H&E Equipment Services, Inc. announced results for the fourth quarter and year ended December 31, 2018.
Fourth Quarter 2018 Summary
- Revenues increased 17.4 percent to $346.0 million versus $294.7 million a year ago.
- Pre-tax income was $34.8 million, an increase of $7.2 million, or 26.1 percent, from a year ago.
- Net income was $25.1 million in the fourth quarter compared to net income of $85.9 million a year ago. The company recorded income tax expense of $9.7 million versus an income tax benefit of $58.4 million a year ago. The prior period $58.4 million tax benefit was due to a one-time revaluation of our deferred tax assets and liabilities resulting from the decrease in the corporate federal income tax rate enacted in December 2017. The effective income tax rate was 27.9 percent in the fourth quarter of 2018 and (211.7) percent in the fourth quarter of 2017.
- Adjusted EBITDA increased 26.2 percent to $114.6 million in the fourth quarter compared to $90.7 million a year ago, yielding a margin of 33.1 percent of revenues compared to 30.8 percent a year ago.
- Rental revenues increased 27.6 percent to $163.0 million in the fourth quarter compared to $127.7 million a year ago.
- New equipment sales increased 7.1 percent to $79.7 million in the fourth quarter compared to $74.4 million a year ago.
- Used equipment sales increased 17.8 percent to $37.8 million in the fourth quarter compared to $32.1 million a year ago.
- Gross margin was 35.6 percent compared to 34.2 percent a year ago. The increase in gross margin was the result of a shift in revenue mix to higher margin rental revenues combined with strong operating performance from several business segments.
- Rental gross margins were 51.5 percent in the fourth quarter of 2018 compared to 51.0 percent a year ago.
- Average time utilization (based on original equipment cost) was 72.9 percent compared to 74.2 percent a year ago. The size of the company's rental fleet based on original acquisition cost increased 25.7 percent from a year ago, to $1.8 billion.
- Average rental rates increased 2.0 percent compared to a year ago and 0.5 percent sequentially.
- Dollar utilization was 37.0 percent in the fourth quarter compared to 36.2 percent a year ago.
- Average rental fleet age at December 31, 2018, was 34.5 months compared to an industry average age of 45.4 months.
Brad Barber, H&E Equipment Services' chief executive officer and president, said, "As a result of strong demand for rental equipment and new machinery combined with solid execution throughout our business, fourth quarter total revenues increased 17.4 percent and Adjusted EBITDA increased 26.2 percent from a year ago. Project activity in the non-residential construction markets remained healthy and we continued to achieve rate improvement and high physical utilization levels, which drove a 27.6 percent increase in rental revenue from the prior year quarter. New equipment sales exceeded our expectations, increasing 7.1 percent from a year ago, which we believe to be a tough comp. The increase in new equipment sales was largely due to higher aerial and crane sales, up 95.5 percent and 5.7 percent, respectively.
"Our outlook for 2019 is positive as industry rental revenues are forecast to increase, growth in the non-residential construction markets is expected to continue and our larger contractor customers remain confident about the level of projects in their pipelines. Even with a fleet size that is 25.7 percent, or $361.0 million by original acquisition cost, larger than a year ago, physical utilization is currently running above year-ago levels. We remain focused on additional growth through acquisitions and warm starts, with two acquisitions in 2018 and our recent purchase of Texas-based We-Rent-It."