Q2 2024 H&E Equipment Services Inc Earnings Call
Good morning and welcome to the H&E Equipment Services Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad.
Operator: for the Earnings Conference Call. All participants will be in listen-only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead.
After today's presentation, there will be an opportunity to ask questions.
To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.
Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead.
Jeffrey L. Chastain: Thank you, operator, and good morning. Welcome to everyone on today's call to review our second quarter 2024 financial performance. A press release following our results for the quarter was issued earlier today and can be found, along with all supporting statements and schedules, on the H&E website, www.he-equipment.com. A slide presentation will accompany today's discussion and is also posted on our website under the Investor Relations tab in Events and Presentations. On slide two, you'll see that joining me on today's call is Brad Barber, Chief Executive Officer; John Engquist, President and Chief Operating Officer; and Leslie Magee, Chief Financial Officer and Corporate Secretary.
Jeffrey L. Chastain: Thank you, operator, and good morning. Welcome to everyone on today's call to review our second quarter 2024 financial performance.
Jeffrey L. Chastain: A press release following our results for the quarter was issued earlier today and can be found, along with all supporting statements and schedules, on the H&E website. That's www.he-equipment.com.
Jeffrey L. Chastain: A slide presentation will accompany today's discussion and is also posted on our website under the Investor Relations tab in Events and Presentations.
Speaker Change: On slide two, you'll see joining me on today's call is Brad Barber, Chief Executive Officer, John Engquist, President and Chief Operating Officer, and Leslie Magee, Chief Financial Officer and Corporate Secretary.
Jeffrey L. Chastain: Brad will begin this morning's review, but before I turn the call over to him, please proceed to slide 3 as I 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 other 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.
Speaker Change: Brad will begin this morning's review, but before I turn the call over to him, please proceed to slide 3 as I remind you that today's call contains forward-looking statements within the meaning of the Federal Securities Laws.
Jeffrey L. Chastain: A summary of these uncertainties is included in the Safe Harbor Statement contained in the company's slide presentation for today's call and includes the risks described in 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 in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.
Speaker Change: Statements about our beliefs and expectations and statements containing words such as may, could, believe, expect, anticipate, and other similar expressions constitute forward-looking statements.
Speaker Change: 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.
Speaker Change: A summary of these uncertainties is included in the Safe Harbor Statement contained in the company's slide presentation for today's call and includes the risks described in the risk factors in the company's annual report on Form 10-K and other periodic reports.
Speaker Change: Investors, potential investors, and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements.
Speaker Change: and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.
Jeffrey L. Chastain: Also, we are referencing non-GAAP financial measures during today's call. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation as supporting schedules to our press release and in the accompanying materials to today's presentation materials. With the initial details of our call complete, I'll now turn the call over to Brad Barber, Chief Executive Officer of H&E Equipment. Thank you, Jeff. Good
Speaker Change: Also, we are referencing non-GAAP financial measures during today's call. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation as supporting schedules to our press release.
Speaker Change: and in the appendix to today's presentation materials.
Bradley W. Barber: With the initial details of our call complete, I'll now turn the call over to Brad Barber, Chief Executive Officer of H&E Equipment.
Bradley W. Barber: Thank you, Jeff. Good morning, and welcome to our review of the second quarter 2024 financial results. As always, we appreciate your continued interest in H&E. Please proceed to slide four.
Bradley W. Barber: Thank you, Jeff. Good morning and welcome to our review of second quarter 2024 financial results. As always, we appreciate your continued interest in H&E.
Bradley W. Barber: The further expansion of our branch network was a highlight in the second quarter, as we demonstrated significant year-over-year growth in our branch count and increased our U.S. penetration to 31 states. The expansion served as an important catalyst for growth in the quarter, helping to offset a more challenging business environment as lower non-residential spending led to declines in key fundamentals. We experienced growth across most financial measures, but at a decreased rate of improvement compared to the second quarter of 2023.
Speaker Change: Proceed to slide four.
Speaker Change: The further expansion of our branch network was a highlight in the second quarter, as we demonstrated significant year-over-year growth in our branch count and increased our U.S. penetration to 31 states.
Speaker Change: The expansion served as an important catalyst for growth in the quarter, helping to offset a more challenging business environment as lower non-residential spending led to declines in key fundamentals.
Speaker Change: We experienced growth across most financial measures, but at a decreased rate of improvement compared to the second quarter of 2023. I'll expand my comments on key financial metrics and offer some observations on the performance of our rental business.
Bradley W. Barber: I'll expand my comments on key financial metrics and offer some observations on the performance of our rental business. Also, an update on industry developments and opportunities is in order, given the transitory state of the construction market. I will close with a quick review of our progress to date on our expansion objectives and what lies ahead as we continue to demonstrate one of the industry's most successful growth profiles. Lastly, we'll follow with a more detailed review of our second quarter financial performance, and then we'll be happy to address any questions. Lot 6, please.
Speaker Change: Also, an update on the industry developments and opportunities is in order, given the transitory state of construction markets.
Speaker Change: I will close with a quick review of our progress to date on our expansion objectives and what lies ahead as we continue to demonstrate one of the industry's most successful profiles.
Speaker Change: Lastly, we'll follow up with a more detailed review of our second quarter financial performance and then we'll be happy to address any questions.
Bradley W. Barber: Second quarter results were generally mixed. Of note, total revenues increased 4.5%, with the improvement partially offset by an 11.9% decline in the sale of rental equipment. Margin on the sale of our rental equipment in the quarter remained near record levels. Total equipment rental revenues increased 7.2 percent, reflecting a modest rise in rental rates, with more impactful support from expansion initiatives, which I'll discuss in greater detail in a moment. On a trailing 12-month basis, our equipment rental revenues improved 14.6 percent compared to the trailing 12 months ending June 30, 2023. However, margins for both the second quarter and the trailing 12 months were slightly lower.
Speaker Change: Last six points.
Speaker Change: Second quarter results were generally mixed. Of note, total revenues increased 4.5% with the improvement partially offset by an 11.9% decline in the sale of rental equipment.
Speaker Change: Margin on the sale of our rental equipment in the quarter remain near record levels.
Speaker Change: Total equipment rental revenues increased 7.2%, reflecting a modest rise in rental rates, with a more impactful support from expansion initiatives, which I'll discuss in greater detail in a moment.
Speaker Change: On a trailing 12-month basis, our equipment rental revenues improved 14.6% compared to the trailing 12 months ending June 30, 2023.
Bradley W. Barber: Finally, our fleet size, as measured by original equipment costs, increased 10.7%, representing the lowest reported year-over-year growth since the fourth quarter of 2021, a two-and-a-half-year period when we expanded our fleet by more than 55%. 5-7, please.
Speaker Change: Margins for both the second quarter and Trailer 12-1s were slightly lower.
Speaker Change: Finally, our fleet size, as measured by original equipment costs, increased to 10.7%, representing the lowest reported year-over-year growth since the fourth quarter of 2021, a two-and-a-half year period when we expanded our fleet by more than 55%.
Speaker Change: Slide 7, please.
Speaker Change: Turning to highlights from our rental operations, revenues in the second quarter improved 6.5% compared to the year ago quarter, with margins of 51% compared to 51.8% over the same period of comparison.
Speaker Change: On a trailing 12-month basis ending June 30, 2024, rental revenues were 14.4% higher.
Speaker Change: The growth in revenues demonstrated the significant expansion of our branch network and continued gains from rental rates.
Bradley W. Barber: Turning to highlights from our rental operations, revenues in the second quarter improved 6.5% compared to the year-ago quarter, with margins of 51% compared to 51.8% over the same period of comparison. On a trailing 12-month basis ending June 30, 2024, rental revenues were 14.4% higher. The growth in revenues demonstrated the significant expansion of our branch network and continued gains from rental rates. Since the close of the second quarter in 2023, we opened 15 new locations through our Accelerated New Location Program, including seven openings through the first six months of 2024. An eighth location was opened following the close of the second quarter.
Speaker Change: Since the close of the second quarter in 2023, we opened 15 new locations through our Accelerated New Location Program, including seven openings through the first six months of 2024.
Bradley W. Barber: Also, since November 2023, eight additional branches were added, resulting from three separate acquisitions. Our focus on expansion is an ongoing, multi-year effort positioning our company in attractive geographic regions with excellent opportunity for long-term growth. Rental rates in the quarter improved 1.9% compared to the year-ago quarter, with a decline of 0.1% on a sequential quarterly basis.
Speaker Change: An eighth location was opened following the close of the second quarter. Also, since November 2023, eight additional branches were added, resulting from three separate acquisitions.
Speaker Change: Our focus on expansion is an ongoing, multi-year effort positioning our company in attractive geographic regions with excellent opportunity for long-term growth.
Speaker Change: Rental rates in the quarter improved 1.9% compared to the year ago quarter, with a decline of 0.1% on a sequential quarterly basis.
Bradley W. Barber: Although year-over-year comparisons are becoming increasingly difficult, rate appreciation over the preceding 24 months, ending June 30, 2024, was 7.1%. Physical fleet utilization in the second quarter averaged 66.4%, a decline of 290 basis points compared to the year-ago quarter, the decline largely related to a reduction in small and medium-sized construction projects and a slower pace of new project start. The second quarter measure represents a 280th basis point improvement from physical utilization recorded in the first quarter of 2024.
Speaker Change: Although year-over-year comparisons are becoming increasingly difficult, rate appreciation over the preceding 24 months, ending June 30, 2024, was 7.1%.
Speaker Change: Physical fleet utilization in the second quarter averaged 66.4%, a decline of 290 basis points compared to the year-ago quarter, the decline largely related to a reduction in small and medium-sized construction projects, and a slower pace of new project starts.
Speaker Change: The second quarter measure represents a 280th basis point improvement from physical utilization recorded in the first quarter of 2024.
Bradley W. Barber: Finally, dollar utilization in the second quarter was 38.6% compared to 40.6% in the second quarter of 2023, with the lower outcome due largely to a decline in physical utilization. Next, I want to address our view of current industry conditions and growing opportunities as we navigate the second half of 2024. We maintain our view of a more moderate pace for construction spending and projected start.
Speaker Change: Finally, dollar utilization in the second quarter was 38.6% compared to 40.6% in the second quarter of 2023, with the lower outcome due largely to a decline in physical utilization.
Speaker Change: Next, I want to address our view of current industry conditions and growing opportunities as we navigate the second half of 2024.
Speaker Change: [inaudible]
Speaker Change: We maintain our view of a more moderate pace for construction spending and projected starts.
Bradley W. Barber: The shift in the business cycle, which we addressed during our last quarterly update, is indicative of an industry that is transitioning to a more normalized business environment compared to the years of 2022 and 2023. Recall, during those years, we observed a period of exceptionally strong growth in construction spending, resulting in elevated industry fundamentals. The sharp acceleration in spending occurred during a period of extremely tight equipment availability, aggravated by material disruption in supply chains.
Speaker Change: The shift in the business cycle, which we addressed during our last quarterly update, is indicative of an industry that is transitioning to a more normalized business environment compared to the years of 2022 and 2023.
Speaker Change: Recall, during those years, we observed a period of exceptionally strong growth in construction spending, resulting in elevated industry fundamentals.
Speaker Change: The sharp acceleration in spending occurred during a period of extremely tight equipment availability, aggravated by material disruption and supply chains.
Bradley W. Barber: In 2024, supply chains will have recovered, leading to an ample supply of most equipment lines, while persistently elevated interest rates and more stringent lending standards continue to have an adverse effect on project activity, especially smaller projects, which are a component of local project opportunity. Despite this industry backdrop, we are encouraged by the continued expansion of MAGA project activity across numerous locations in the U.S., representing a source of protracted demand for our equipment.
Bradley W. Barber: Our participation in these multi-year projects continues to grow as our branch expansion efforts lead to increased density and scale. According to Dodd Construction Network, NPEC, 342 projects with a projected value of $400 million or greater are planned or in progress across our 31-state branch network. Approximately 68% of these projects fall within our Gulf Coast, Southeast, and Mid-Atlantic regions, which together represent 65% of our current branch count.
Speaker Change: Our participation in these multi-year projects continues to grow as our branch expansion efforts lead to increased density and scale.
Speaker Change: According to Dodd Construction Network, in fact, 342 projects with a projected value of $400 million or greater are planned or in progress in our 31-state branch network.
Speaker Change: Approximately 68% of these projects fall within our Gulf Coast, Southeast, and Mid-Atlantic regions, which together represent 65% of our current branch count.
Bradley W. Barber: Megaprojects are a meaningful growth opportunity for H&E and our industry, and given their size and long duration, they provide a more stable base of demand in support of key industry fundamentals. In addition to growth in megaprojects, further support is expected from infrastructure spending, with increased funding expected to lead greater project activity. With project expansion expected from both of these major sources of spending, you can see why the latest forecast of 2024 construction spending from DOJ's construction data concludes an increased level of spending compared to the year-ago level.
Speaker Change: Megaprojects are a meaningful growth opportunity for H&E and our industry, and given their size and long duration, they provide a more stable base of demand and support of key industry fundamentals.
Speaker Change: With project expansion expected from both of these major sources of spending, you can see why the latest forecast of 2024 construction spending from DOJ's construction data concludes an increased level of spending compared to the year-ago levels.
Bradley W. Barber: Also, the DMI, which is DOJ's measure of the value of non-residential projects going into planning, has been flat or increased for the first six months of 2024, an encouraging indication of growth and project activity for 2025 and beyond. We are confident in the prospects for our industry and therefore remain committed to our growth objectives. Slide 9, please.
Speaker Change: Also, the DMI, which is DODGE's measure of the value of non-residential projects going into planning, has been flat or increased for the first six months of 2024, an encouraging indication for growth in project activity for 2025 and beyond.
Speaker Change: We are confident in the prospects for our industry and therefore remain committed to our growth objectives.
Bradley W. Barber: We continued to successfully execute our growth strategy with near record achievement in the second quarter. We opened six branch locations during the quarter, which followed a single branch opening in the first quarter, enhancing our presence in the southeast, gulf coast, and mid-Atlantic regions of the U.S. These areas represent attractive geographies with increased construction activity and excellent long-term potential. Also, the completion of our latest acquisition in May 2024 resulted in the addition of four branches in northern and central Montana, increasing our presence in the state to six locations while improving our exposure to a diverse set of project opportunities.
Speaker Change: Slide 9, please.
Speaker Change: These areas represent attractive geographies with increased construction activity and excellent long-term potential.
Speaker Change: Also, the completion of our latest acquisition in May 2024 resulted in the addition of four branches in northern and central Montana, increasing our presence in the state to six locations while improving our exposure to a diverse set of project opportunities.
Speaker Change: Our targeted goal of 12 to 15 new branch openings, excluding acquired branches, is well within reach as we move into the second half of the year.
Bradley W. Barber: We concluded the second quarter of 2024 with 149 branches across 31 states, representing a growth of approximately 45% in the last 36 months ending June 30, 2024. Our targeted goal of 12 to 15 new branch openings, excluding acquired branches, is well within reach as we move into the second half of the year. Since the close of the second quarter, we announced the opening of a location in Idaho Falls, Idaho, adding to our presence in the Internet Mountain region and increasing our total number of new locations year-to-date to eight.
Leslie S. Magee: Our 2024 growth fleet expenditures, which we revised last quarter, remain in a range of $350 million to $400 million as we leverage our record 2023 expenditures and our young fleet age to meet prevailing market demand. In closing, H&E has made tremendous strides over the last three years, growing our presence across the U.S. while establishing a solid record of achievement in supporting improving financial performance and value creation. We're a pure-play rental company that has achieved an industry-leading 45% increase in branch growth since mid-2021, establishing a growing geographic presence in established and emerging regions of opportunity.
Speaker Change: Our 2024 growth fleet expenditures, which we revised last quarter, remain in a range of $350 million to $400 million, as we leverage our record 2023 expenditures and our young fleet age to meet prevailing market demand.
Speaker Change: We are a pure-play rental company that has achieved an industry-leading 45% increase in branch growth since mid-2021, establishing a growing geographic presence in established and emerging regions of opportunity.
Leslie S. Magee: With this expanded presence comes improved access to the rising megaproject activity, encompassing data centers, solar farm installations, advanced manufacturing projects, and LNG export facilities, to name a few. Our young fleet age and outstanding mix of equipment are important attributes of our company, as is our strong execution at the operating level, including advanced IT systems that cover the rental life cycle while facilitating the needs of our customers. Expanding these other elements of our operating profile remains a core focus of our management as we position H&E to succeed in today's business environment as well as for the next leg of the construction cycle. Now on to slide 10, and I'm going to turn the call over to Leslie, who will discuss our second quarter financial performance in greater detail. Leslie
Speaker Change: With this expanded presence comes improving access to the rising megaproject activity encompassing data centers, solar farm installations, advanced manufacturing projects, and LNG export facilities to name a few.
Speaker Change: Our young fleet age and outstanding mix of equipment are important attributes of our company, as is our strong execution at the operating level, including advanced IT systems that cover the rental lifecycle while facilitating the needs of our customers.
Speaker Change: Expanding these other elements of our operating profile remains a core focus of our management as we position H&E to succeed in today's business environment as well as for the next leg of the construction cycle.
Speaker Change: Now on to slide 10, and I'm going to turn the call over to Leslie who will discuss our second quarter financial performance in greater detail. Leslie. Thank you.
Leslie S. Magee: Thank you, Brad. Good morning and welcome, everyone.
Leslie S. Magee: Thank you, Brad. Good morning and welcome, everyone. I'll begin this morning with slide 11 and a review of second quarter revenues, gross profit, and profit margins.
Leslie S. Magee: I'll begin this morning with slide 11 and a review of second quarter revenues, gross profit, and profit margins. Revenues in the second quarter totaled $376.3 million, an improvement of $16.1 million or 4.5% compared to the second quarter of 2023. The growth was substantially due to higher rental revenues and sales of new equipment. Rental revenues grew $16.8 million, or 6.5%, to $275.5 million compared to $258.7 million in the year-ago quarter. Further expansion of our branch network was one of the several factors contributing to the improved outcome.
Leslie S. Magee: Revenues in the second quarter total $376.3 million, an improvement of $16.1 million or 4.5% compared to the second quarter of 2023.
Leslie S. Magee: The growth was substantially due to higher rental revenues and sales of new equipment.
Leslie S. Magee: Rental revenues grew $16.8 million or 6.5% to $275.5 million compared to $258.7 million in the year-ago quarter.
Leslie S. Magee: Further expansion of our branch network was one of the several factors contributing to the improved outcome.
Leslie S. Magee: Since the close of the second quarter of 2023, our branch count increased 18.3%, or 23 locations, with 15 of the locations a product of our warm start strategy and eight other locations resulting from the closing of three acquisitions. Also, our Fleet Original Equipment Cost, or OEC, increased $279 million, or 10.7%, over the same period of comparison, concluding the second quarter of 2024 at approximately $2.9 billion. Finally, rental rates in the quarter were 1.9% better than the year-ago quarter, while declining 0.1% on a sequential quarterly basis.
Leslie S. Magee: Since the close of the second quarter of 2023, our branch count increased 18.3 percent, or 23 locations, with 15 of the locations a product of our Warm Start strategy and 8 other locations resulting from the closing of 3 acquisitions.
Leslie S. Magee: Also, our Fleet Original Equipment Cost, or OEC, increased $279 million, or 10.7%, over the same period of comparison, concluding the second quarter of 2024 at approximately $2.9 billion.
Leslie S. Magee: Finally, rental rates in the quarter were 1.9% better than the year-ago quarter while declining 0.1% on a sequential quarterly basis.
Leslie S. Magee: Partially offsetting revenues in the quarter was lower physical utilization, which averaged 66.4% or 290 basis points below the year-ago outcome. On a sequential quarterly basis, average physical utilization improved by 280 basis points. Revenues from the sale of new equipment increased 20.5% to $10.7 million following a pickup in the sales of aerial work platforms and material handling equipment.
Leslie S. Magee: Partially offsetting revenues in the quarter was lower physical utilization, which averaged 66.4%, or 290 basis points below the year-agum outcome.
Leslie S. Magee: On a sequential quarterly basis, average physical utilization improved 280 basis points.
Leslie S. Magee: Revenues from the sale of new equipment increased 20.5% to $10.7 million following a pickup in the sales of aerial work platforms and material handling equipment.
Leslie S. Magee: Sales of rental equipment declined 11.9% compared to the year-ago quarter to $34.9 million. The result, which was 27% lower on a sequential quarterly basis, reflects an alignment of our fleet management strategy with prevailing industry fundamentals. The average age of equipment sold in a quarter was an estimated 71 months.
Leslie S. Magee: Sales of rental equipment declined 11.9% compared to the year ago, quartered to $34.9 million.
Leslie S. Magee: The result, which was 27% lower on a sequential quarterly basis, reflects an alignment of our fleet management strategy with prevailing industry fundamentals.
Leslie S. Magee: The average age of equipment sold in a quarter was an estimated 71 months.
Leslie S. Magee: Gross profit in the second quarter totaled $171.3 million, up 1.7% from the second quarter of 2023. The gross margin of 45.5% was 120 basis points below the year-ago result, as lower margins on rentals and an unfavorable revenue mix were partially offset by higher margins on sales of rental equipment. In the second quarter of 2024, total equipment rental margins were 45.5%, compared to 46.7%, with rental margins of 51%, compared to 51.8%. Finally, margins on sales of rental equipment remained elevated at 62.4% compared to 59.1%, while margins on sales of new equipment improved to 16.9% compared to 14.9%. Slide 12, please.
Leslie S. Magee: Gross profit in the second quarter totaled $171.3 million, up 1.7% from the second quarter in 2023.
Leslie S. Magee: The gross margin of 45.5% was 120 basis points below the year-ago result, as lower margins on rentals and an unfavorable revenue mix were partially offset by higher margins on sales of rental equipment.
Leslie S. Magee: In the second quarter of 2024, total equipment rental margins were 45.5% compared to 46.7% with rental margins of 51% compared to 51.8%.
Leslie S. Magee: Finally, margins on sales of rental equipment remained elevated at 62.4% compared to 59.1%, while margins on sales of new equipment improved to 16.9% compared to 14.9%.
Leslie S. Magee: Income from operations of $62.8 million was $6.7 million lower in the second quarter compared to the same quarter of 2023. The 9.7% decrease resulted in a margin of 16.7% of revenues in the second quarter compared to 19.3% in the year-ago quarter, with the lower margin due primarily to higher SG&A expense, lower rental margins, and an unfavorable revenue mix. The decline was partially offset by higher gross margins on sales of rental equipment.
Leslie S. Magee: Slide 12, please.
Leslie S. Magee: Income from operations of $62.8 million, with $6.7 million lower in the second quarter compared to the same quarter of 2023.
Leslie S. Magee: The 9.7% decrease resulted in a margin of 16.7% of revenues in the second quarter compared to 19.3% in the year-ago quarter, with the lower margin due primarily to higher SG&A expense, lower rental margins, and an unfavorable revenue mix.
Leslie S. Magee: The decline was partially offset by higher gross margins on sales of rental equipment.
Leslie S. Magee: Proceed to slide 13, please. Net income in the second quarter was $33.3 million, or $0.91 per deleted share, compared to net income of $41.2 million, or $1.14 per deleted share, in the second quarter of 2023. Our effective income tax rate in the second quarter was 27.8%, compared to 26.3% for the same quarter in 2023. Proceed to slide 14, please.
Leslie S. Magee: Proceed to slide 13, please.
Leslie S. Magee: Net income in the second quarter was $33.3 million, or $0.91 per diluted share, compared to net income of $41.2 million, or $1.14 per diluted share in the second quarter of 2023.
Leslie S. Magee: Our effective income tax rate in the second quarter was 27.8% compared to 26.3% for the same quarter in 2023.
Leslie S. Magee: Adjusted EBITDA in the second quarter increased 2.8 percent to $173.2 million, compared to $168.6 million in the year-ago quarter. Our adjusted EBITDA margin in the second quarter was 46 percent, compared to 46.8 percent in the year-ago quarter. Higher SG&A expenses were partially offset by an increase in gain on sales of PP&E and exceptionally high margins on sales of rental equipment. Next slide, 15, please.
Leslie S. Magee: Proceed to slide 14, please.
Leslie S. Magee: Adjusted EBITDA in the second quarter increased 2.8% to $173.2 million compared to $168.6 million in the year ago quarter.
Leslie S. Magee: Our adjusted EBITDA margin in the second quarter was 46%, compared to 46.8% in the year-ago quarter. Higher SG&A expenses were partially offset by an increase in gain on sales of PP&E and exceptionally high margins on sale of rental equipment.
Leslie S. Magee: ST&A expense in the second quarter totaled $111.8 million, or 12.7% greater than $99.3 million in the year-ago quarter. The increase was largely due to our steady growth initiatives, with 23 branches open since the close of the second quarter of 2023, contributing to increased employee salaries, wages, payroll taxes, and other benefits, and higher depreciation and amortization expense. Also, higher expenses relating to facilities, liability, insurance, and professional fees contributed to the year-over-year increase. SG&A in the second quarter was 29.7% of revenues compared to 27.6% in the second quarter of 2023 and included $10.8 million of costs associated with our branch expansion and acquisition activity. 516, please.
Leslie S. Magee: Next slide, 15 please.
Leslie S. Magee: ST&A expense in the second quarter totaled $111.8 million or 12.7% greater than $99.3 million in the year-ago quarter. The increase was largely due to our steady growth initiatives, with 23 branches open since the close of the second quarter of 2023.
Leslie S. Magee: contributing to increased employee salaries, wages, payroll taxes, and other benefits and higher depreciation and amortization expense.
Leslie S. Magee: Also, higher expenses relating to facilities, liability, insurance, and professional fees contributed to the year-over-year increase.
Leslie S. Magee: SG&A in the second quarter was 29.7% of revenues compared to 27.6% in the second quarter of 2023 and included $10.8 million of costs associated with our branch expansion and acquisition activities.
Leslie S. Magee: Gross rental fleet capital expenditures in the second quarter totaled $122.1 million, with net rental fleet capital expenditures of $87.2 million. For the six months ended June 30, 2024, these figures were $196.5 million and $113.8 million, respectively. In addition, gross PP&E capital expenditures in the second quarter were $37.9 million, or $34.1 million net of sales of PP&E. And for the six months ended June 30, 2024, gross PP&E capital expenditures totaled $77.1 million, with net PP&E capital expenditures of $71.5 million.
Leslie S. Magee: Slide 16 please.
Leslie S. Magee: Gross rental fleet capital expenditures in the second quarter totaled $122.1 million, with net rental fleet capital expenditures of $87.2 million.
Leslie S. Magee: For the six months ended June 30, 2024, these figures were $196.5 million and $113.8 million, respectively.
Leslie S. Magee: In addition, gross PP&E capital expenditures in the second order were $37.9 million or $34.1 million net of sales of PP&E.
Leslie S. Magee: And for the six months ended June 30, 2024, gross PP&E capital expenditures totaled $77.1 million, with net PP&E capital expenditures of $71.5 million.
Leslie S. Magee: Free cash flow used was $82 million compared to free cash flow used of $134 million over the same period of comparison, and excluding acquisitions, adjusted free cash flow for the six months ended June 30, 2024 was $75.7 million. Slide 17, please. Based on original equipment cost, our fleet size on June 30, 2024 was approximately $2.9 billion, an increase of $279 million or 10.7% compared to our OEC on June 30, 2023, and includes approximately $109 million in fleet acquisitions.
Leslie S. Magee: Free cash flow used was $82 million compared to free cash flow used of $134 million over the same period of comparison, and excluding acquisitions, adjusted free cash flow for the six-month end of June 30, 2024 was $75.7 million.
Leslie S. Magee: Slide 17, please.
Leslie S. Magee: Based on original equipment costs, our fleet size on June 30, 2024 was approximately $2.9 billion, an increase of $279 million, or 10.7% compared to our OEC on June 30, 2023.
Leslie S. Magee: We close the second quarter with an average fleet age of 40 months compared to an industry average age of 48.1 months. Average dollar utilization in the second quarter of 2024 was 38.6% compared to 40.6% in the year-ago quarter. As Brad previously noted, the decline was due primarily to lower physical utilization.
Leslie S. Magee: and includes approximately $109 million in fleet acquired. We closed the second quarter with an average fleet age of 40 months compared to an industry average age of 48.1 months.
Leslie S. Magee: Average dollar utilization in the second quarter of 2024 was 38.6% compared to 40.6% in the year ago quarter.
Leslie S. Magee: As Brad previously noted, the decline was due primarily to lower physical utilization.
Leslie S. Magee: The measure was up 160 basis points on a sequential quarterly basis. Slide 18, please. A review of the balance sheet reveals the continuation of a solid capital position, including a net leverage ratio of 2.2 times, which remains well within our target range of 2 to 3 times, and no debt maturities before December 2028 on our $1.25 billion of senior unsecured notes in our senior credit facility. Slide 19, please. Finally, we closed the second quarter with liquidity of $459 million, while excess availability under the ABL facility was approximately $1.7 billion, compared to $1.8 billion on December 31, 2023.
Speaker Change: The measure was up 160 basis points on a sequential quarterly basis.
Speaker Change: Slide 18, please.
Speaker Change: A review of the balance sheet reveals the continuation of a solid capital position, including net leverage ratio of 2.2 times, which remains well within our target range of 2 to 3 times,
Speaker Change: and no debt maturities before December 2028 on our $1.25 billion of senior unsecured notes in our Senior Credit Facility.
Speaker Change: Slide 19, please.
Speaker Change: Finally, we closed the second quarter with liquidity of $459 million while excess availability under the ABL facility was approximately $1.7 billion compared to $1.8 billion on December 31, 2023.
Leslie S. Magee: Our minimum availability, as defined by the ABL agreement, remains $75 million, and with our excess availability of $1.7 billion, we remain free of any covenant concerns. And finally, we paid our regular quarterly dividend of $0.275 per share of common stock in the second quarter of 2024. And while dividends are subject to board approval, it is our intent to continue to pay the dividend. Moving to slide 20, please.
Speaker Change: Our minimum availability, as defined by the ABL agreement, remains $75 million. And with our excess availability of $1.7 billion, we remain free of any covenant concerns.
Speaker Change: And finally, we paid our regular quarterly dividend of $.27.50 per share of common stock in the second quarter of 2024. And while dividends are subject to board approval, it is our intent to continue to pay the dividend.
Operator: And to conclude, I confidently say that H&E will be a stronger company in 2024, possessing greater geographic reach, a larger, more diverse fleet, and a solid capital structure and an experienced management team accustomed to managing a pivot in the business cycle. With these essential attributes in place, we move ahead in 2024, continuing our focus on the expansion of our geographic footprint, establishing increased scale in regions where construction spending and growth trends are exceptional.
Speaker Change: Moving to slide 20 please.
Speaker Change: And to conclude, I confidently say that H&E is a stronger company in 2024, possessing greater geographic reach, a larger, more diverse fleet, and a solid capital structure, and an experienced management team accustomed to managing a pivot in the business cycle.
Speaker Change: With these essential attributes in place, we move ahead in 2024, continuing our focus on the expansion of our geographic footprint, establishing increased scale in regions where construction spending and growth trends are exceptional.
Operator: With 150 branches currently in operation, we intend to grow our participation in a multi-year mega-project opportunity, which, as Brad noted, has an expanding presence across our 31 state networks. Also, our previously announced decision to reduce our 2024 gross fleet expenditures, while leveraging both our record spending over the past two years and our young fleet age, positions the company for meaningful free cash flow generation in 2024 when adjusted for transactions. When combined with available capital resources, we possess ample liquidity to pursue additional expansion opportunities in an industry with a 10% year-to-year growth expectation in 2024, according to Dodge Construction Network. Operator, we are now ready to begin the Q&A period. Please provide instruction.
Speaker Change: With 150 branches currently in operation, we intend to grow our participation in the multi-year megaproject opportunity, which as Brad noted, has an expanding presence across our 31-state network.
Speaker Change: Also, our previously announced decision to reduce our 2024 gross fleet expenditures, while leveraging both our record spending over the past two years and our young fleet age, positions the company for meaningful free cash flow generation in 2024 when adjusted for transactions.
Speaker Change: When combined with available capital resources, we possess ample liquidity to pursue additional expansion opportunities in an industry with a 10% year-over-year growth expectation in 2024, according to Dodge Construction Networks.
Speaker Change: Operator, we are now ready to begin the Q&A period. Please provide instructions.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Tim Thein with Raymond James. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Tim Thine with Raymond James. Please go ahead.
Timothy W. Thein: Great. Thank you. Good morning.
Tim Thine: Great, thank you, good morning. I had a, I guess the first question was just on the rate environment and how
Timothy W. Thein: I had a, I guess the first question was just on the rate environment and how, if you think about, relative to your expectations, how things have transpired, obviously, you have responded in terms of, back to the last quarter, in terms of resetting your CapEx outlook. I'm just curious how you've seen the industry as a whole, you know, kind of respond and accordingly, so it's basically looking back in terms of how rates perform relative to your expectations and how you're expecting that to play out as we look to the balance of the year. Again, we'll start again on rental rates. Thanks.
Tim Thine: if you think about, I guess, relative to your expectations.
Speaker Change: how things have transpired. Obviously you have responded in terms of...
Speaker Change: back to the last quarter in terms of resetting your...
Speaker Change: your CapEx.
Speaker Change: Outlook. I'm just curious how...
Speaker Change: how you've seen the industry as a whole, you know, kind of respond and...
Speaker Change: And accordingly, so it's basically looking back in terms of how rates perform relative to your expectations and how you're expecting that to play out as we look through the balance of the year. And again, we'll start again on rental rates. Thanks.
Bradley W. Barber: Thank you, Tim, and good morning. Rail rates performed basically as expected. Our anticipation has been that there was an opportunity for them to continue to very incrementally improve, potentially being flat or slightly down 0.1% behind 0.02% in Q1 and 0.01% this quarter. So we accept rates where they are. Our utilization was slightly disappointing. We hoped that we would see a little bit more improvement in physical utilization within the quarter than we did.
Speaker Change: Thank you, Tim, and good morning. Rental rates performed, you know, basically as expected. Our anticipation has been that there was an opportunity for them to continue to very incrementally improve.
Speaker Change: potentially be flat or slightly down.
Speaker Change: You know, I'm 0.1% behind, 0.02% excuse me, in Q1 and 0.01 this quarter.
Speaker Change: So, you know, we accept rates where they are. Our utilization was slightly disappointing. I mean, we hoped that we would see a little bit more improvement in physical utilization within the core than we did. With that as a backdrop, not surprised by rates in the least.
Bradley W. Barber: With that as a backdrop, I'm not surprised by rates in the least. On a go-forward basis, as we're continuing to expand our presence on megaprojects on a weekly basis, I expect rates to come under more pressure. Now, I want to be clear, I don't expect any grand rate decreases on a go-forward basis, but I think the likelihood of rates decreasing on a sequential basis going forward absolutely exists, not because we're discounting at all in our local markets for the small and medium-sized work that we continue to participate in, just simply due to the weighting that we're starting to build up with megaprojects.
Speaker Change: on a go-forward basis as we're continuing to expand our presence on megaprojects on a weekly basis.
Speaker Change: I expect rates to come under more pressure. I want to be clear, I don't expect any grand rate decreases on a go-forward basis, but I think the likelihood for rates to decrease on a sequential basis
Speaker Change: going forward absolutely exist, not because we're discounting at all in our local markets for the small and medium-sized work that we continue to participate on, just simply due to the weighting that we're starting to build up with mega projects.
Bradley W. Barber: As you know, mega-projects consume vast amounts of equipment for very elongated periods of time. In our view, when we do the calculations, the yield result is still very positive for H&E, but that could and is likely to lead to some slight degradation in rates on a sequential basis moving forward.
Speaker Change: As you know, megaprojects consume vast amounts of equipment for very elongated periods of time. In our view, when we do the calculations, that the yield result is still very positive for H&E.
Timothy W. Thein: Got it. Okay, that's helpful.
Speaker Change: But however, you know, that could and is likely to lead to some slight degradation in rates on a sequential basis moving forward.
Bradley W. Barber: And then, Brad, just on the question of how should we think about, as you look at the fleet growth of, call it 11% relative to equipment revenue growth of closer to seven, how should we think about the dynamic of just cycling through higher-cost equipment, you know, without a corresponding uplift in rental revenue in terms of, you know, the inflationary component? Is there a way to size that in terms of what that impact is? And I would expect we'll continue to be ahead when just given the amount of equipment inflation for the past couple years.
Speaker Change: Got it. Okay, that's helpful.
Speaker Change: And then, Brad, just on the, how should we think about, as you look at the fleet growth of, call it, 11% relative to...
Speaker Change: Equipment Revenue Growth of Closer to Seven, how should we think about the dynamic of just cycling through higher cost equipment?
Speaker Change: you know, without a corresponding uplift in rental revenue in terms of, you know, the inflationary component. Is there a way to size that?
Speaker Change: in terms of what that impact is and I would expect will continue to be ahead when just given the amount of equipment inflation for the past couple years.
Bradley W. Barber: As Leslie stated in her prepared comments, what we sold out of the fleet was 71 months old, so there's certainly an incremental inflationary headwind. I don't want to... And I think that's all I can say.
Speaker Change: Yeah. As Leslie stated in her prepared comments, you know, what we sold out of the fleet was 71 months old. So there's certainly an incremental inflationary headwind. I want to, I don't want to
Bradley W. Barber: I don't want to understate it, but that's really minimal in the scheme of what we're facing. As for utilization, look, we've moderated our spending to allow us to come into a better balance for supply and demand and for physical utilization to improve. As I stated, yeah, we were a little dissatisfied and I think...
Speaker Change: understated but that that's really minimal in the scheme of what we're we're facing as our utilization look we've moderated our our spending to allow us to come into a better balance with for supply and demand and for physical utilization to improve
Speaker Change: As I stated, we were a little dissatisfied and I've seen slightly more improvement in physical utilization during the quarter.
Speaker Change: That being said, that inflationary impact does not cause me any real concern. There's a mix involved. There's certainly something there, but it's nothing that's going to hurt anyone's modeling. It's a minimal piece of what's occurring.
Timothy W. Thein: Okay, okay, last quick one, Brad.
Speaker Change: and the overall scheme of it.
Speaker Change: Okay, okay, last quick one, Brad, what analysis is the...
Bradley W. Barber: A hard one, and I guess probably the $64,000 question, but this whole dynamic of...
Bradley W. Barber: you know, softness in the local accounts, which...
Speaker Change: You're not alone in flagging, you know, obviously a bit more rate-sensitive in parts of that market. Have you, has history shown any kind of relationship, and again, I know each cycle is different.
Speaker Change: Very difficult to answer, but just in terms of if we were to start to see some cuts to benchmark rates, how those markets have historically responded in terms of a lag to changes in policy rates?
Bradley W. Barber: Let me answer it this way: I expect... zero decline in small and medium, or let's just call it local, work. We're not anticipating any decreases. In some cases, we're still getting incremental increases in certain regions with certain products. The discipline that exists, the data that we all possess, and I'm speaking of H&E and our larger peer group, which, you know, substantially dominate these marketplaces. We're all using the same set of data, and I believe we are very focused on assuring that we continue to give good returns on the invested capital.
Speaker Change: Let me answer it this way, I expect...
Speaker Change: Zero decline in small and medium, or let's just call it local work. We're not anticipating any decreases. In some cases, we're still getting incremental increases in certain regions with certain products.
Speaker Change: The discipline that exists, the data that we all possess, and I'm speaking of H&E and our larger peer group, which substantially dominate these marketplaces.
Speaker Change: We're all using the same set of data and I believe we are very focused on assuring that we continue to give good returns on the invested capital.
Bradley W. Barber: So, you know, if we go back to prior cycles, you said it right; each prior cycle has been characterized differently. I don't know that we would even consider COVID, but I think there was an extreme amount of discipline shown in the face of the substantial decline in COVID, and I think there I have very little, I basically have basically no concern. At this point, small and medium-sized businesses, or small and medium-sized customers, are going to start to enjoy any type of decline in rental rates. I think our rental rate output will be a product of how much product we put on megaprojects on a go-forward basis.
Speaker Change: You know, if we go back to prior cycles, you said it right, each prior cycle has been characterized differently.
Speaker Change: I don't know that we would even consider COVID, but I think there was an extreme amount of discipline shown in the face of the substantial decline in COVID. And I think there, I have very little, I have basically no concern.
Speaker Change: At this point, small and medium-sized work or small and medium-sized customers are going to start to enjoy any type of decline in rental rates. I think our rental rate output will be a product of how much product we put on mega-projects on a go-forward basis.
Timothy W. Thein: Got it. Thank you for the time.
Bradley W. Barber: Thank you for your questions.
Speaker Change: Got it. Thank you for the time. Thank you for your question. The next question comes from Sherif El-Sabahi with Bank of America. Please go ahead.
Sherif Abdul: Hi, good morning. Thanks for taking my question. Just to begin, both you and a large peer have noted that 2024 is a transition year to more normalized growth. Do you expect 2025 to see another leg up in growth, or do you expect this to be the new normal type of growth rate for the medium term?
Sherif Abdul: Hi, good morning. Thanks for taking my question. Just to begin, both you and a large peer have noted that 2024 is a transition type of year to more normalized growth. Do you expect 2025 to see another leg up in growth, or do you expect this to be the new normal type of growth rate for the medium term?
Bradley W. Barber: It's really early to try to make that type of prediction. But I'll tell you, we're fairly optimistic around here and believe that there's a lot of work to be done. The small and medium-sized businesses that have been impacted by these higher for longer interest rates, I think that could pivot relatively quickly. I think it's going to depend on when we see interest rates actually start to decline. Within that, I think, would be the answer to the question.
Sherif Abdul: Sherif, it's really early to try to make that type of prediction. I'll tell you, we're fairly optimistic around here and believe that there's a lot of work to be done. The small and medium work that has been impacted by these higher for longer interest rates.
Bradley W. Barber: I don't envision 2025 declining from 2024 levels. I think there's an opportunity that things could get substantially better if interest rates were to decline sooner and maybe more rapidly than our current view tells us. It's to be seen. We don't feel bad about 2025. I'm just not sure how bullish we are about 2025.
Speaker Change: I think that could pivot relatively quickly.
Sherif Abdul: So I think it's going to depend on when we see interest rates actually start to decline. Within that I think would be the answer to the outlook. I don't envision a 2025 declining from 2024 levels.
Sherif Abdul: And I think there's an opportunity that things could get.
Sherif Abdul: substantially better if interest rates were to decline sooner and maybe more rapidly than our current view tells us. So it's to be seen, but we don't feel bad about 2025. I'm just not sure how bullish we are on 2025 just yet.
Sherif Abdul: And just given some of your language around megaprojects, it seems like you're still seeing very good uptake on those types of projects. For the remainder of the year, what kind of incremental flow-through do you expect to see on eBay?
Speaker Change: Understood. And just given some of your language around megaprojects, it seems like you're still seeing very good uptake on those types of projects. Just for the remainder of the year, what kind of incremental flow-through do you expect to see on EBITDA?
Leslie S. Magee: Leslie, can you help Sherif with the... Sure, sure. So, you know, a lot of the drivers we've talked about here this morning, but we do expect some pressure on EBITDA flow-through margins in the back half of 2024. And again, those themes are driven by moderating year-over-year rate increases, which we've talked about. Continued expectations of lower year-over-year physical utilization, and then one thing to note is we also expect lower year-over-year fleet sales in the back half.
Speaker Change: Leslie, can you help Sherif with the...
Alessa: Sure, sure. So you know a lot of the drivers we've talked about here this morning but we do expect some pressure on EBITDA flow through margins.
Alessa: in the back half of 2024. And again, those themes are driven by moderating year-to-year rate increases, which we've talked about, continued expectations of
Alessa: lower year-over-year physical utilization. And then one thing to note is we also expect lower year-over-year fleet sales in the back half. And we spoke to that earlier in the year, and we haven't seen that play out.
Leslie S. Magee: And we spoke about that earlier in the year, and we haven't seen that play out in a big way, and we expect that to increase to a larger degree in the back half of the year. And then also, you know, we're going to have higher costs driven by our focus on our new store opening.
Alessa: in a big way, and we expect that to increase to a larger degree in the back half of the year. And then also, you know, we're going to have higher costs driven by our focus on our new store openings.
Stanley Stoker Elliott: The next question comes from Stanley Elliott with Stifel. Please go ahead.
Speaker Change: Thank you.
Speaker Change: The next question comes from Stanley Elliott with Stifel. Please go ahead.
Stanley Stoker Elliott: Hey, good morning, everybody. Thank you for the question.
John Martindale Engquist: Brad, you talked a little bit about the utilization side. I was curious maybe how that tracked through the quarter? And I guess I was trying to get a sense for if some of that disappointment was from weather impacting, the availability of the equipment out in the market, or if that really was kind of more of what we're seeing with just some of the smaller local contractors softening a touch.
Stanley Stoker Elliott: Hey, good morning, everybody. Thank you for the question.
Stanley Stoker Elliott: Bradley, you talked a little bit on the utilization side. I was curious maybe, how did that track through the quarter? And I guess I was trying to get a sense for, you know, if some of that disappointment was from weather impacting, you know, the availability of the equipment out in the market, or, you know, if that really was kind of more of what we're seeing with just some of the smaller local contractors softening a touch.
John Martindale Engquist: Yes, Stanley, this is John. I'll take that. And look, I don't think we're going to point to weather as a material impact on utilization. Really, what we're seeing is fewer small and mid-sized jobs coming out of the ground. And as we continue to see a ramp-up with the large megaprojects, you know, our participation, we're very pleased with our participation rate on these large jobs. And we're seeing continued fleet growth, you know, on a weekly basis. More and more fleets are going out each and every week. But really, what we saw was, you know, more of a decline in the small to mid-sized jobs, which had that impact on utilization.
Stanley Stoker Elliott: Yes, Stanley, this is John . I'll take that. And look, I don't think we're going to point to weather.
Stanley Stoker Elliott: is a material impact utilization.
Speaker Change: Really what we're seeing is fewer small and mid-sized jobs coming out of the ground. And as we continue to see a ramp up with the large megaprojects,
Stanley Stoker Elliott: You know, our participation, we're very pleased with our participation rate on these large jobs.
Stanley Stoker Elliott: And we're seeing continued fleet on a weekly basis. More and more fleet are going out each and every week. But really what we saw was more of a decline in the small to mid-sized jobs, which had that impact on utilization.
Stanley Stoker Elliott: And with the scale that you guys have kind of built over the past several years, unless you kind of mentioned it on the free cash flow side, how should investors think about, you know, H&E's ability to generate stronger free cash flow through the cycle?
Speaker Change: And with the scale that you guys have kind of built over the past several years, unless you kind of mentioned it on the free cash flow side, how should investors think about H&E's ability to generate stronger free cash flow through the cycle?
Bradley W. Barber: Yeah, well, you know, through the cycle, a great question. Obviously, this year, we're going to generate nice, very healthy free cash flow at growth. As you know, we've continued to pay our dividend and are going to continue paying our dividend. Our focus on these 12 to 15 new locations is ironclad.
Speaker Change: Yes, well, you know, through the cycle, a great question.
Speaker Change: Obviously, this year we're going to generate nice, very healthy free cash flow.
Speaker Change: At the growth, as you know, we've continued to pay our dividend and are going to continue paying our dividend.
Speaker Change: Our focus on these 12 to 15 new locations is...
Bradley W. Barber: Unless we were to see a real, not a transition, but a real disruption, we're going to continue to open those up. And as you know, we continue to look for tuck-in acquisitions. So we've only been able to perfect four of those since 2021, but three of them more recently. So we're still actively pursuing those.
Speaker Change: is ironclad, unless we were to see a real, not a transition, but a real disruption.
Speaker Change: We're going to continue to open those up, and as you know, we continue to...
Speaker Change: Peckaway at Tuck-In Acquisitions.
Speaker Change: And so, we've only been able to perfect four of those since 2021, but three of them more recently. So, we're still actively pursuing those.
Bradley W. Barber: All of that mashed together with our traditional spending makes it a challenge for us to be free cash flow positive on an annual basis. That being said, we will be approaching a scale in our modeling, probably in the four to five year range, with the type of growth profile that we have illustrated over the last few years that will be generating free cash flow. So in the short run, when we're opportunistic and the markets are heating up and growing, we're going to grow with them.
Speaker Change: All of that mashed together with our traditional spending makes it a challenge for us to be free cash flow positive on an annual basis.
Speaker Change: That being said, we will be approaching a scale in our modeling, probably in the 4 to 5 year range, with the type of growth profile that we have illustrated over the last few years, that will be generating free cash flow. So, you know, in the short run, when we're opportunistic and the markets are heating up and growing, we're going to grow with them.
Bradley W. Barber: But, you know, this year we're certainly going to produce free cash flow, so we'll have some puts and takes depending on the given year for the next few years, and we should settle into a nice rhythm that allows us to be free cash flow positive throughout the year.
Speaker Change: But, you know, this year we're certainly going to produce free cash flow, so we'll have some puts and takes depending on the given year for the next few years, and we should settle into a nice rhythm that allows us to be free cash flow positive throughout the cycle.
Stanley Stoker Elliott: And with the larger megaprojects out there, your ability to add scale will not only service those projects but probably cut down on your delivered costs just from the ability to share. It would seem like, with that megaproject dynamic still looking to accelerate, that we should continue to think about you all remaining pretty focused on the growth platforms that you guys are putting out there.
Speaker Change: And with the larger megaprojects out there, your ability to add scale,
Speaker Change: You'll not only service those projects, but probably cut down on your delivery costs just from the ability to share. It would seem like that with that mega project dynamic still looking to accelerate, that we should continue to think about you all remaining pretty focused on this, on the growth platforms that you guys are putting out there.
Bradley W. Barber: That's right. We're just going to be disciplined and measured about doing so, and I think that's reflected in our CapEx reduction this year. We're always going to focus on returns, and we're going to focus on the bottom line profitability while we balance that against growth opportunities, but we have substantial growth opportunities in front of us with our 150 locations, 31 state geography.
Speaker Change: That's right. We're just going to be disciplined and measured about doing so. And I think that's reflected in our CapEx reduction this year.
Speaker Change: We're always going to focus on returns, and we're going to focus on the bottom-line profitability while we balance that against growth opportunity. But we have substantial growth opportunity in front of us with our 150 locations, 31 state geographies.
Steven Ramsey: Perfect guys, thanks so much and best of luck.
Speaker Change: Perfect, guys. Thanks so much, and best of luck. Thank you, Steve.
Steven Ramsey: The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead.
Speaker Change: The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead.
John Martindale Engquist: Hi, good morning. I'm curious for you guys, or if you see it as competitors, the movement of fleet around the network to optimize your positioning, to capture activity in good markets and maybe reduce exposure to slower markets. I know that's the normal course of business, but maybe how does it compare year to date versus those normal times?
Steven Ramsey: Hi, good morning. I'm curious for you guys, or if you're seeing it competitors, the movement of fleet.
Speaker Change: around the network to optimize your positioning.
Steven Ramsey: to capture activity in good markets and maybe reduce exposure to slower markets. I know that's normal course of business, but maybe how does it compare year-to-date versus those normal times.
John Martindale Engquist: You know, Steven, this is John. There's nothing terribly different this year compared to previous years. You know, moving fleets from low demand areas to those with higher demand is just basic fleet management. We do that every year. What I can tell you is we have moved a considerable amount of fleet around in the first half of the year from some areas that are a little bit softer to capitalize on this mega project opportunity. So, again, nothing really unique there from what we've done in any other given year. Yeah, Steven, let me...
Steven Ramsey: You know, Steven, this is John , it's, it, it, there's nothing terribly different this year compared to any previous years, you know, moving fleet from
Steven Ramsey: Low demand areas to those with higher demand is just basic fleet management.
Speaker Change: We do that every year. What I can tell you is we have moved.
Speaker Change: A considerable amount of fleet around in the first half of the year from some areas that are a little bit softer to capitalize on this megaproject opportunity. So, again, nothing really unique there from what we've done on any other given year.
Bradley W. Barber: Yeah, Steven, let me add, and Leslie mentioned in her comment that we're talking about flow-through, you know, we are absolutely going to throttle down on fleet sales, you know, just thinking about fleet management. Fleet sales in the back half of the year will see a nice decrease compared to the front half of the year that we've just completed, and that's a part of that product of fleet management. In a nutshell, we have got the fleet allocated where we want it, and what we have left is going to go very strategically to the locations who are performing at the highest level and ensure that we continue to participate and get exposure to these mega-project opportunities.
Steven Ramsey: Yeah, Steven, let me add, and Leslie mentioned in her comment, we're talking about flow-through. You know, we are absolutely going to throttle down on fleet sales. You know, just thinking about fleet management.
Speaker Change: Fleet sales in the back half of the year will see a nice decrease compared to the
Speaker Change: front half of the year that we've just completed. And that's a part of that product of fleet management. In a nutshell, we have got the fleet allocated where we want it, and what we have left coming is going to go very strategically to the locations who are performing at the highest level.
Speaker Change: and ensure that we continue to participate and get exposure to these mega-project opportunities.
Steven Ramsey: Okay, that's helpful. And then thinking about megaprojects, clearly H&E, more gen-rent focused, larger public peers have a larger base of specialty gear. Do you feel like you're capturing all of the opportunity on these megaprojects that you could, or do you feel like your business serving these types of projects gives you a right to win with specialty equipment and maybe spurs you to invest more in that type of fleet?
Speaker Change: Okay, that's helpful. And then thinking about megaprojects, clearly H&E, more gen-rent focused, larger public peers.
Speaker Change: Do you feel like you're capturing all of the opportunity on these mega-projects that you could, or do you feel like...
Speaker Change: Your business serving these types of projects gives you a right to win with specialty equipment and maybe spurs you to invest more in that type of fleet.
Bradley W. Barber: Look, I don't know that we've ever run across a project where we've gotten enough that we didn't want more, and your question is very fair, and that is, could we provide more if we had more? For us, specialty still continues to fit in the nice to have category and not the need to have category. We have a small element of specialty, and we're growing it organically. At the level it's at currently, it's not really worth speaking about on calls.
Speaker Change: Look, I don't know that we've ever run across a project where we've gotten enough that we didn't want more, and your question is very fair, and that is, could we provide more if we had more? For us, specialty still continues to fit in the nice-to-have and not need-to-have.
Speaker Change: We have a small element of specialty. We're growing it organically.
Speaker Change: It's at the level it's at currently, it's not really worth speaking about on calls, but we will continue to grow it over a period of time. We view that as future or pent-up opportunity.
Bradley W. Barber: But we will continue to grow it over a period of time. We view that as a future or pent-up opportunity. That being stated, there's a general rental product on every single megaproject in every single geography we serve, and within that lies a lot of opportunity for H&E to continue to expand our exposure.
Speaker Change: That being stated, there's general rental product on every single megaproject in every single geography we serve, and within that lies a lot of opportunity for H&E to continue to expand our exposure.
Steven Ramsey: Okay, that's helpful. Thank you.
Avinatan Jaroslawicz: The next question comes from Avi Jaroslawicz with UBS. Please go ahead.
Speaker Change: Okay, that's helpful. Thank you.
Steve: Thank you, Steve.
Steve: The next question comes from Avi Yaroslavich with UBS. Please go ahead.
Avinatan Jaroslawicz: Hey, good morning, guys. So just a quick question here on your CapEx. I know you held the guide this quarter, but how are you thinking about CapEx for the rest of the year? And have your plans changed at all between same-store spending versus new branches? As in, have you shifted any of the spend that you're planning on from the same stores to new locations? And also, how confident are you that we won't need to cut CapEx here further this year?
Avi Yaroslavich: Hey, good morning guys. So just a quick question here on your CapEx. I know you helped guide this quarter.
Avi Yaroslavich: But how are you thinking about CapEx for the rest of the year?
Speaker Change: Have your plans changed at all?
Speaker Change: between same store spending versus new branches, as in have you shifted any of the spend that you're planning on from the same stores to new locations? And also, how confident are you that we won't need to cut CapEx here further this year?
Bradley W. Barber: Yeah, Avi, thank you for the question. You know, we've got a similar cadence. We may be a little front-end loaded on CapEx, but we're going to have a very traditional cadence regarding our CapEx. To the question of whether we are moving from the same store to a new location, that's not. We view these all in separate channels of spending, and we plan them together. So we're not taking from one to give to the other.
Speaker Change: Yeah, Avi, thank you for the question.
Speaker Change: You know we've got a similar case. We may be a little front-end loaded on on CAFX But we're going to have a very traditional cadence regarding our CAFX
Speaker Change: to the question of, are we moving from...
Speaker Change: and the same store to new location. We view these all in separate channels of spending and we plan associated. So we're not taking from one to give to the other. As Leslie said, our access to capital, our cost to capital, we are not worried about capital constraints. We're purely focused on performance and returns.
Bradley W. Barber: As Leslie said, our access to capital, our cost of capital, we are, you know, not worried about capital constraints. We're purely focused on performance and returns. So that being stated, that's not an issue for us. Going forward, how comfortable are we with our CapEx guidance? Listen, you know; we are going to be disciplined. Currently, we're comfortable with the reduced $350 to $400 million. If we see a reason to decrease it, we would do so.
Speaker Change: So that being stated, that's not an issue for us. Going forward, how comfortable are we with our CAPEX guidance? Listen, you know, we are going to be disciplined. Currently, we're comfortable.
Leslie S. Magee: With the reduced $350 to $400 million, if we see a reason to decrease, we would do so.
Bradley W. Barber: I just don't feel like that's going to be an issue for us. If someone were to say, what are the chances you go above your high end of your guidance?, I'm going to tell you that's not going to happen this year. We're focused on being disciplined. We're in a seasonal business. Q3 is always the peak of the seasonality, and I suspect it will be again in 2024, and we're comfortable with the guidance we've put forward.
Leslie S. Magee: I just don't feel like that's going to be an issue for us. If someone were to say, what are the chances you go above your...
Leslie S. Magee: High end of your guidance, I'm going to tell you, that's not going to happen this year. We're focused on being disciplined. We're in a seasonal business. Q3 is always the peak of the seasonality. I suspect it will be again here in 2024. And we're comfortable with the guidance we've put forth.
Avinatan Jaroslawicz: Okay, that makes sense. And then, just getting back into utilization for a second here. So, last quarter, you noted that time utilization was just north of 70% at the start of Q2, I believe. So, it seems like there was a big deceleration in May and June. I know warm starts are a headwind, but I think you added the same amount in Q2 of last year. So, can you just talk to us about what you saw with the utilization trending throughout the quarter? Was it lower utilization across the board, or were certain verticals or regions having an outsized impact?
Speaker Change: Okay, that makes sense.
Speaker Change: And then just getting back into utilization for a second here. So last quarter, you noted that time utilization was just north of 70% start of Q2, I believe.
Speaker Change: So, seems like there was a big deceleration in May and June .
Speaker Change: I know warm starts are a headwind, but I think you added the same amount in Q2 of last year.
Speaker Change: So, can you just talk to us about what you saw with utilization trending Q2 throughout the quarter? Was it lower utilization across the board, or were certain verticals or regions having an outsized impact there?
Bradley W. Barber: I'm going to let John add some context, but the quote we made at the time was that our utilization was just approaching or had touched 67%. The simple answer is it's remained in a very similar profile since that point in time. We've had some incremental growth in fleet. John, do you want to talk about any puts or takes in geography?
Speaker Change: I'm going to let John add some context, but the quote we made at the time is, our utilization was just approaching or had touched 67%.
John Martindale Engquist: The simple answer is...
John Martindale Engquist: It's remained in a very similar profile since that point in time. We've had some incremental growth in fleet. John , do you want to talk about any puts or takes geographic? I mean, I know it's fairly consistent. Yeah, it's fairly consistent. I mean, obviously, we've had, you know, some areas have...
John Martindale Engquist: I mean, I know it's fairly consistent. Yeah, it's fairly consistent. Obviously, we've had, you know, some areas have had a little more of a struggle than others.
John Martindale Engquist: But generally speaking, it's been fairly consistent. I mean, we've seen incremental improvement, you know, obviously since that Q2 average of 66.4%. You know, we're north of 67% today. When you look at Q2 of last year, it was 69.3%. You know, our third-quarter average was 70%, so up about 70 basis points quarter over quarter. As we sit here this year, you know, we would expect to see at least that same type of a bump on an average for Q3.
John Martindale Engquist: have had a little more of a struggle than others.
John Martindale Engquist: But generally speaking, it's been fairly consistent. I mean, we've seen incremental improvement.
Speaker Change: Obviously, since that Q2 average of 66.4%, we're north of 67% today. When you look at Q2 of last year, it's 69.3%. Our third quarter average was 70%, so up about 70 basis points.
Speaker Change: quarter over quarter.
Speaker Change: As we sit here this year, you know, we would expect to see at least that same type of a bump on an average for Q3.
John Martindale Engquist: And, of course, as we get into the, you know, the fourth quarter seasonality sets in, that one's a little more challenging to speak about today. But, you know, I suspect we'll have an update on our next call. I mean, I think you probably caught it in our prepared comments and the press release. But, you know, we're down 290 basis points year over year but up 280 basis points over Q1. So, you know, as candidly as we have stated it, we would like to be up a little more. We were hoping for a little more. But we understand the environment we're in. We're encouraged by our go-forward opportunities, and we've adjusted our capital spending accordingly to these metrics.
Speaker Change: And, of course, as we get into the, you know, the fourth quarter...
Speaker Change: Seasonality sets in. That one's a little more challenging to speak about today, but I suspect we'll have an update on our next call. I think you probably caught it in our prepared comments and the press release, but we're down 290 basis points year-over-year, but up 280 basis points over Q1.
Speaker Change: You know, as candidly as we have stated it, we would like to be up a little more, we were hoping for a little more, but we understand the environment we're in, we're encouraged by our go-forward opportunities, and we've adjusted our capital spending accordingly to these metrics.
Avinatan Jaroslawicz: Yep, no, I appreciate that and appreciate the correction there. That's my bad. I'll turn it over. Thank you.
Speaker Change: Yep, nope, appreciate that and appreciate the correction there. That's my bad. I'll turn it over. Thank you.
Alexander John Rygiel: The next question comes from Alex Rygiel with B. Reilly. Please go ahead.
Speaker Change: Thank you.
Alexander John Rygiel: Thank you. Good morning, gentlemen. Could you help us to understand what percentage of your fleet is targeted at megaprojects today and, or kind of, what percentage of revenue is tied to megaprojects today?
Speaker Change: The next question comes from Alex Rygiel with BE Reilly. Please go ahead.
Alexander John Rygiel: Thank you. Good morning, gentlemen. Could you help us to understand what percentage of your fleet is targeted to megaprojects today and or kind of what percentage of revenue is tied to megaprojects today?
Bradley W. Barber: Alec, w-w-w-w-w- Partly, I wish I could. I mean, obviously, we measure the amount of OEC that's in megaprojects, the amount of OEC that we add on a weekly basis. And I'll tell you, while I can't provide you with a number, we're not going to start providing guidance. We're very happy with the pace of what we're seeing in the marketplace, and it's a meaningful amount that we're adding on a weekly basis.
Alex Reigiel: [inaudible]
Speaker Change: Partly, I wish I could. I mean, obviously we know, we measure the amount of OEC that's on megaprojects, the amount of OEC that we add on a weekly basis.
Speaker Change: And I'll tell you, while I can't provide you a number, we're not going to start providing guidance.
Speaker Change: We are very happy with the cadence of what we're seeing in the marketplace.
Speaker Change: And it's a meaningful amount that we're adding on a weekly basis. So, it's a nice piece of our business, it'll continue to be a growing piece of our business, and I do not anticipate a quarter where we're not making nice gains of deploying more of our OEC to mega projects than we had the preceding quarter.
Bradley W. Barber: So it's a nice piece of our business. It'll continue to be a growing piece of our business, and I do not anticipate a quarter where we're not making nice gains on deploying more of our OEC to megaprojects than we had the preceding quarter.
Alexander John Rygiel: And maybe you can't quantify it exactly, but you've talked a lot about sort of the pipeline or backlog of megaprojects sort of growing. Is there a way to think about kind of what that growth rate has looked like, maybe in this current quarter or over the last, you know, 12 months or so? Is it up sort of 20%, or is it up 100%? How might you kind of measure that growth and backlog from megaprojects?
Speaker Change: And maybe if you can't quantify it exactly, but you've talked a lot about sort of the pipeline or backlog of megaprojects sort of growing. Is there a way to think about kind of what that growth rate has looked like maybe in this current quarter or over the last 12 months or so?
Speaker Change: Is it up sort of 20% or is it up 100%? How might you kind of bracket that growth in backlog from megaprojects?
Bradley W. Barber: Yeah, I don't have a percent, but I can tell you that, year over year, it's up substantially. It's up substantially, and I think that in a year from now, I'll be able to make the same comments about this year. These projects are certainly, they're not just emerging. They've been emerging, they're advancing, and more new projects are being announced and breaking ground almost on a daily basis. So, it's a substantial improvement over the last 12 months, and my anticipation is that, in 12 months from now, I'll be able to say the same thing again about 2025 as compared to 2024.
Speaker Change: Yeah, I don't have a percent, but I can tell you year over year, it's up substantially.
Speaker Change: It's up substantially, and I think that in a year from now, I'll be able to make the same comments about this year. These projects are certainly...
Speaker Change: They're not just emerging, they've been emerging.
Speaker Change: They're advancing, and more new projects are being announced and breaking ground almost on a daily basis. So, it's a substantial improvement in the last 12 months, and my anticipation is that in 12 months from now, I'll be able to say the same thing again about 2025 as compared to 2024.
Alexander John Rygiel: That's great. Thank you very much. Thank you.
Sean Wondrak: The next question comes from Sean Wondrak of Deutsche Bank. Please go ahead.
Speaker Change: That's great. Thank you very much. Thank you. The next question comes from Sean Wondrak with Deutsche Bank. Please go ahead.
Sean Wondrak: Hi there, thank you for taking my question. Um, sorry, I don't mean to beat a dead horse, but just a couple more on the megaprojects. Are there, are there certain gating factors that are preventing some of these smaller firms such as Breath of Equipment or National Presence from using your proprietary tech? Could you just comment on that, please?
Sean Wondrak: Hi there, thank you for taking my questions.
Sean Wondrak: Sorry, I don't mean to beat a dead horse, but just a couple more on the megaprojects.
Sean Wondrak: Are there certain gating factors?
Sean Wondrak: that are preventing some of these smaller firms such as Breath of Equipment, or National Presence, or your proprietary tech. Could you just comment on that, please?
Bradley W. Barber: Yeah. Well, there certainly can be. You know, look, it's important with megaprojects. I think people confuse this sometimes.
Sean Wondrak: Yeah.
Speaker Change: Well, there certainly can be. You know, look, it's important with mega projects, I think people confuse this sometimes. I've had an individual investor ask me, you know, without a meaningful specialty, you're really disadvantaged. And that's certainly true.
Bradley W. Barber: I've had an individual investor ask me, "You know, without a meaningful specialty, you're really disadvantaged, and that's certainly not true. It's not the case. There are certain contractors on megaprojects who use specialty products, and in those cases, H&E would be disadvantaged. I can't supply someone with power generation or trench or HVAC, maybe, on a particular job. However, there are various trade types who don't ever use those types of products, that only use the general rental, the aerial work platforms, the telehandlers, earth-moving products, air compressors, things of that nature, and we're not disadvantaged. Now, your question is, how do you become disadvantaged outside of that?
Speaker Change: Holistically not true. It's not the case.
Speaker Change: There are certain contractors on megaprojects who use specialty products, and in those cases, H&E would be disadvantaged. I can't supply someone.
Speaker Change: power generation or trench or HVAC, maybe on a particular job. However, there are various trade types who don't ever use those types of products. They only use the general rental, the aerial work platforms, the telehandlers, earth-moving products, air compressors, things of that nature.
Speaker Change: And we're not disadvantaged. Now, your question is, how do you become disadvantaged outside of that? Technology would be number one.
Bradley W. Barber: Technology would be number one. I mean, our technology is second to none. Again, I believe many times it's misunderstood because, at our size and scale, folks may just assume that we don't have advanced technology, but, in fact, we do. Our customers pay their bill online, they requisition equipment online, they manage their account, and they report their telematic data. The list goes on and on and on, so we're at a disadvantage in no respect.
Speaker Change: Our technology is second to no one. Again, I believe many times it's misunderstood because of our size and scale.
Speaker Change: Folks may just assume that we don't have advanced technology, but in fact we do. Our customers pay their bill online, they requisition equipment online, they manage their account, they're reporting their telematic data, the list goes on and on and on. So we're at a disadvantage in their respect.
Bradley W. Barber: If you don't have telematic data, if you do not have a portal, if you don't have an ability for your customers to consolidate their billing, pay it online, view and manage their account more broadly, you're absolutely going to be excluded. So it's probably the top five, six companies by volume in the U.S. who are participating. If you drive by these projects, that's what you're going to see, and you're not going to see smaller projects.
Speaker Change: If you don't have telematic data, if you do not have a portal, if you don't have an ability for your customers to consolidate their billing, pay it online, to view and manage their account more broadly, you're absolutely going to get excluded.
Speaker Change: You know, it's probably the top five, six companies by volume in the U.S. who are participating. If you drive on these projects, that's what you're going to see, and you're not going to see smaller participants.
Sean Wondrak: Right, that's very helpful, and it kind of leaped into my follow-up. When you just think about the top five or six players sort of doubling their share over the last ten years and a lack of access to these megaprojects, does this create opportunities to acquire some of these mom-and-pops that maybe weren't going to sell themselves earlier but don't have access to this market demand here?
Speaker Change #101: Right, that's very helpful. And it kind of leads into my follow-up. When you just think about, you know, the top five or six players sort of doubling their share over the last ten years.
Speaker Change: and a lack of access to these mega-projects, does this create opportunities to acquire some of these mom-and-pops that maybe weren't going to sell themselves earlier but don't have access to this market demand here?
Bradley W. Barber: The answer is yes. We have actually purchased companies that, two or three years ago, they may never sell their business, and their realities change. You know, the cost of technology is just a hurdle they can't handle. I mean, for a number of years, the cost of capital, access to equipment, the price that they pay compared to H&E or larger competitors, is just an extreme disadvantage for them. And many more companies have come to the realization that they're either going out of business slowly or that they're going to have to sell their business. And yes, we have seen those opportunities.
Speaker Change #100: The answer is yes. We have actually purchased companies that two or three years ago
Speaker Change #100: said they may never sell their business.
Speaker Change #100: Their realities change, you know, the cost of technology is just a hurdle they can't handle. I mean, for a number of years, the cost of capital, the access to equipment, the price that they pay compared to...
Speaker Change #100: to H&E or larger competitors, it's just an extreme disadvantage for them and many more companies have come to the realization that they're either going out of business slowly or that they're going to have to sell their business and yes, we have seen those opportunities.
Sean Wondrak: Great. I appreciate that.
Speaker Change #106: Great, I appreciate that. If I could squeeze in one more, just on the infrastructure side.
John Martindale Engquist: If I could squeeze in one more, just on the infrastructure side, and I'm not sure if you have an answer to this, but do you have an idea of maybe what inning we're in relative to the infrastructure spend? I mean, the funds came in a few years ago. There has been sort of a slow rollout over the past couple of years, but it seems to be accelerating a little bit. It's difficult to tell kind of from where we're sitting.
Speaker Change #102: And I'm not sure if you have an answer to this, but...
Speaker Change #105: Do you have an idea of maybe what inning we are in relative to the infrastructure spend? I mean, the funds came in a few years ago. There was sort of a slow rollout the past couple of years. It seems to be accelerating a little bit. It's difficult to tell kind of from where we're sitting.
Sean Wondrak: Yeah, I'll take that question. Look, I think we're in the early innings. You know, while we have seen funds released, and look, these projects are breaking ground every day. I mean, from looking at the roadwork, bridges, airports, seaports, I mean, you name it, the infrastructure work is really starting to pick up steam, and we see this as a multi-year opportunity. So, you know, the short answer is early innings.
Sean Wondrak: That's great. Thank you for answering my questions. I appreciate it.
Speaker Change #103: Yeah, I'll take that question. Look, I think we're in the early innings, you know, that while we have seen funds released, and look, these projects are breaking ground.
Speaker Change #104: every day. I mean, from looking at the roadwork, bridges, airports, seaports, I mean, you name it, the infrastructure work is really starting to pick up steam, and we see this as a multi-year opportunity. So, you know, short answer is early innings.
Speaker Change #108: That's great. Thank you for answering my question. Appreciate it.
Bradley W. Barber: This concludes our question and answer session. I would like to turn the conference back over to Brad Barber for any closing remarks.
Joe: Thank you, Joe.
Joe: This concludes our question and answer session. I would like to turn the conference back over to Brad Barber for any closing remarks.
Bradley W. Barber: Thank you, operator. Before we conclude today's call, I want to reiterate a couple of things, not the least of which is our strategic commitment to growth and our strong track record of success. As we stated earlier, H&E has established one of the most attractive growth profiles in the industry, led by our highly successful Accelerate a New Location program. By the end of this year, I expect H&E will be nearing 50 or more new location openings since we implemented this strategy in 2021.
Bradley W. Barber: Thank you, operator. Before we conclude today's call, I want to reiterate a couple of things, not the least of which is our strategic commitment to growth and our strong track record of success.
Bradley W. Barber: As we stated earlier, H&E has established one of the most attractive growth profiles in the industry, led by our highly successful Accelerated New Location program.
Bradley W. Barber: By the end of this year, I expect H&E will be nearing 50 or more new location openings since we implemented this strategy in 2021.
Bradley W. Barber: Over the same period of time, we've completed four tuck-in acquisitions, adding 16 additional locations. And while we've been focused on achieving the significant growth in locations, we have also been pleased with our same-store growth and margin improvement. Our shift away from distribution to a pure play rental focus has proven to be a winning strategy, providing us with greater durability in our revenues and associated margins. We remain fully committed to our Accelerate New Location strategy with an expectation of 12 to 15 branch additions per year as we continue to pursue additional tuck-in acquisitions that meet our criteria.
Bradley W. Barber: Over the same period of time, we've completed four tuck-in acquisitions, adding 16 additional locations.
Bradley W. Barber: And while we've been focused on achieving the significant growth in locations, we also have been pleased with our same-store growth and margin improvement.
Bradley W. Barber: Our shift away from distribution to pure play rental focus has proven to be a winning strategy, providing us with greater durability in our revenues and associated margins.
Bradley W. Barber: We remain fully committed to our Accelerate New Location Strategy with an expectation of 12 to 15 branch additions per year as we continue to pursue additional tuck-in acquisitions that meet our criteria.
Bradley W. Barber: We possess both the people and the capital necessary to support our ongoing growth plans, and we look forward to updating you on our future. With that, we'll conclude today's call, and we appreciate your continued interest in H&E Equipment Services and look forward to speaking to you again soon.
Bradley W. Barber: We possess both the people and the capital necessary to support our ongoing growth plans, and we look forward to updating you on our future achievements.
Speaker Change #109: With this, we'll conclude today's call, and we appreciate your continued interest in H&E Equipment Services and look forward to speaking to you again soon.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #110: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.