
Lastly, considering our continued confidence in the industry I will bring you up to date with our revised 2023 strategic growth targets Leslie will follow with a review of the second quarter financial including business segment performance ended up date of our capital structure and liquidity then we'll be happy to address your questions.
It's five six please.
Ancient reported superb financial results in the second Corps.
As expected strong industry conditions prevail throughout the period with healthy customer project backlogs, yielding steady demand in front of the rate appreciation.
We also benefited from the successful growth initiative launched in 2022, we were very focused on our 2023 strategic expansion targets and made significant progress in the quarter with substantial fleet growth and six new locations opened.
Collectively these important factors led to strong financial achievement.
A year over year growth was impressive with total revenues and equipment rental revenues up significantly.
Both measures reached record levels of the core.
Total revenues included notable increase in revenue from used equipment sales, reflecting an effective management effort at the market for used equipment remain robust.
Record levels were also report for gross profit and gross margin, while EBITDA, which grew 36% approached the record level in the quarter posted a 480 banks is point increase in EBITDA margin to 46.2% compared to the year ago.
These poorly financial achievements were made possible by the successful execution of our strategic growth objectives led by nearly 602 million dollar increase in a rental fleet always see it in the quarter at a record 2.6 billion.
Are growing rental fleet was distributed across an expanding branch network, which include a 12, new warm start open over the last 12 months and as mentioned six of these added in the current quarter.
The performance of a rental business was equally impressive so I'll want to review these major drivers.
The slides seven please.
Rental revenues in the second quarter of 2023 were up 28.6 per cent compared to the year ago quarter.
Gross margins, where 51.8 per cent compared to 53.7% over the period of comparison.
The modest acquired a margin was largely due to the impact that purchase accounting following the acquisition on one source.
Lastly will provide further detail of her financial review.
When compared to the first quarter of 2023 rental gross margins achieved a solid gain of 340 basis points.
A rental operations benefit it from another quarter of strong pricing performance, excluding one source rental rates in the second quarter were up 7.1% compared to the year ago quarter, and we're at 1.1 per cent better on a sequential quarterly basis.
The first six months of 2023 rental rates improved 8.2% compared to the same period in 2022 and remain among the best in the industry.
Physical utilization in the second quarter of 69.3 per cent, representing a normal second quarter outcome when viewed historically compared to 73.2%. During the same period of 2022, a time of unusual tight supply in the industry.
When compared to the first quarter of 2023 fields of utilization improve 200 basis points.
Finally dollar utilization in the second quarter was 46% compared to 40.9% in the second quarter of 2022 or essentially unchanged. Despite.
Despite the significant growth of a rental fleet dollar utilization was 200 basis points better on a sequential quarterly basis, due primarily to improve rental rates.
I know I want to address our perspective on the equipment rental industry, including some material developments that should lead to additional opportunities and prospects for growth.
All the sladek beliefs.
Val and industry fundamentals persisted through the second quarter supported in part by resilient nonresidential construction spending.
Through May 2023, construction spending in this important segment was up 17% year over year. According to the U S Census Bureau.
As a result healthy project backlog remain in place and we expect them to sustain through 2000 twenty-three with increasingly positive implications for 2024.
Along with a solid base of demand, we're witnessing a steady escalation and the number of large scale or mega projects, we expect to serve as a catalyst for further construction spending and expansion across the equipment real industry.
Construction of these private and family funded projects, which include sizable manufacturing install installations and public infrastructure programs are active throughout the geography reserved representing the growing component of our project mix.
Also leading indicators of nonresidential construction spending have demonstrated increase stability in recent months and remain solidly ahead of year ago measures, implying continued growth into 2024.
We are encouraged by these attractive and dynamic forces and expect a combination of strong industry fundamentals and the stimulus for major projects to produce solid business opportunities throughout the balance of 2023 and the end of 2024.
Finally, and before I turn the call over the lastly, I want to address substantial progress achieved in the second quarter towards our growth and expansion objectives and disclose a revised 2000 twenty-three targets as we positioned the company for future success.
Five minutes please.
Our business expansion initiatives have been and will remain centered on our rental fleet and branch network.
Regarding our fleet gross capital investment in the second quarter, a total of approximately $247 million, representing a record quarterly investment by the company and result, as a capital expenditure of 375 million through June 30th 2023.
As we close the second quarter the size of a rental fleet as measured by original equipment costs totaled approximately 2.6 billion, representing a 30% increase when compared to the always see on June 30th 2022. It was yet another company milestone.
As mentioned earlier in my comments, we open six locations in the core improving our branch density in the mid Atlantic Southeast Gulf Coast in Intermountain regions.
Additional locations are set to open in the third and fourth quarters.
As we concluded the second quarter, our branch count stood at 126 locations across 29 states, representing a year over year growth of 19% inclusive of warm starch and act acquired locations.
A map of our current branch network with second quarter branch editions noted is included in the appendix of today's presentation.
We follow a disciplined approach to growth and expansion and we value strong execution, we have consistently demonstrate an ability to adapt to changing market conditions. Accordingly, we believe our decision to raise our 2023 growth initiatives is an appropriate response to our heightened level of confidence in the continuation of attractive.
Industry fundamentals. We also believe it is essential as we position HED properly for future growth and enhanced financial performance.
2023 capital expenditure target has increased to arrange a 600 billion to $650 million up from 500 million to 550 million also we have raised our anticipated 2023 branch additions to a range of 12 to 15 locations up from 10 to 15 locations.
In conclusion, our second quarter financial performance as further evidence of the capability and financial potential of HD. Since we began our transition to a pure play rental focus of 2021, we have demonstrated consistent growth in revenues, while significantly elevating operating margins.
A commitment to growth and expansion combined with ample capital robust technical systems and a dedicated workforce represents a critical drivers of our rising potential.
We're excited about the prospects for the equipment rental industry and we're confident in our ability to address new opportunities as we continued to effectively execute our growth plans and demonstrate operational excellence throughout our expanding footprint I'll look forward to updating you on our future achievements.
Now all of the slots in and I'll turn the call over the lastly provide a review of our second quarter financial performance Lastly.
Thank you <unk> good morning, and welcome everyone I don't think England sign of Latin interview in second quarter revenues cramps profit and profit margins.
Second quarter revenues increased 65.6, 90, and comparing the second order of 2020 team, reaching our highest quarterly level today at $360 to $90 and 22.2% increase with the length by higher revenues from rentals and you see this house.
Rental revenues in the quarter imprint, 28.6% to 258.7 million compared to $101.2 million in the year that corner.
Grant and a rental fleet together with rising rental rates contributing to the strong year over year resolved.
In quantifying these impactful developed means I want to review some of France comedy.
Our rental fleet athanasia by original equipment cost or at least seen Greene, 30% in the second quarter of 2020 team or 601.6 million suggest Stanford 2.6 Italian.
In addition rental rates in the second quarter, excluding one source, where 7.1% better than a year ago quarter, and we continue to damage strength sequential quarterly raining, please maintaining 1.1% in the quarter when compared to the first quarter of 2023.
It took like utilization was 69.3% in the second quarter billed as a year and then measure of 73.2%.
The second corner out home was modestly MPD patents 90 per cent grant an athlete and Ah their expansion initiatives. However, I as France faded 69, 3%, it's representing 10th at a more normal asked for salt when compared to the utilization in the ear against Warner which was intense lingering an appointment supply shortage.
He used equipment, South and then thinking ordering printed 110.6% to $39.7 million compared to $18 Ain't young and the year that border.
We have seen a moderate imprisoning and the availability of certain types of equipment and because of this change and we were able to capture attractive opportunities and a sound eased equipment market.
New equipment, South at 8.9, $9 declined 58.8 per cent and a quarter compared to 21.5 million and then second quarter of 2020 team with a decline resulting from the December of 2020 divestiture of our Komatsu earthmoving distribution business, which complaint in.
Our accident from distribution activities.
Consolidated grants profit in the second quarter increased 36 million or 27.2% to $168.4 million compared to $192 $3 million in the year again corner.
As a result gross profit margin in the corner and praised in 46.7% compared to 44.9%.
Quarter at 2020 team with the 190 basis point increase in largely to a favorable revenue mix and higher gross margins high needs to Clinton his house, partially offset by lower price margins on rental.
Casually equipment rental margins, where 46.8% in the second quarter of 2023 compared to 48.6% in the year ago quarter, and rental margins, where 61.8% compared to 53.7%.
These declines in rental margins were primarily due to the impact that purchase accounting and the associated higher depreciation expense, resulting from the fair value markup at the fleet acquired from one source.
And comparing other results to the year that order used equipment margins increase to $59, 1% compared to 47.6% with laid out on the margins excluding used equipment obtained to trade in and printing, 59.3% compared to 50.9%.
Margins are newly equipment sales were largely unchanged at 14.9% compared to 15% and finally margins on part sales improved to 29.6% compared to 26.8% while service margins finished the quarter at 62.2% compared to 64.6%.
These are known to fly 12th please.
Income from operations closest second quarter at $69.5 million or 837.2% increase when compared to $57 million in the second quarter of 2022.
Operating income marching increase in 19.3% compared to 17.2% in the year ago quarter.
A favorable revenue next higher gross margins on used equipment sales and lower <unk>, 10% of remedies contribute to the imprint marching these.
These factors would partially offset by lower rental margins, resulting from the one source acquisition.
Proceed to slide 13 please.
Net income from continuing operations in the second quarter increased 47.9% to 41.2 million Orient dollars 14 cents per diluted share compared to $27.9 million or 76 cents permanently each year and the year of headquarters.
[noise] affected income tax rate in in second quarter declined to $26, 3% compared to 26.8% for the same quarter in 2028.
Flying 14 please.
EBITDA in the second quarter in print to $166.5 million compared to 121.9 million a year ago order.
Or an increase of 36.6% in comparison to a $22, 2% in presenting taboo revenues in the quarter.
At 46.2% in EBITDA margin in the corner was 490 basis points better than the margin in the second quarter of 2020 team with the increase in primarily feeling pretty drab and he'd mix higher gross margins I needed to Clinton in sales and lower SG&A as a percentage of revenues.
515 please.
SG&A expensive in the second quarter increased $16.6 million or 21% to 99.3 million compared to S. G N and $82 $70 million in a year that order.
The increase was a tradable two employee salaries wages in variable compensation as well as increased head count high.
Hi, I'm facility expenses professional fees, and depreciation where secondary contributors to the quarter over quarter increase.
Expressed as a percentage of revenues SG&A expenses, and a quarter or 27.6% down from 28.1% in the prior year corner.
Approximately 74 million at the expense increase in the quarter was entering thing of all the branches as in you or acquired since the close of the prior year quarter.
516.
Perhaps rental fleet capital expenditures in the corner inclusive of non-cash transfers from inventory totaled $247.4 million net rental fleet capital expenditures for the quarter over $299.
P. P D capex in this border.
$21 million or $24 million net sales at P. P N E.
Net cash provided by operating activities totaled 91.7 million quarter compared to 65.7 million in the second quarter of 2020 team free.
Free cash flow needs in order was 128 19 compared to free cash plan. He used to 63 million over the same period as a comparison.
The average age are around fleet on June 30th 2023 was 42.5 months down from 43.7 months in the first quarter of 2023 and.
And the average continued to compare favorably to the industry average clean age at 53 months.
517 planes are rental fleet size based on our original equipment costs on June 30th 2023 exceeded 2.6 billion and it was approximately $601.6 million or 30% larger than our fleet sizes, taking sneezing in the second quarter of 2022.
Average tolerant realization in the second quarter of 2023, with 46% compared to 48.9% in the prior quarter and 38.6% in the first quarter of 2023.
Glad 18 please.
Net dead on June 30th 2023 was approximately 1.3 billion up slightly from 1.2 billion on December 31st 2020 team. We concluded the second quarter with net leverage measure of two two times and changed from December 31st 2020 team, we have namely charities before 2020th.
And a 1.25 billion of senior unsecured Nate.
519 please.
Our liquidity position on June 30th 2023 titles $658.5 million, while excess availability under the Yankee L facility was approximately 1.6 billion up from 1.5 billion on December 31st 2022.
Ah minimum availability as defined by the ADL agreement remain 75 million and that that excess availability is the management each determine whether our screening X charged coverage is applicable and with our excess availability of 1.6 billion. We continue to have men covenant concerns.
Finally, we pay our regular quarterly dividend of 27, and a half cents per share common stock in the second quarter of 2023 Wild evidence are subject to board approval. It is our intent to continue to pay the dividend.
Slash 20 place.
In summary, we continue to demonstrate strong execution of are defined objectives and with our fleet at least see in branch locations at 30% and 19% respectively over the last year or financial metrics Hen praised significantly over this period.
They include income from operations in EBITDA, both of which were up over 30% and neck cash provided by operating activities, which was up approximately 40% with net income from continuing operations up almost 48%.
Several measures achieved record levels in the second quarter, while others are pricing new highs.
Warm starts added in the last 12 months, including six in the second quarter had been strategically located in high crime areas of the country and you have yet to reach their full financial potential.
As Brad stated earlier industry fundamentals remain sound are increasingly underpinned by growing backlog of major projects that are expected to add to the impressive nonresidential pass laws already in place.
We are accelerating our greatest capital expenditures and branch expansion plans because we are encouraged by these industry developments and at the top participate in our equipment rental industry as measured by annual revenues, we have a successful strategy for grades and the financial resources and determination to achieve.
Part of their success.
We're now ready to began to Q&A period, which you. Please provide instructions to our call participants and it's simple the key thank you.
Thank you.
I have a question and answer session.
To ask a question you know my purse started in the one on your Touchtone phone.
He was a a speaker phone where else can you. Please pick up your handset before pressing the keys.
Withdraw your question. Please first started them too.
First question comes from Steve around constantly.
Thompson I sore throat.
Huh.
Good morning, I have a few questions that revolve around the larger size and navy to start with.
Utilization down 300 to 400.
You over a year in each of the past two quarters should we expect the second half to show similar time utilization declines or could it be more pressured as capex is deployed.
Good morning, Steven the I appreciate the question and I think the answers we fully expect to see a seasonal increase we've started the week here just north of 70% utilization. So we've crept up a little bit since the Q2 average.
When we look over history and as we referred our second quarter was actually pretty typical when we look at a tenure window of time in in 2022 was anything but typical with extreme supply constraints. So you know we expect to see see a seasonal uptick we're not done we have not picked on utilization to.
A day, we will not have feet tomorrow, we will continue to get incremental improvement throughout the quarter now I wouldn't want to lead you to believe that we're gonna end back up at last year's physical utilization, that's just not possible ignores it practical under the circumstances, we've never achieve those levels before so you know as we're bringing in more capital where.
Very happy that we're going to see a typical seasonal trend continued incremental rental rate improvement and substantial fruit fleet growth is going to provide a lot of positive slogan for the business.
Okay helpful and this larger capex level, clearly meaningfully higher when do you sleep.
<unk> to be delivered in what I'm getting at is will this have much impact on 2023 results or a greater impact on 2024.
It certainly will have a greater impact on 2024, because we'll get a full your impact that's but but I don't want to lead you to believe that we're going to take the majority of the remaining guide capex in queue for that's not the case Q.
Q Q2, excuse me our second quarter was by far record, it's just been pretty traditional in our business that Q3 typically holds the record but the vast majority of your Capex comes in and Q2 and Q3 that will not change this year Ah jus to is going to be the the high level for gross capex for the year, but the majority.
City of what we will bring in for the remainder of the year will come in Q3.
And that's just that's typical business. So we're gonna get some impact in some benefit this year.
But of course, we will get you know regular full your impact next year.
Okay helpful. And then the last one for me on the <unk> on similar topics. It appears delivery times are improving from the Oems and is more rental companies can get a larger number of orders delivered over the next few quarters.
Like any incremental rape pressure in the second half of this year or early 2024, basically do you expect the right environment to stay as favorable as it has been.
Ah I fully expect it's going to remain as stable as it is today, we increased pricing seven tenths of a percent in Q1 sequentially I think we just reported 1.1%.
John do you have any comments on pricing kind of on a go forward basis, Yes, Steven only go forward basis, and we do expect more sequential right improvement in the third and fourth quarter now not at the same levels as last year, you know going back to last year, our third quarter sequential right improvements about 3.2%.
We do not expect to be that those same levels. When we do expect us more seasonal loved it from the second quarter and the Q3 [noise].
And then rounded out Q for you know, we're going to see that typical seasonal impact, but we are comfortable with consistent sequential right improvement for the next two quarters.
Excellent. Thank you.
Q and our next question comes from <unk> Harbor World Wells Fargo.
Hi, Good morning, guys. This is hilarious dubinsky on per cent. This morning.
Thanks for taking my questions. So I wanted to go back to the gross Capex raise is it a function of more availability equipment availability from the Oems or is it you know greater project activity.
Will the project activities absolutely there, we fundamentally wouldn't take more capex. So you know that we.
We have no concerns about the continuation of these emerging large projects and the continuation of art more traditional typical projects. So that fundamental basis, we've checked that box with a big Bowl check as it pertains to the the rays, Larry last year, we were forced to reduce our capex guidance Ah.
When a handful like them about three of our manager about.
About three of our manufacturers has a very large impact on our ability to secure enough product to support the Catholics got it again I'm speaking of 2022.
As we entered this year, we were very strategic with who we partnered with housing time the purchases as to ensure that this product was showing up on time, when we needed it and I've Gotta tell you I've been very pleased with our internal team.
Pleased with a manufacturer partners no one is letting us down there meeting expectations I wouldn't want to lead you to believe that they're calling us up and say we have more products do you want it. That's just not the case, we have decided to do was to ensure that we did not overstate our ability to bring into capex with the five to 550 now with.
Half a year behind us.
And knowing that these manufacturers can and will produce as expected we're comfortable with this 100 million dollar raise on both ends of that God and again the fundamentals of the market are there we're going to deploy this product.
Okay, great. Thank you for that and what type of fleet are you adding.
I guess, just what what what what is the point that you're at the additional fleet.
It's it's typical there there's nothing unique about the mix of products that have come in or will come in for the remainder of the year. It fit squarely into the typical percentiles of our current investment so nothing.
Nothing unique on a on a mixed standpoint.
Got it thanks, a lot guys appreciate it.
Thank you <unk>.
Thank you and our question today comes from Islands <unk>. Please go ahead.
Good morning, and very nice quarter, a few questions here first.
Gross profit in the southwest seems a bit below national average suspect it's due to a limited number of branches [laughter] can you talk about your plans to improve that gross profit in that territory and maybe expand to your branch count.
Alex I suspect you're speaking to the percent of gross profit we derive and that's just the that's a product of how big those particular locations may be it is not at all indicative of gross margin or the quality of revenues. It's just it's just more about the unocal basis obviously.
126 locations they vary in size of invested oeec.
Looking at her upper since that's representative but those locations perform very well.
Sorry about that and.
But can you also expand upon sort of some regional trends that you're seeing or identify some obvious outliers in either strength of utilization across the regions or gross profits or anything of that nature.
Yeah.
Great question and that's the beauty of the position. We're in there are no outliers right now I mean, you know if you want to if we want to get granular and talk about a single location in one particular geography that may be incrementally flattish or something like that I guess, we could we could get to that level, but when we look at these.
Aggregated groups, everyone is running strong utilization traditional utilization everyone is achieving right improvements every product isn't as achieving reagan improvements, which are leading to better returns.
Just a really nice picture across the board. So there is nothing specific to call out a strap across the board.
Great. Thank you.
Thank you.
Oh.
Vermont or if you'd like to ask a question. Please press start with an award.
Alright next question comes from Stanley <unk>. Please go ahead.
Hi, Good morning, everyone. Thank you for the question.
Uhm.
In terms of like the store locations you bumped it up a little bit on the low end kind of 12 and 15.
I would imagine you there's amount of legwork.
In in terms of real estate and things along those lines.
Should we expect a similar sort of an organic growth strategy into next year, you will be you have to make those commitment how should we think about that.
Yes daily good morning to you.
Facilities are the biggest hurdle, we have with entering the market I mean, it's facilities people and product.
With the manufacturer again to lead towns are far from normal most most manufacturer lease apps still kind of start with a six month window and expand from there with a few isolated exceptions people, we generally need about a six month window to onboard and trained people for these warm start location and facilities of the big.
You know as Leslie mentioned and are prepared comments, we're only going through the best markets. We plan to be for extended periods of time and so in some cases, we're actually doing bill to suits to ensure that we're properly located not just for 2022 or excuse me 2023, or 24, but decades to come sort of.
A broader question. The answer is yes, you should fully expect to see US continued to produce 10 to 15 locations on a go forward basis, and our ability to ramp that up if we saw left absolutely exists. These are these are low cost low risk very high returns and as you know with our 29 states foot.
And our current density we have tremendous opportunity to expand in adversity.
This is embarrassing, but I guess, maybe can you talk a little bit about the M&A environment, what you're seeing out there you go.
That's still kinda ranks.
Up there in terms of the organic growth opportunities.
That you're planning on.
It it does ranks.
Many times I think we ended up talking about M&A.
We simply will not overpay for an acquisition.
When we look at the quality of the fleet, maybe the age of the fleet. That's all part of our calculation for the investment.
I can tell you were working acquisition opportunities right now will be working.
Quarter in the next quarter, we have a team that's dedicated to that and I would love to point forward and say I expect to do 123 or four acquisitions a year, because we can digest that within our business with no disruption to our focus and it just adds to our growth, but the truth is they're going to have to be a little more opportunistic and some of the <unk>.
<unk>, we have seen out there. So our hope is to perfect wanted to talk to you in acquisitions, a year and when you see a new one you can though we paid a fair price and we feel good about it in the in the interim we ended up kind of frustrated at some of the levels we've seen pool.
<unk> run or poorly invested a foreign businesses transact that we're not going to participate at those levels.
And then lastly, just kind of a point of clarification in terms of the right piece I think you guys talked about sequential improvement kinda through the balance of the year I think I'll probably prior calls we talked about kind of maybe like a mid single digits sort of a price increase is that R. Pardon me on a year with your basis.
Still kind of where we think we might end up on the year could it be higher than that just curious kind of what the markets telling me right now.
Stanley I'll take that so you know as I said earlier, you know much tougher comps in the second half.
We feel comfortable with a 1% sequential increase for the third quarter and hopefully you know something after seasonality sets in something in the the mid single digits for the second or for the fourth quarter or I should say, but what you mean by the exit right.
I'm Gonna say, we are going to feel comfortable somewhere in that forest percentage range.
For an exit right for the full year, Yeah, Yeah, Let me, let me add to that if I could you know we started improving our rental rates in the second quarter of 2021.
Since the second quarter of 2021, we haven't cruised our rental rates and impressive 17% as we sit here today.
So I don't want to give anyone an indication that rates are softening because that's not the case.
You should expect to see us produce consistent incremental price improvements going forward that being said I feel very certain that we're leading the industry was 17 per cent price improvement since the second quarter of 2021, and there was a market out there that we could only chip away at so we're reaching a point where.
We're going to continue to get these incremental incremental gains as we have the last two quarters and you could try to calculate that exit right is John said Flores per cent may be the case, but that's.
One fantastic number when you're context against all the weight, where Kerry from 41, Yeah. No. Absolutely you guys have done a great job. Thank you so much for the time and best of luck.
Thank you statements.
Thank you. Our next question comes from Oliver We all were Bercor ISI. Please go ahead.
Hi, This is actually David Rason from Evercore.
Quick question. The time, you the comment about you're getting some traditional seasonal time you'd improvement from the end up last quarter to start this quarter.
Unless something happens dramatic in the fourth quarter.
It appears your time mute for the year.
Still gonna be well into the upper sixties.
Can you give us a sense of where that is versus history and.
The spirit of the question is.
At that level of time, you how was that influencing how you think about capex as a base case for next year.
Obviously always balance against how you're thinking about rapes and obviously I just heard the conversation about the exit right.
4%. So I'm just kind of curious is thinking bigger picture last year. Obviously every quarter time, you was above 70%, which is very unique.
Trying to get a sense of how you view a high sixties time you.
Going into next to your balancing capex versus right. Thank you yeah.
David Thank you for the question, we viewed positively I mean, obviously you know higher is always better.
A lot of folks focus on 2022 or have focused on 2022, and you know we look to do more of a 10 year window of time HED has traditionally ran the highest physical utilization in the industry are mix is not substantially changed over the last three or four years, we've waited ourselves a little more to earthmoving, which carries a low or physical utilization.
Had a higher dollar return it's also really a nice entry first product on the job. There are other attribute is easier to manage the backside in the fleet complexion, when you need to but if the question is are we going to be comfortable exiting this year at typical physical utilization levels and will that that.
And our enthusiasm for next year. It will not we're very enthusiastic as we sit here today and look forward and if we achieve the numbers, we fully expect to achieve for the balance of the year.
Unless there was a shift we're going to end of 2024 with momentum and enthusiasm in our Capex will match that.
Well, that's that's what I'm trying to turned balance at that level of time you.
It would appear at least base case, if you. If you said historically, if I'm exited the year where time you.
There's still that high and there is at least the general comfort level with demands at a minimum similar for.
For the next year is it fair to say you think you can raise capex next year and still get a little right with it.
Cause that's always the trade off to some degree right little little more art than science, when you're starting a year, but is that a fair way to represent that level of time, you and the thoughts on 24 get a little capex and a little right.
Yeah, what what I'm not comfortable doing is really talking about capex for 2024.
What I can tell us that our fundamentals exist here and that if we have that type of utilization that we expect or better and we continue to raise rental rates as we're clearly stating we'd expect to continue to do then we're going to invest in growing our rental business and when we get a narrow window of time will start to talk about capex for 2024.
Yeah.
I I appreciate that thank you so much for the question.
Thank you.
Thank you I'm gonna reasons that I wanted to conclude your question and answer session Alright, Let's turn the conference sarcoma transferring pretty close in Vermont.
Okay, well and will conclude today's call and we appreciate everyone taking the time to join US today. Your continued interest in Asia neat. We look forward to updating you again and Rocco. We appreciate your assistance today good day everyone.
Thank you Sir This concludes today's conference call. Thank you all for coming to in today's presentation.
I'll just go out tomorrow as well have a wonderful day.