H&E Equipment Services, Inc.

Good morning, and welcome to H&E Equipment Services' third quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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. At this time, I would like to turn the call over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to a review of H&E's results for the third quarter of 2022. We appreciate your participation and your continued support. A copy of the press release covering our third quarter results was just issued earlier today and can be found along with all supporting statements and schedules at the H&E website, www.he-equipment.com. Our discussion this morning is accompanied by a slide presentation which can also be found at the H&E website under the Investor Relations tab in Events and Presentations. As you will see on slide two of the presentation, I'm joined today by Brad Barber, Chief Executive Officer, John Inquist, President and Chief Operating Officer, and Leslie McGee, 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 three and remind you that today's call contains forward-looking statements within the meaning of the federal securities laws. Statements about our beliefs and expectations and statements containing words such as may, could, believe, expect, anticipate, and 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-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 our caution 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&E Equipment Services.

Thank you, Jeff. Good morning and welcome to our review of the third quarter 2022 financial results. Your participation in today's call and continued interest in H&E are appreciated. Our third quarter 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 third quarter, which included record revenues in our equipment rental segment, strong gains in profitability, and notable margin appreciation on both a business segment and consolidated basis. Proceed to slide four. I'll begin this morning with a review of our financial highlights for the quarter, followed by a discussion of several of the critical 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 fourth quarter and into 2023. Then I will close with a rundown of considerable progress achieved towards expanding our business and positioning H&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. Lastly, we'll follow with a thorough review of third 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 six. A review of our third 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 network. Given these robust business fundamentals, total revenues in the third quarter reached $324.3 million, or 17.7% better than the same quarter in 2021, while improving 10% on a sequential quarterly basis. Also, adjusted EBITDA gained 24.1% on a year-over-year basis, closing the quarter at $139.4 million while posting a margin of 43%, with both financial measures representing records for our company. Revenues from our equipment rental segment, which include ancillary rental revenues, were up 28.6% on a year-over-year basis and 11.4% sequentially, totaling a record of $253.6 million. 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%, 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 $305.4 million larger than a year-ago measure on an increase or an increase of 16.7%. A fundamentally sound business cycle will typically exhibit three important attributes, rental rate appreciation, strong utilization, and growth in the rental fleet. Each was present in the third quarter, and it resulted in record revenue performance. On to slide seven, please. Rental revenue in the third quarter totaled 224.1 million, a year-over-year increase of 26.9%, and a sequential quarterly improvement of 11.4%. The record results surpassed the previous record set last quarter. Rental growth margin rose to 55.6%, or 470 basis points better than the year-ago quarter, and 190 basis points ahead of the second quarter of 2022. 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% and a sequential quarterly gain of 3.2%. On average, our rental rates have increased an impressive 8.9% through the nine months ending September 30, 2022. Our ability to achieve such impressive levels of rate increase was made possible by our proprietary SmartRate platform and exceptional execution by our professional sales force. 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 third quarter average fiscal utilization was 73.3%, representing our highest quarterly measure since the second half of 2017. The result was 140 basis points ahead of the third quarter of 2021, and 10 basis points better than the previous quarter in 2022. Despite growing our fleet OEC by $277 million since the beginning of 2022, including $129 million in the third 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 third quarter dollar utilization of 42.7%, or 380 basis points better than the third quarter of 2021, and 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 2023, we're continually encouraged by what we see and hear. Slide eight, please. 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 traditional seasonality, are expected to sustain a set of underlying fundamentals characterized by strong fleet utilization and favorable pricing trends into 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 to benefit from the onset of numerous infrastructure projects beginning in 2023 as well as other construction projects that contribute to the expansion of the U.S. manufacturing capabilities and renewable energy. We believe these programs will provide greater visibility to emerging construction opportunities. 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 nine, please. Throughout the third quarter, 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&E. Despite continued disruptions to global supply chain, we increased the year-to-date gross capital investment of our fleet to 379.5 million, including 163.9 million in the third quarter. The size of our fleet, as measured by OEC, is now just over 2.1 billion, representing a record for the company. We expect to close 2022 with gross capital expenditures in a range of 465 million to 500 million. Regarding expansion of our operations, our acquisition of OneSource, which closed on October 1st, 2022, increased our branch network by 10 locations, including an initial presence in three states, Illinois, Indiana, and Kentucky. Additionally, we gained density with locations within our existing coverage area. OneSource is an excellent cultural fit for H&E with an emphasis on operations excellence and customer satisfaction. The integration process is underway, and we're excited about the prospects for our combined operations, as well as our growing presence in the Midwest and South. Slide 10, please. The consistent progress of our accelerated new location program was evident in the third quarter, with four branches open during the period. The openings included our 10th branch in Florida, our 12th branch in California, our 21st branch in Texas, and our first branch in Delaware. The latest branch openings bring the total of new locations this year to eight. With more openings expected in the fourth quarter, 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 earth moving distribution in the state of Arkansas, and we continue to evaluate strategic opportunities that would further concentrate our focus on rental operations. H&E has clearly demonstrated the ability to transition our business while successfully executing strategic growth initiatives. In less than two 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, expanding to 120 locations across 29 states while investing significant capital in our rental fleet, which now sits at a record OEC of more than $2.1 billion. Through this period of transition and growth, our operational performance has remained exceptional. With our greater concentration on rental operations, H&E remains poised for revenue growth and margin appreciation throughout this fundamentally robust business environment, while benefit 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&E has both an experienced and motivated team of loyal professionals who demonstrate a dedication to excellence and respect towards our customers and each other. In addition to our intensified focus on rental operations, It is our robust systems, talented workforce, and attractive geographic footprint that position H&E for a successful future. Slide 11, please. I will now turn the call over to Leslie for a review of our third quarter financial performance. Leslie?

Thank you, Brad. Good morning and welcome, everyone. I'll begin today's financial review on slide 12. Third quarter revenues total $324.3 million. an improvement of 48.8 million, or 17.7%, compared to the third quarter of 2021. The increase was led by the combination of a larger rental fleet, rising rental rates, and strong utilization. These same factors drove a 26.9% increase in rental revenue, which set another record in the quarter, totaling $224.1 million compared to $176.7 million in the third quarter of 2021. Rental rates increased 10.1% when compared to the year-ago quarter and were 3.2% better on a sequential quarterly basis. Utilization remained strong throughout the quarter, closing at an average of 73.3% or 140 basis points ahead of the third quarter of 2021 and 10 basis points better on a sequential quarterly basis. We continued our record investment in the fleet with fleet OEC increasing 305.4 million or 16.7% when compared to the OEC at September 30th, 2021. Since the close of 2021, OEC is up $277 million or 14.9%. Continuing with other business segment results, used equipment sales in the third quarter declined $10.8 million or 34.7% to $20.3 million. We continue to prioritize utilization while rental equipment remains constrained, resulting in lower sales across all major product lines. New equipment sales improved by 4.1 million, or 21.4%, to 23.5 million compared to the third quarter of 2021, with the increase due primarily to higher sales of earth moving and other equipment. Consolidated gross profit set another record in the third quarter, totaling 151.9 million, an increase of 38 million, or 33.3%, compared to the third quarter of 2021. Our gross margin grew to a record 46.8% or 540 basis points ahead of the third quarter of 2021 and 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 third quarter business segment margins to the year ago quarter reveals solid margin improvement. with total equipment rental margins of 50.5% compared to 45.6% and record rental margins of 55.6% compared to 50.9%. 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 part 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 third quarter increased 40.2% to $64 million compared to $45.7 million in the third quarter of 2021. Margin in the third quarter rose to 19.7% compared to 16.6% in the third quarter of 2021. The improvement was primarily due to higher gross margins on rentals, rental leather, and used equipment sales and partially offset by lower gain on sales of property, plant, and equipment, or PP&E. Recall the prior year result included a gain of $5.3 million 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 third quarter rose 55.2% to $38.4 million or $1.05 per diluted share compared to $24.7 million or $0.68 per diluted share in the year-ago quarter. Our effective income tax rate in the third 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 third quarter reached a record 139.4 million, or 24.1% better than the prior year total of 112.3 million. The percent increase compared favorably to our 17.7% improvement in total revenue. Our adjusted EBITDA margin in the third quarter increased to a record 43%, or 220 basis points better than the third quarter of 2021, and 160 basis points ahead of the prior quarter in 2022. 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&E following the prior year sale of the Arkansas branch. Next slide 16, please. ST&A expenses totaled 87.9 million in the third quarter, an increase of 13.5 million, or 18.1%, compared to the third quarter of 2021. The increase was due primarily to employee salaries, wages, incentive compensation related to increased profitability, and headcount. In addition, higher facility expenses, liability insurance, and professional fees contributed to the increase. Expressed as a percentage of revenue, SG&A expense, in the third quarter, were unchanged at 27.1% compared to 27% a year ago. Our branch expansion efforts contributed 3.3 million of expense in the third quarter of 2022 compared to the year-ago quarter, as nine 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 third quarter totaled 163.9 million, including non-cash transfers from inventory. Net rental fleet capital expenditures in the quarter were 144.5 million. Gross PP&E capital expenditures for the third quarter were 11.9 million, while net PP&E expenditures were 11.1 million. Our average fleet age as of September 30, 2022, remained among the lowest in the industry at 40.6 months and compared to the industry average fleet age of 53 months. Net cash provided by operating activities totaled $107 million in the third quarter, while free cash flow used in the quarter was $47.1 million, with the latter result reflecting the continuation of our fleet investment programs. Slide 18. On September 30th, 2022, the size of our rental fleet based on original equipment costs was approximately 2.1 billion, an increase of 305.4 million or 16.7% larger than at the close on September 30th, 2021. Average dollar utilization in the third quarter of 2022 improved to 42.7% compared to 38.9% in the prior year quarter. On slide 19, net debt at the close of the third quarter was approximately one billion compared to 973 million at the close of the previous quarter in 2022. Our net leverage in the third quarter remained at 2.2 times over the same period of comparison. We have no maturities before 2028 on our 1.25 billion of senior unsecured notes. Let's flip to slide 20 please. Our liquidity position at September 30, 2022, totaled $960.8 million, including a cash balance of $220.5 million, and borrowing availability under our amended ABL facility of $740.3 million. Excess availability under the ABL facility improved to approximately $1.4 billion at September 30, 2022, compared to approximately $1.2 billion 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 million. By definition, excess availability is the measurement used to determine if our springing fixed charge is applicable. With excess availability of 1.4 billion, we continue to have no covenant concerns. Finally, we paid our regular quarterly dividend of 27.5 cents per share of common stock in the third quarter of 2022. While dividends are subject to Board approval, it is our intent to continue to pay the dividends. Slide 21, please. In summary, our third 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&E's competitive position, leading to an expanded base of opportunities in what remains a fundamentally robust cycle. Greater opportunities have led to consistent and 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 quarter, a level that would be difficult to achieve in the absence of a pure play rental strategy. The outlook for our industry 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 to our business strategy, all of which are intended to drive further improvement in financial metrics. With that, we are ready to begin the Q&A period. Operator, please provide our instructions.

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. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Seth Weber with Wells Fargo.

Please go ahead. Hi, guys. This is actually Larry Stavitsky on Percept today. Thanks for taking my questions.

Thank you, Larry.

I just wanted to start out with rate. I mean, obviously, really, really strong again, 10.1% year over year. How should we think about rate going into the fourth quarter in 2023? You know, I mean, how much further can we see rate go, or what are our expectations there?

Yeah, our base expectation is that rates will remain positive. We're not immune to seasonality. You know, sometime in November, 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. You know, I don't know that it's impossible that we scare a 10% exit rate, but I wouldn't say that's a given. I think we're probably somewhere in the 8.5% to 10% expectation with, you know, maybe another point coming out of the quarter. John, would you have anything to add to that?

Yeah, look, it's, you know, as long as utilization holds, which, you know, 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.

Okay, great. That's very, very helpful. Thank you. And I guess just a follow-up, on your acquisitions, can you just tell us how much acquisitions contributed to revenue in the quarter and expectations for the fourth quarter?

Yeah, it contributed nothing to the quarter. We actually closed at the beginning of October, so it will be embedded into Q4. You know, we've had pretty limited disclosure, but roughly $138 million in OEC and a revenue mix that's similar to ours. I would point out, as excited as we are, this is a great acquisition, 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 products at a better price and to increase their rental rates, among other operational efficiencies. And I think the point there is, you know, they're not performing at quite the same levels of H&E, but, you know, $138 million a fleet, bringing a very motivated, capable team aboard, and they're going to be a positive contributor here in Q4 and going forward.

Great. Thanks for the call, guys. I appreciate it.

Thank you. The next question is from Stephen Ramsey with Thompson Research Group. Please go ahead.

Good morning. I want to continue with that line of thought on one source. Maybe can you talk to the EBITDA margin gap versus H&E, just order of magnitude and how quickly you think you can get one source to your company operating levels?

Stephen, 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, 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&E will be operating at the same levels.

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?

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, you know, lays out a nice set of dynamics for us to continue to grow and achieve improvement in our business. There's not a customer we speak to of any magnitude that has anything other than concern of 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.

Okay, helpful. And then would you talk about the occasional enhancement of your business strategy, big moves in the past year plus? What does that mean going forward?

It could mean a variety of things. We continue to evaluate acquisition opportunities. 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. You know, so often folks may believe that with 120 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 the case. 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 into that achievement. So acquisition specialty, you know, punching out 10 plus locations a year, very proud of our team. You know, we've 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, you know, 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.

Excellent. And last quick one for me, residential vertical is 10% of trailing 12 months. 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?

It will have no impact. And we're almost entirely multifamily. It would be rare to see an H&E equipment machine on a single-family residence.

Great, thank you.

Thank you. The next question is from Sharif El Sabahi with Bank of America. Please go ahead.

Hey, good morning, everyone, and congratulations on the great quarter. Thank you. 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? Have you placed a large or substantial portion of your orders for next year already?

Sharif, 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.

And could you give us a sense of the pricing that's been negotiated on those orders?

You know, Sharif, so far we're looking at, you know, mid to single digits. I mean, you know, our best analysis tells us we're going to be somewhere in the 4% to 6% range, and that's with all products combined.

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 subproducts and demand in that segment?

Well, when you talk about rental other, that's primarily fuel. Fuel is one of the larger pieces, hauling, and some other ancillary revenues. So could you clarify your question a little more so we'll make sure we're accurate in our response?

Yes. So looking at the fleet utilization and the other categories, 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 utilization.

Yeah, 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 continued to grow the fleet, raise rates, and set new levels in utilization. Damage waiver is also another component of that. There's no material change in damage waiver, but it's another component of those ancillary charges.

Understood. And then just within non-residential exposure, how much of that is tied to new builds versus maintenance or other ongoing activities such as CapEx spend?

It's a mix. It's really more predicated by market. You know, we're heavily reliant on new construction. That's certainly 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.

Understood. Thank you.

Thank you. Again, if you have a question, please press star, then 1. The next question is from Stanley Elliott with Stifel. Please go ahead.

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 this, but supply of equipment has been constrained. Do you get a sense that that improves much in the coming year? And I say that in the context of both dollar and time you'd have been exceptionally strong this year. just trying to get a sense for how all that could play out into next year.

Yeah. 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 it. So I think that's going to improve. One of the questions we received just earlier was about have we issued POs. We have excellent availability going into next year, but I don't think that's representative of what's going on in 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.

In 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?

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 three new states is important to us, and we're looking forward to making those additional considerations.

And then lastly, with Hurricane Ian, in your position within Florida, How do we think about that in terms of, you know, I don't know if you can drive kind of your time or dollar much higher, but, you know, it sounds like it would be – it 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?

Well, one thing that I can say is, you know, the demand is going to be strong for an extended period of time. You know, 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, you know, is it an opportunity for us? Sure it is. You know, when we start to see seasonality impacts, you know, hit down there, you know, we will have a little bit of excess fleet come available. And there's certainly going to be a place to send it, you know, with all the repairs and cleanup that's going on down there.

Great, guys. Thanks so much and best of luck. Yeah, thank you, Stanley.

This concludes our question and answer session. I would like to turn the conference back over to Jeff Chastain for any closing remarks.

Okay, thank you, Gary, and thank everyone for participating on today's call and for your continued interest in H&E. We look forward to speaking with you again. Gary, thank you for assisting us on today's call, and good day, everyone.

You're quite welcome, sir. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.