H&E Equipment Services (HEES) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues rose 4.5% year-over-year to $376.3 million, driven by higher rental revenues, branch network expansion, and recent acquisitions, despite a challenging environment with lower non-residential spending and declines in key fundamentals.

• Net income declined to $33.3 million ($0.91 per diluted share), down from $41.2 million ($1.14 per share) in Q2 2023, reflecting higher SG&A and interest expenses.

• Adjusted EBITDA increased 2.8% to $173.2 million, with margin at 46.0% of revenues, down from 46.8% last year.

• Branch count increased by 23 locations year-over-year, with 6 new and 4 acquired branches in Q2, expanding to 149 branches in 31 states.

• Mega projects and infrastructure spending are providing stable, long-term demand, offsetting softness in small and mid-sized projects.

Financial highlights

• Total revenues reached $376.3 million, up $16.1 million (4.5%) year-over-year; rental revenues grew 6.5% to $275.5 million; equipment rental revenues up 7.2% to $312.4 million.

• Net income was $33.3 million, down 19.3% from Q2 2023; diluted EPS was $0.91 compared to $1.14.

• Adjusted EBITDA rose 2.8% to $173.2 million, with margin at 46.0% versus 46.8% last year.

• Gross profit increased 1.7% to $171.3 million; gross margin declined to 45.5% from 46.7% due to lower rental margins and revenue mix.

• SG&A expense rose 12.7% to $111.8 million, mainly from growth initiatives, branch expansion, and higher personnel costs.

Outlook and guidance

• 2024 is viewed as a transition year to normalized growth; 2025 outlook depends on interest rate trends, with potential for improvement if rates decline.

• CapEx guidance for 2024 remains at $350–$400 million, with discipline and no plans to exceed the high end.

• EBITDA flow-through margins expected to face pressure in the second half due to moderating rate increases, lower utilization, and higher costs from new store openings.

• Management expects continued growth from recent acquisitions and branch expansion, with cash flow and credit expected to meet liquidity needs.

• Construction spending growth is slowing, with elevated financing costs and tighter lending standards as headwinds, but mega projects and infrastructure funding support long-term growth.