H&E Equipment Services - Q3 2022
October 27, 2022
Transcript
Speaker 0
Good morning, and welcome to H and E Equipment Services Third Quarter 2022 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. At this time, I would like to turn the call over to Mr.
Jeff Chastain, Vice President of Investor Relations. Please go ahead.
Speaker 1
Thank you, and good morning, everyone. Welcome to a review of H and E's results for the Q3 of 2022. We appreciate your participation and your continued support. A copy of the press release covering our Q3 results was issued earlier today and can be found along with all supporting statements and schedules at the H and E website, www.he equipment.com. Our discussion this morning is accompanied by a slide presentation, which can also be found at the H and E website under the Investor Relations tab in Events and Presentations.
As you will see on Slide 2 of the presentation, I'm joined today by Brad Barber, Chief Executive Officer John Enquist, President and Chief Operating Officer and Leslie Magee, Chief Financial Officer and Corporate Secretary. Brad will begin today's discussion. But before I turn the call over to him, I'll call your attention to Slide 3 and remind you that today's call and statements containing words such as may, could, believe, expect, anticipate and other expressions constitute forward looking statements. Forward looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward looking statement. A summary of these uncertainties is included in the Safe Harbor statement contained in the company's slide presentation for today's call and includes the risks described in the Risk Factors in the company's 2021 Annual Report on Form 10 ks 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. 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 appendix to today's presentation materials. Finally, unless specifically noted, our results and comparisons for the periods reported and discussed this morning are presented on a continuing operations basis.
I'll now turn the call over to Brad Barber, Chief Executive Officer of H and E Equipment Services.
Speaker 2
Thank you, Jeff. Good morning, and welcome Our review of the Q3 2022 financial results. Your participation in today's call and continued interest in H and E are appreciated. Our Q3 financial results were exceptional and continue to trend to financial improvement across consecutive quarters. Our intensified focus on rental operations has been a significant component of our consistency in 2022.
Our industry leading rental rates, fleet utilization, fleet growth and steady expansion of our branch network have also contributed to the quarter's outstanding results. Collectively, these factors have led to substantial improved financial performance in the Q3, which included record revenues in our equipment rental segment, Strong gains in profitability and notable margin appreciation on both the business segment and consolidated basis. Proceed to Slide 4. I'll begin this morning with a review of our financial highlights for the quarter, followed by a discussion of several of performance factors that contributed to another impressive quarterly result for our equipment rental segment. In addition, I'll address our outlook for the industry and why I currently believe strong business conditions should persist through the Q4 and into 2023.
Then I will close with a rundown of considerable progress achieved towards expanding our business and positioning H and E for future success. Relating to the latter point, I will discuss our previously announced acquisition of OneSource Equipment Rental Incorporated, which we closed earlier this month. Leslie will follow with a thorough review of 3rd quarter financial results, including business segment performance and an update on our capital structure and liquidity. Then we will be happy to address your questions. On to Slide 6.
A review of our 3rd quarter Highlights reveals the continued strength and vigor in the equipment rental business cycle. Business conditions remained fundamentally strong throughout the quarter with elevated activity across our branch Given these robust business fundamentals, total revenues in the 3rd quarter reached $324,300,000 were 17.7% better than the same quarter in 2021, while improving 10% on a sequential quarterly basis. Also, adjusted EBITDA gained 24.1 percent on a year over year basis, closing the quarter at $139,400,000 while posted a margin of 40 3% with both financial measures representing records for our company. Revenues from our equipment rental segment, which include ancillary rental revenues, were up The strength of this performance was due in part to a combination of healthy rental rate appreciation, a strong physical fleet utilization, which averaged 73.3 percent or 140 basis points ahead of the same quarter in 2021. Also, equipment rental revenues benefited from continued fleet growth.
Our rental fleet, as measured by original equipment cost, or OEC, was $305,400,000 larger than a year ago measure on an increase or an increase of 16.7%. A fundamentally sound business cycle will typically exhibit 3 important attributes: Rental rate appreciation, strong utilization and growth in the rental fleet. Each was present in the 3rd quarter and the results and it resulted in record revenue performance. On to Slide 7, please. Rental revenue in the 3rd quarter totaled $224,100,000 a year over year increase of 26.9 percent and a sequential quarterly improvement of 11.4%.
The record results surpassed the previous record set last quarter. Rental gross margin rose to 55.6 percent or 4 70 basis points better than the year ago quarter and 190 basis points ahead of the 2nd The segment's results were supported by another quarter of excellent pricing achievement as demonstrated by a year over year rental rate increase of 10.1 percent and a sequential quarterly gain of 3.2%. On average, our rental rates have increased an Impressive 8.9 percent through the 9 months ending September 30, 2022. Our ability to achieve such impressive levels of rate increase was made possible An excellent pricing environment was supported by a combination of persistent customer demand and a constrained supply of equipment, which together sustained high utilization through the quarter. As noted earlier, our 3rd quarter average physical utilization was 73.3%, representing our highest quarterly measure since the second half of twenty seventeen.
The result was 140 basis points ahead of the Q3 of 2021 and ten basis points better than the previous quarter in 2022. Despite growing our fleet, OEC, by $277,000,000 since the beginning of 2022, Including $129,000,000 in the 3rd quarter, utilization of our fleet has shown sequential quarterly improvement in 2022, which is indicative of the strong underlying demand for our equipment as well as our exceptional operational capabilities. The robust industry environment resulted in a 3rd quarter dial utilization of 42.7 percent or 380 Basis points better than the Q3 of 2021 180 basis points ahead of the previous quarter in 2022. The result was yet another record in the quarter. As we manage through the final quarter of 2022 and consider business prospects for 20 We continue to experience a steady backlog of projects in the non residential construction and industrial end markets.
Feedback from our customer base remains reassuring with projects proceeding as planned. Also, with the continuation of a robust demand, Global supply chains remain challenged, limiting the immediate availability of equipment. These factors reinforce a strong business environment and apart from 2023. In addition, we remain encouraged by the indicators for future construction activity. Recent measures from Dodge Momentum Index and the Architectural Billing Index and the associated builder and contractors continue to signal the likelihood of further expansion well into 2023 as additional construction projects enter the planning stages.
Furthermore, we expect Our evaluation of projected construction activity in the end markets we serve reinforces our confidence in the future and represents a sturdy base of support and an important catalyst for growing our company. Slide 9, please. Throughout the Q3, we demonstrated exceptional progress in our strategic initiatives, which earlier this year we identified as record fleet investment for the rental fleet and Continued expansion of our branch network. In fact, 2022 has been a year of record growth and expansion for H and E. Despite continued disruptions to global supply chain, we increased the year to date gross capital investment out of our fleet to $379,500,000 including $163,900,000 in the 3rd quarter.
The size of our fleet as measured by OEC is now just over $2,100,000,000 representing a record for the company. We expect to close 2022 with gross capital expenditures in a range of $465,000,000 to 500,000,000 Regarding expansion of our operations, our acquisition of OneSource, which closed on October 1, 2022, Increased our branch network by 10 locations, including an initial presence in 3 states, Illinois, Indiana and Kentucky. Additionally, we gained density with locations within our existing coverage area. OneSource is an excellent cultural fit with an emphasis on operations excellence and customer satisfaction. The integration process is underway and we're excited about the prospects for our combined The consistent progress of our accelerated new location program was evident in the Q3 with 4 branches opened during the period.
The openings included our 10th branch in Florida, our 12th branch in California, our 21st branch in Texas in our 1st branch in Delaware. The latest branch openings bring the total of new locations this year to 8. With more openings expected in the Q4, we are confident in achieving our goal of no fewer than 10 new locations in 2022. As I conclude my comments on the quarter and prepare to turn the call over to Leslie, I want to review the substantial progress achieved over the last 12 months to position the company for better long term success. The progress began in 2021 with a transformative divestiture, including the sale of the crane business.
This was a consequential step in our evolution to a pure play rental focus. A short time later, we exited earthmoving distribution in the state of Arkansas and we continue to evaluate strategic opportunities that would further concentrate our focus on rental operations. H and E has clearly demonstrated the ability to transition our business while successfully executing strategic growth initiatives. In less than 2 years, we have substantially exited our lower margin, less predictable Distribution business and simultaneously delivered significant improvement in key financial metrics following our intensified focus on the rental business. Also, we have added 28 locations to our branch network, expanded to 120 locations across 29 states, while investing significant capital in our rental fleet, which now sits at a record OEC of more than $2,100,000,000 Through this period of transition and growth, our operational performance has remained exceptional.
With our greater concentration on rental operations, H and E remains poised for Revenue growth and margin appreciation throughout this fundamentally robust business environment, while benefiting from a steadier base of revenues and margins through the entirety of the business cycle. I also want to highlight our outstanding suite of information systems and platforms that are instrumental in achieving Many best in class performance measures. These systems will continue to evolve and support our operating proficiency. Finally, H and E has both an experienced and motivated team of loyal professionals who demonstrate a dedication to excellence in respect towards our customers and each other. In addition to our intensified focus on rental operations, it is our robust systems, Slide 11, please.
I will now turn the call over to Leslie for a review of our Q3 financial performance. Leslie?
Speaker 3
Thank you, Brad. Good morning, and welcome, everyone. I'll begin today's financial review on Slide 12. 3rd quarter revenues totaled $324,300,000 an improvement of 48,800,000 or 17.7% compared to the Q3 of 2021. The increase was led by the combination of These same factors drove a 26.9% increase in rental revenue, which set another record in the quarter, totaling $224,100,000 compared to $176,700,000 in the Q3 of 2021.
Rental rates increased 10.1% when compared to the year ago quarter and were 3.2% better on a Utilization remained strong throughout the quarter, closing at an average of 73.3 or 140 basis points ahead of the Q3 of 2021 and $105,400,000 or 16.7 percent when compared to the OEC at September 30, 2021. Since the close of 2021, OEC is up $277,000,000 or 14.9 percent. Continuing with other business segment results, used equipment sales in the 3rd quarter declined $10,800,000 or 34.7 percent to $20,300,000 We continue to prioritize utilization, while rental equipment remains constrained, resulting in lower sales across all major product lines. New equipment sales improved by 4 Higher sales of earthmoving and other equipment. Consolidated gross profit set another record in the 3rd quarter, totaling $151,900,000 an increase of $38,000,000 or 33.3 percent compared to the Quarter of 2021.
Our gross margin grew to a record 46.8 percent or 540 basis points ahead of the Q3 of 2021 190 basis points better than the sequential quarter in 2022. Higher margins on rentals, rental other and used equipment sales were the primary drivers of the record results. A comparison of 3rd quarter business segment margins to the year ago quarter reveals solid margin improvement with total equipment rental margins of Also, used equipment margins in the quarter improved to 53.7% compared to 37.6% With fleet only margins, which exclude used equipment obtained through trade in, improved to 55.6% compared to 39.7%. Margins on new equipment were 13.8% compared to 12.4%. And finally, margins on parts sales improved to 29% compared to 24.5%, while service margins dipped slightly to 63.2% compared to 65.2%.
Slide 13, please. Income from operations in the 3rd quarter increased 40.2 percent to $64,000,000 compared to 45 point $7,000,000 in the Q3 of 2021. Margin in the Q3 rose to 19.7% compared to Recall the prior year results included a gain of $5,300,000 relating to the sale of our Arkansas branch, which was a component of our transition to a pure rental focus. Proceed to Slide 14, please. Net income in the 3rd quarter rose 55.2 percent to $38,400,000 or 1.05 per diluted share compared to $24,700,000 or $0.68 per diluted share in the year ago quarter.
Our effective income tax rate in the 3rd quarter was 25.2% compared to 24.7% over the same period of comparison. Let's move to Slide 15, please. Adjusted EBITDA in the 3rd quarter reached a record $139,400,000 or 24.1% better than the prior year total of $112,300,000 The percent increase compared favorably to our 17.7% improvement in total Our adjusted EBITDA margin in the 3rd quarter increased to a record 43% or 2 20 basis A stronger revenue mix along with higher margins on used equipment, rental and rental other drove the favorable outcome, which was partially offset by lower gain on sales of PP and E following the prior year sale of the Arkansas branch. Next Slide 16, please. SG and A expenses totaled $87,900,000 in the 3rd quarter, an increase of In addition, higher facility expenses, liability insurance and professional fees contributed to the increase.
Our branch expansion efforts contributed $3,300,000 of expense in the Q3 of 2022 compared to the year ago quarter as 9 branches were opened since the year ago period. Slide 17, please. Turning to our capital expenditures and cash flow. Gross fleet capital expenditures in the 3rd quarter totaled $163,900,000 including non cash transfers from inventory. Net rental fleet capital expenditures in the quarter were 144,500,000 Gross PP and E capital expenditures for the Q3 were $11,900,000 while net PP and E expenditures were 11,100,000 Our average fleet age as of September 30, 2022, remained among the lowest in the industry at 40.6 Tivities totaled $107,000,000 in the 3rd quarter, while free cash flow used in the quarter was 47,100,000 with the latter result reflecting the continuation of our fleet investment program.
Slide 18. On September 30, 2022, the size of our rental fleet based on original equipment costs was approximately $2,100,000,000 an increase of $305,400,000 or 16.7 percent larger than at the close on September 30, 2021. Average dollar utilization in the Q3 of 2022 improved to 42.7% compared to 38.9% in the prior year On Slide 19, net Debt at the close of the 3rd quarter was approximately $1,000,000,000 compared to $973,000,000 at the close of the previous quarter in 2022. Our net leverage in the 3rd quarter remained at 2.2x over the same period of comparison. We have no maturities before 20 $28,000,000 on our $1,250,000,000 of senior unsecured notes.
Let's flip to Slide 20, please. Our liquidity position at September 30, 2022, totaled 960,800,000 including a cash balance of $220,500,000 and borrowing availability under our amended ABL Approximately $1,400,000,000 at September 30, 2022 compared to approximately $1,200,000,000 on June 30, 2022, with the increase reflecting the continued investment in our fleet and favorable fleet appraisal results. Our minimum availability as defined by the ABL agreement remains $75,000,000 By definition, Excess availability is the measurement used to determine if our springing fixed charge is applicable. With excess availability of 1 point $4,000,000,000 We continue to have no covenant concerns. Finally, we paid our regular quarterly dividend of 0.275 dollars per share of common stock in the Q3 of 2022.
And while dividends are subject to Board approval, it is our intent to continue to 3rd quarter results are further evidence of the success of our business strategy. Our intensified focus on rental operations, including significant fleet investment and steady expansion of our geographic reach has strengthened H and E's competitive position, leading to an Meaningful improvement in financial performance, gross profit and EBITDA are currently at record levels as are rental revenues and margins. Also, our dollar utilization, which is a measure of how well we are deploying capital to our fleet, stood at 42.7% this a level that would be difficult to achieve in the absence of a pure play rental strategy. The outlook for our remains encouraging with new opportunities emerging due in part to the U. S.
Manufacturing and energy transition. You should expect further expansion of our operating presence in addition to a continued focus on operational improvement and when appropriate, an occasional enhancement With that, we are ready to begin the Q and A period. Operator, please provide our instructions.
Speaker 0
Our first question is from Seth Weber with Wells Fargo. Please go ahead.
Speaker 4
Hi, guys. This is actually Larry Stavitsky on for Seth today. Thanks for taking my questions.
Speaker 2
Thank you, Larry.
Speaker 4
I just wanted to start out with rate. I mean, obviously, really, really strong again, 10.1 Percent year over year, how should we think about rate going into the Q4 and 2023? I mean, how much further can we see rate go? Or what are our expectations there?
Speaker 2
Yes. Our base expectation is that rates will remain positive. We're not immune to seasonality. Sometime in November, we October is typically our peak utilization month. In November, we start to see some softness from both weather and holidays.
Where we go with rate will probably be determined by how much typical seasonality we receive this quarter. I don't know that it's impossible that we scare a 10% exit rate, but I don't I wouldn't say that's a given. I think we're probably somewhere in the 8.5% to 10% expectation with maybe another point coming out of the quarter. John, would you have anything to add to that?
Speaker 5
Yes. Look, it's as long as utilization holds, which we expect it will. As Brad mentioned, October is typically our peak month for utilization. And with where we are today, we are very comfortable. We expect the remainder of the quarter to be solid.
Demand is still there. As Brad mentioned, seasonality is a reality that we're going to have to deal with. When we look at Q4 of last year, the seasonal impacts were not typical. It was not nearly As impactful as it has been in past years. So with that being said, I think it is fair to say that we could achieve a double digit exit rate Between the 8.5% to 10% range is where we feel comfortable.
Speaker 4
Okay, great. That's very, very helpful. Thank you. And I guess just a follow-up, Can you just tell us how much acquisition contributed to revenue in the quarter and expectations for the 4th quarter?
Speaker 2
Yes. It contributed nothing to the quarter. We actually closed at the beginning of October. So it will be embedded into Q4. We've had pretty limited disclosure, but Roughly $138,000,000 in OEC and a revenue mix that's similar to ours.
I would point out, as excited as we are, this This is a great acquisitions, superior culture, great team where we're going to do good things. This is a smaller business where we're going to find opportunities To purchase product at a better price and to increase their rental rates, among other operational efficiencies. And I think the point there is, They're not performing at quite the same levels of H and E, but $130,000,000 a fleet, bringing a very motivated capable team aboard and they're going to be a Contributor here in Q4 and going forward.
Speaker 4
Great. Thanks for the color guys. I appreciate it.
Speaker 2
Thank you.
Speaker 0
The next question is from Steven Ramsey with Thompson Research Group. Please go ahead.
Speaker 6
Good morning. I want to continue with that line of thought on OneSource. Maybe can you talk to The EBITDA margin gap versus H and E, just order of magnitude and how quickly you think you can get one source to your company operating levels?
Speaker 2
Let me take the Steven, thank you for the question. Let me take the last piece of that first. I think given a steady state of economy, we will have them at our levels in 12 to 18 months. As it pertains to the Impact, I mean, they are a little lower than we're achieving, but give us 12 to 18 months and I think those folks as part of H and E will be operating at the same levels.
Speaker 6
Excellent. And then when you compare this October to other years in October, Is the visibility right now greater than prior years as you look forward? And what is fueling or supporting that visibility?
Speaker 2
Yes, our visibility today is better than the last few years for sure. We've been in like environments before where we have Really good visibility. But the momentum we see in our utilization as we sit here today with the rate achievement, with the discipline in the market, with the constrained Equipment supply that is going to persist through the better part of next year, if not all of next year, lays out a nice set of dynamics for us Continue to grow and achieve improvement in our business. There's not a customer we speak to of any magnitude who has anything other than Manning their projects and getting these things started. No postponements, no cancellations and new projects hitting the books every day.
So I do feel like we see, while there's some other looming economic concerns, Our visibility and all of the data points, anecdotal and quantifiable, point to another very solid 2023.
Speaker 6
Okay, helpful. And then, would you talk about the occasional enhancement of your business strategy, Big moves in the past year plus, what do you what does that mean going forward?
Speaker 2
It could mean a variety of things. We continue to evaluate acquisition opportunities. I think we've been I think we've proven to be very selective and disciplined. We're going to continue to be selective and disciplined. We always have the opportunity of adding a larger portion or maybe stated better, a meaningful portion of specialty rentals into our mix.
That's not fixing to occur next week, but that's an opportunity for us. The opportunity for us to continue to develop our systems, so often folks may believe that with 100 20 locations in 29 states that in some way our systems may not be up to par with our largest competitors and that's just not We could run an enterprise multiples our current size with our systems. And so as we continue to build those out, I think there's a lot of opportunity built So acquisition specialty punching out 10 plus locations a year, Very proud of our team. We spent the better part of a decade paying some tuition or perfecting our warm start strategy that's accompanied by Outstanding acquisition excuse me, talent pipeline. And so we've done the work, 60 plus year old company.
We've always been consistent. We've always been reliable. We've been growing in rental for the last decade And we're positioned ourselves now so we can grow a little bit faster in rental while we're more focused and that's going to continue to show up in our results.
Speaker 6
Excellent. And then last quick one for me. Residential vertical is 10% of trailing 12 month revenue. That is slowing clearly In the coming months, how much of that is multifamily and therefore may have more durability? And should it slow meaningfully?
How could this impact utilization rates and the need to redeploy that fleet?
Speaker 2
It will have no impact And we're almost entirely multifamily. It would be rare to see an H and E equipment machine on a single family residence.
Speaker 6
Great. Thank you.
Speaker 2
Thank you.
Speaker 0
The next question is from Sherif El Sabahi with Bank of America. Please go ahead.
Speaker 7
Hey, good morning, everyone, and congratulations on the great quarter.
Speaker 2
Yes, thank you.
Speaker 7
So just looking At the strong market demand you're seeing in your current fleet, how are you thinking about equipment orders next year relative to this year? And have you placed a large Are a substantial portion of your orders for next year already?
Speaker 2
Shareef, we have. We've placed both POs and what we call APOs, advanced purchase orders. And so yes, we have. We've negotiated with all of our key manufacturers and our orders are slated for next year With an ability to continue to refine as we close the year out.
Speaker 7
And could you give us A sense of the pricing that's been negotiated on those orders?
Speaker 5
Sherif, so far we're looking at Mid to single digits, I mean, our best analysis tells us we're going to be somewhere in the 4% to 6% range and that's with all products combined.
Speaker 7
Got it. And then just looking at rental other, there's a strong pickup in revenues and it's got the highest Dollar utilization across your portfolio, could you give a bit more color on the sub products and demand in that segment?
Speaker 2
Well, when you talk about rental other, that's primarily fuel fuel is one of the larger pieces, hauling and some other ancillary revenue. So could you clarify your question a little more so we'll make sure we're accurate And a response?
Speaker 7
Yes. So looking at the fleet utilization in the other category, You've seen the strongest dollar utilization in that category. If you could give a bit of color on the demand there that's driving that strong dollar
Speaker 2
Yes. Normally with other, we refer more to the gross margin associated. And I think the answer to your question is our teams have done an Outstanding job of increasing delivery fees and fuel charges to our end users as we've It's another component of those ancillary charges.
Speaker 7
Understood. And then just within non residential exposure, How much of that is tied to newbuilds versus maintenance or other ongoing activities such as CapEx spend?
Speaker 2
It's a mix. It's really more predicated by market. We're heavily reliant on new construction. That's Where the majority of those dollars are, but we have selected markets where there's significant ongoing maintenance on an annual basis. So There's a mix and it's really more driven by geography.
Speaker 7
Understood. Thank you.
Speaker 2
Thank you.
Speaker 0
The next question is from Stanley Elliott with Stifel. Please go ahead.
Speaker 8
Good morning, everyone. Thank you for taking the question and congratulations on a great year so far. You all mentioned and I apologize if you've all answered some of that's been bouncing around our calls, but your supply of equipment has been Trained, do you get a sense that improves much in the coming year? And I think that in the context of both Dollar and TimeMute have been exceptionally strong this year. Just trying to get a sense for how that could play out into next year.
Speaker 2
Yes. I don't get the sense that it's going to improve much for this next year, meaning availability from the manufacturers. I do believe that we have improved the alignment with manufacturers that we're going to spend our money with and that we're going to be in better position to achieve, Stanley, if you remember, we reduced our original CapEx guidance. And As I stated very clearly on the last call, that was due to one reason, manufacturers inability to deliver, not our desire not to take So I think that's going to improve. One of the questions we received just earlier was about have we issued POs or We have excellent availability going into next year, but I don't think that's representative of what's going on with the supply chain healing itself.
I think that's good planning with our team and selected manufacturers who we're confident can supply our needs.
Speaker 8
And bringing on one source, I guess, does that change your appetite for additional warm starts in the coming year and even within the context of some of the supply equipment being constrained?
Speaker 2
Look, it certainly increases our appetite in those geographies. As you know, We prefer to do warm starts where there's some name recognition, where we have a warm base of customer revenues, where we have employees. And so bringing this fine company into our company is going to allow us to consider this particular geography more than we have before. Entering 3 new states is important to us and we're looking forward to making those additional considerations.
Speaker 8
And then lastly, with hurricane In your position within Florida, how do we think about that in terms of I don't know if you can drive Your time or dollar, much higher, but it sounds like it would be should soak up a lot of additional equipment down there. And Maybe is there any way to kind of quantify or ballpark what sort of a tailwind that could be for the business over, let's say, 12 months, 18 months, something like that?
Speaker 5
Well, one thing that I can't say is the demand is going to be strong for an extended period of time. As you mentioned, We don't have a lot of excess supply to feed the need of what's going on down there in South Florida. But is it an opportunity for us? Sure it is. When we start to see seasonality impacts hit down there, we will have a little bit of excess fleet come available and There's certainly going to be a place to send it with all the repairs and cleanup that's going on down there.
Speaker 8
Great, guys. Thanks so much and best of luck.
Speaker 2
Yes. Thank you, Stanley.
Speaker 0
This concludes our question and answer session. I would like to turn the conference back over to Jeff Chastain for any closing remarks.
Speaker 1
Okay. Thank you, Gary, and thanks, Everyone for participating on today's call and for your continued interest in H and E. We look forward to speaking with you again. Gary, thank you for assisting us on today's call and Good day, everyone.
Speaker 0
You're quite welcome, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.