H&E Equipment Services Inc
NASDAQ:HEES
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
42.2
65.61
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
H&E Equipment Services Inc
You don't have any saved screeners yet
Good morning, and welcome to H&E Equipment Services First Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead.
Thank you, Kate, and welcome to H&E Equipment Services conference call to review the Company's results for the first quarter ended March 31, 2021, which were released earlier this morning. The format for today's call includes a slide presentation, which is posted on our website at www.he-equipment.com.
Please proceed to Slide 2. Conducting the call today will be John Engquist, Executive Chairman of the Board of Directors; Brad Barber, Chief Executive Officer; and Leslie Magee, Chief Financial Officer and Secretary.
Please proceed to Slide 3. During today's call, we will refer to certain non-GAAP financial measures and we've reconciled these measures to GAAP figures in our earnings release and in the appendix to this presentation, each of which is available on our website.
Before we start, let me offer the cautionary note that this 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 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.
A summary of these uncertainties is included in the safe harbor statement in the Company's slide presentation for today's call and also includes the risks described in the risk factors on the Company's most recent 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.
With that stated, I'll now turn the call over to Brad Barber.
Thank you, Kevin, and good morning, everyone. Welcome to H&E Equipment Services first quarter 2021 earnings call. On the call with me today are John Engquist, Executive Chairman; Leslie Magee, our Chief Financial Officer; and Kevin Inda, our Vice President of Investor Relations.
I will begin on Slide 4. I'll briefly discuss our first quarter highlights, performance and the trends in our rental business and provide an update on our growth strategy. Leslie will review our financial results for the quarter in more detail. After, we will take your questions.
Slide 6, please. We are becoming increasingly optimistic that the cycle maybe near and it returned to pre-pandemic levels. Demand in our end-user markets continued to improve throughout the first quarter, particularly with our rental utilization. The historic winter storm in February was an unexpected headwind for our business during the quarter as approximately 40% of our branches were closed for nearly a week. Even after the weather cleared, the severity of the storm had an extended impact in some of the hardest hit areas.
Despite the impact from the storm and lower-than-expected financial results from this disruption, we are pleased with our operational performance and continued forward momentum in our rental business. Total revenues in the first quarter were down 2.6%, or $7.5 million from a year-ago and we are making significant strides towards further improvement as the year progresses.
Slide 7, please. Now let me provide some additional color on the momentum in our rental business. To frame the cadence of improving customer demand during the quarter, look at our physical utilization trends during the period. As I said on our fourth quarter call, we started the year just under 60% and we expect that utilization to be slightly challenging during the first quarter due to typical seasonality.
From the end of December to the end of January, utilization increased 430 basis points. From the end of January to the end of February, utilization rose another 170 basis points despite the impact from the winter storms. From the end of February to the end of March, we gained another 260 basis points. Also, in early March, physical utilization surpassed our 2020 levels, which was before we realized the full impact of COVID later in the month.
Thus, we eventually landed net utilization of 63.5% for the first quarter, which was down just 80 basis points from a year-ago. Currently, utilization is running significantly higher than this time a year-ago, up nearly 1,000 basis points ahead of the 2020 and within 370 basis points of the same period in 2019, which was a very good year for our rental business.
We are pleased that our rental rates are also stabilizing down 4% versus year-ago and 0.2% sequentially, and improvement from declines of 4.5% and 0.3% in the fourth quarter. As we progress into the stronger seasonal quarters, we expect to see rental rates show sequential positive increases. We are also encouraged by the recent rebound in several key industry indicators. The February Dodge Momentum Index rose 7.1% to 149 from the revised January reading of 139.1, the highest level in nearly three years.
The March ABI increased to 55.6 from 53.3 in February, reaching the highest point since July 2007. The ABC Backlog Indicator and ABC Customer Confidence Index have also shown solid improvement in recent months. This data certainly correlates with the sentiment of our customers, which continues to grow increasingly positive as we move into the year.
As we know, a federal infrastructure proposal is on the table and over time, we will see how the potential bill unfolds. Any meaningful bill that passes would likely be a benefit to H&E. With earthmoving comprising 23% or $400 million of our $1.8 billion total rental fleet and consisting of a wide range of dirt products, we are in a good position to benefit from an infrastructure-related project.
Let me quickly provide some observations about the Gulf Coast, specifically Texas. The state fully lifted restrictions associated with COVID-19 much earlier than many other and our business there is doing well. Energy-related work is coming back and new projects are abundant. Furthermore, Texas is not waiting on an infrastructure bill. Texas DOT recently announced it would let almost $10 billion in new construction projects in fiscal year 2021, which is up 27.5% year-over-year. Additionally, the winter storms wreak havoc on Texas, as well as other joining states with mass power outages, water system failures and other major problems.
Correcting these issues will be a massive effort. It could result in significant spending on projects to ensure these infrastructure failures never occur again. We remain very bullish about our opportunities in Texas and along the Gulf Coast. Overall, demand is solid, industry indicators are positive and business conditions continue to improve. Our market position is strong and we have an expansive and growing footprint in high growth geographies. We like our exposure to a wide range of verticals in the non-residential construction segment and other healthy end markets. H&E has all the tools to capitalize on these improving conditions.
Slide 8, please. Let me conclude by providing an update on our growth strategy. In terms of our organic growth plans, we believe that our expansion team is on track to accomplish our goal of opening eight to 10 starts this year. We opened two new branches in the first quarter in Lodi, California and Concord, North Carolina. With Lodi, we have 10 branches in California and further expect to expand our presence in this state.
Our new branch in Concord, North Carolina will compliment our existing branch in Charlotte and brings the number of H&E branches in the state to eight. Thus far in the second quarter, we have opened another five branches, including Murfreesboro, Tennessee; Longview, Texas; Macon, Georgia; Knoxville, Tennessee; and Marietta, Georgia.
Our Murfreesboro location positions us with a second branch just 25 miles from our existing Nashville facility to adequately support our current customer activity and new business from nearby municipalities. With Longview, we will be able to capture new business and provide greater convenience to our customers in areas between the growing Dallas, Texas and Shreveport, Louisiana market. We now have 22 branches in Texas.
Macon allows us to serve customers between Central Georgia and existing facilities in Atlanta, Savannah and Opelika. Marietta positions a third branch near Atlanta, one of the fastest growing cities in the past 10 years and increases our total locations in the state to five. Knoxville is the third largest city in the state and gives us our fifth location in Tennessee. With seven new locations open year-to-date, we are clearly executing upon this component of our growth strategy.
Lastly, our balance sheet remains strong and we are continuing to explore opportunities to deploy capital for acquisitions in the general rental and specialty segments that will compliment our existing business and further expand our geographic scale and product offering.
With this, I will now turn the call over to Leslie to discuss our first quarter financial results in more detail. Leslie?
Good morning, everyone, and thank you, Brad. Let's proceed with Slide 11 for more details of our financial results. As a reminder, the prior year's first quarter results included a non-cash goodwill impairment charge of $62 million identified in connection with an interim goodwill impairment test due to certain triggering events related to the impact to our business from the COVID-19 pandemic.
Now let me move on to our first quarter 2021 results. We were pleased that total revenues were only down 2.6% or $7.5 million to $278.4 million compared to the same period a year-ago, especially given the impact to our business from the winter storm. Rental revenues decreased 11.8% or $18.7 million to $139.9 million from $158.6 million a year-ago. The size of our fleet decreased by 8.4% or $161 million compared with the prior year comparable period.
Rental rates this quarter declined 4% year-over-year, however, rates were down only 0.2% sequentially. Even though the prior year comparable period was before significant impact to our business from COVID-19, the time utilization in the current quarter decreased only 80 basis points to 63.5% compared to a year-ago. Consequently, our dollar returns decreased 110 basis points to 32% compared to last year.
New equipment sales increased 22.3% to $37.7 million compared to $30.9 million last year. The improvement was primarily the result of 72.3% or $6.1 million increase in new crane sales. Used equipment sales increased 33.8% or $10.5 million to $41.8 million and was primarily the result of higher sales in all product categories, except crane. Sales from our rental fleet comprised 93% of total used equipment sales in both comparable period. Our parts and service segments generated $40.1 million in revenue on a combined basis, which is down 13.9% from a year-ago.
Moving on to a discussion of gross profit and margins. Gross profit decreased 11.8% to $93 million from a year-ago. Consolidated margins were 33.4% compared to 36.9% a year-ago, primarily because of lower gross margins on rentals and used equipment sales combined with revenue mix.
For gross margin detail by segment, rental gross margins were 42.1% during the quarter compared to 46.1% a year-ago due to pressure on rates and time utilization. Also, the prior year comparable period included an additional billing day as a result of leap year on February 29, 2020, which we estimate accounted for approximately 60 basis points of the decline in the first quarter of 2021 around gross margin.
Margins on new equipment sales increased to 11.4% during the first quarter compared to 11.2% a year-ago as margins were higher in all product lines with the exception of new crane and new other sales. Used equipment sales gross margins decreased to 32.1% from 34.5% last year, primarily due to lower margins in all categories, except other used equipment gross margins. Margins on pure rental fleet only sales were 34% compared to 36.4% year-ago. And our parts and service gross margins on a combined basis were 41.6% compared to 41.1% a year-ago.
Slide 12, please. Income from operations for the first quarter of 2020 was $18.5 million or 6.6% of revenues, which is compared to a loss from operations of $31.9 million in the prior year period. Included in loss from operations for the first quarter of 2020 was a $62 million non-cash goodwill impairment charge. Excluding the impairment charge, income from operations was $30.1 million or 10.5% of revenues a year-ago.
The declines in income from operations and margins compared to prior year on an adjusted basis was primarily a result of 2.6% decline in revenues, revenue mix, lower gross margins and lower gain on sales of property and equipment of $4.1 million. Partially offsetting these declines in income from operations were lower SG&A cost of 7.1% or $5.7 million.
Proceed to Slide 13. Net income was $4.2 million or $0.11 per diluted share in the first quarter of 2021 compared to a net loss of $37 million or a loss of $1.03 per share in the first quarter of 2020. The effective income tax rate was 27.1% in the first quarter of 2021 and 21.9% in the first quarter of 2020. Excluding the prior year's impairment charge, net income was $10.8 million or $0.30 per diluted share in the first quarter of 2020. On an adjusted basis, the effective income tax rate was 26.2% in the first quarter of 2020.
Please move to Slide 14. Adjusted EBITDA was $83.2 million in the first quarter compared to $99.2 million a year-ago, a decrease of 16.2%. Adjusted EBITDA margins were down 480 basis points to 29.9% this quarter compared to a year-ago, largely as a result of revenue mix. In addition, adjusted EBITDA margins were negatively impacted by lower gross margins combined with lower gain on sales of property and equipment. As mentioned, SG&A expenses declined $5.7 million or 7.1% partially offsetting the aforementioned declines to adjusted EBITDA margin.
Next, Slide 15. SG&A expenses for the first quarter of 2021 were $74 million compared with $79.6 million in the prior year, a $5.7 million or 7.1%, decrease. SG&A expenses in the first quarter of 2021, as a percentage of total revenues were 26.6% compared to 27.8% a year-ago. Employee salaries, wages, payroll taxes and related employee benefits, and other employee-related expenses decreased $3.4 million, primarily as a result of lower commissions and incentive pay combined with headcount reductions, decreases in health insurance costs and workers compensation costs, and other employee cost reductions implemented subsequent to the first quarter of 2020 in response to COVID-19’s impact to our business.
Bad debt expense decreased $1.3 million and liability insurance expense decreased $0.9 million. Legal and professional fees decreased $0.6 million. Partially offsetting these decreases was a $1 million increase in accrued litigation loss contingencies. Approximately $2.2 million of total increase in SG&A expenses was attributable to our warm start openings compared to a year-ago.
Next, on Slide 16. On this slide, you will find CapEx, fleet CapEx and cash flow for the 12-month period ending March 31, 2021. And our gross fleet CapEx in the first quarter was $71.7 million, including non-cash transfers from inventory. Our net rental fleet CapEx for the first quarter was $32.9 million. Gross PP&E CapEx for the first quarter was $7.3 million and net was $7.1 million. Our average fleet age as of March 31, 2021 was 41.5 months. Free cash flow for the first quarter of 2021 was $22.2 million compared to a free cash flow of $40.5 million a year-ago.
Next, on Slide 17. At the end of the first quarter, the size of our rental fleet based on OAC was $1.8 billion and 8.4% or $161 million decrease from a year-ago. Average dollar utilization was 32% compared to 33.1% a year-ago, reflecting lower time utilization and rates.
Proceed to Slide 19, please. We continue to operate with ample liquidity and no near-term maturities. At the end of the first quarter, we had no borrowings under our amended ABL facility and more than $300 million of cash on hand at quarter end. We had $741.3 million of cash availability at quarter end, net of $8.7 million of outstanding letters of credit.
Our excess availability was $968.5 million at the end of the first quarter, which is the measurement used to determining if our springing fixed charge covenant is applicable. With excess availability of nearly $1 billion, we have no covenant concerns. Also, our net leverage remains low at 2.4x. We paid our regular dividend of $0.275 per common stock share again in the first quarter. And while dividends are always subject to Board approval, it is our intent to continue to pay the dividend.
Let's now get into questions. Operator, please provide instructions for the Q&A session.
We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Steven Ramsey of Thompson Research Group. Please go ahead.
Hey. Good morning. Maybe to start with, the fleet size down 8%, improving outlook and obviously, seasonality coming in, I mean, how do you think about CapEx for rest of the year? Would you prefer your CapEx to be even higher, but the constraints at the manufacturers level maybe slowing you down from maybe what you would prefer to do on the CapEx front?
Yes. Good morning, Steve. The answer is, I think we're very pleased with our CapEx that we have in the Q. There are some products. We've really had an opportunity to pull forward as Leslie mentioned. We had a little headwind in SG&A costs related to pulling forward. We've opened now seven of these Greenfield/warm start for the year. That's been a little bit of a challenge. But generally speaking, we've been able to meet the expectations. If there would be anything different to isolator products, we would pull forward a little faster. But for the full-year, we have no concerns. We got our orders in early. Price protected very, very minimal and in most cases, zero price increase. So we're satisfied that we've got the plan to fill our expectations.
Okay. Great. And then thinking about the winter weather impact, maybe how that hits Q2. Are you seeing any kind of catch-up work there? Is it already caught up? Or do you expect higher fleet on rent in Q2 partly from the winter weather catch-up?
That disruption, we had two specific impacts on our business. The one you're referring to is the pause it placed on our utilization, having 40% of our locations shutdown in the better part of a week and then some of that extended impact certainly pause it. So to that part – to that – to your question, we resumed, we've recently run back up close to 68% utilization. So our trend on on-rent continuing to improve has resumed and we're satisfied with that.
The area it had an impact to us not in Q2, but in Q1 that we can't really replace or resume on was in our parts and service business. When you lose those man hours, they're just lost. It's not pent-up demand. We've got adequate demand on the parts and service side of our business, but it had more of a specific impact to parts and service side. But on the rental side, we're in good shape. Our utilization is trending back to our expectations, approaching 68%, and we expect that trend to continue.
Okay. Great. And one last quick one for me. Your outlook, you had discussed clearly the macros improving and you talked some about what you're hearing from the sales force and customer feedback in the field, can you maybe share or clarify that? And if what you're hearing from customers and from your sales force is more or less optimistic than what you're seeing in some of the macro data.
It's more optimistic, clearly, if you were talking to a group of my sales people and ask them, did we have adequate fleet coming to the extent they had a real view of the total plan. They would say, no, we need to buy much more. And so as we're going to continue to grow the fleet, where we see opportunities, that optimism is much higher in the field, but we're also trying to balance against these right improvements that we expect to make for the remainder of the year.
Excellent. Thank you.
Thank you.
The next question is from Stanley Elliott of Stifel. Please go ahead.
Hey. Good morning, everyone. Thank you all for taking the question. Starting off, thinking about the weather impact, do those items come off rent? You're just curious kind of how that flow through if you look at kind of that 40%, it seemed like maybe a 3% sort of the headwind. But just trying to make sure we’re thinking about that correctly?
Yes. Some of them do come off rent. What you certainly don't get is you lose all your momentum going forward. As we pointed out, our utilization has continued to step up every week in January. I think I covered on our fourth quarter call, every week in January was sequentially improving in physical utilization. When we had that call the second week in February, it was improved over the end of January. And we talked about that cadence just continuing as well in my prepared comments.
But to answer your question, you do get some off rents. You certainly don't, you certainly lose all your momentum and you just kind of stand in place or tread water for a couple of weeks in that broader geography and so that hurts. Good news is that since resumed and we're back off and running and as optimistic as we were before that storm hits.
With the backlogs, a lot of OEMs are facing and some supply chain disruptions, things like that, do you guys have a view whether the rental channel could actually increase penetration this cycle or even over the next 12 months relative to new equipment purchases?
I believe the rental – I think that is likely to occur. My view is that rental penetration in the short-term, and likely the longer-term is going to continue to trend in the direction it's frankly been trending in for quite some time.
And then, lastly, in terms of the SG&A, lots of moving parts with kind of the slowdown and then some of the new add. Is there any way we should think about that to the cadence or the balance of the year especially with, what like two more locations look to be opening?
Yes. I'll let Leslie to give a little more detail, but you nailed it, right. I mean, we had this slowdown, we've got these seven locations that we've opened in a pretty short period of time. Leslie, do you want to give some color on the…
Sure. So on our last call, I stated that we ended the full-year 2020 at 24.7% as a percent of revenue. And we expected to imply pressure as a percent of revenues compared to that for 2021. And that view is really unchanged and that's really largely due to the warm start strategy that we have. And related to the cadence of that, Q1 is always the highest percent of revenue just because of the seasonality. So that should begin to settle down as the year progresses down to that overall guidance that I gave.
Perfect. Thank you, guys. Best of luck.
Thank you.
The next question is from Ross Gilardi of Bank of America. Please go ahead.
Good morning, guys.
Good morning, Ross.
Hey, Brad. Can you talk a little bit more about that Texas infrastructure spend and the timing of that as to when it should get spent and where [indiscernible] types of projects? Any color there will be helpful.
What I was referring to specifically in prepared comments was DOT spending, so roads and bridges, primarily. Those projects will let throughout this year and I do not have the schedule in front of me. But generally, they're largely let earlier in the year as opposed to later in the year. So I would need to research a little bit more to give you firm assurance on that. But I would tell you that's the typical trend. And I think what's nice to see is, their projected letting is going to be up about 30% year-over-year.
Okay. Interesting. And then are you seeing any signs that the smaller independent rental chains that maybe didn't order as early as you did are really struggling to obtain fleet and losing market share to yourselves and national rental companies?
What I can tell you is certainty, if they did not have their orders in, they're not going to get product is what I believe. So I don't have a lot of insights to most small rental competitors. But generally, they order in a very short view in a short horizon, so that would imply to me that they probably did not order early. And if they have not ordered at this point in time, I think they're going to get blocked out on the…
Got it. Okay. And then just lastly, how are you thinking about specialty going forward? I mean, is it just kind of something you wish you had more of and will gradually build up? Or are you feeling more urgency to address it either by M&A or organic investment and what areas of specialty are most compelling to at H&E?
Yes. Good question. I think it's going to be a slow process for us here. What could move that needle faster would be an acquisition opportunity and we are certainly open to investigating those as they come along. Anything we would consider, as you know and others know, we've talked about the trend safety space that plays well with our existing 23%, 24% of our earthmoving products. So we would look for things that are synergistic to our existing customer base bring us some more customers, but more importantly, allow us to penetrate them deeper.
Over a period of time, especially, we'll still be a relatively small piece of the business here at H&E, and given enough years in the right acquisitions and organic growth, it'll become a larger piece of – we're serious, we're looking, our sense of urgency and getting something done, I would just tell you is going to be the same as every other part of our business. We're disciplined and we're focused and we're not going to do anything crazy, but at the same time, we're optimistic.
Well, just on that – just a quick follow-up. In terms of like, how you define anything crazy, it just seems like it's hard to acquire. There's a lot of competition for these assets as we all know. I mean, most of these businesses seem to go for a high single-digit, low double-digit EBITDA margins. I mean, are you – when I asked you about urgency, would you guys be willing to tolerate some upfront dilution to actually start to build a footprint or not? Just curious if you could respond to that.
It's possible. And I don't mean to be evasive. It's possible to the extent we would have to evaluate the opportunity in and off itself. What we pay on day one as opposed to what it may bring to us over a period of time being able to grow that or bring that experience into our business and spread it across our footprint could allow us to pay maybe a price tag that – otherwise we would not have considered in a general rental business. That being said, we're not going to lean too far forward unless we have a high degree of certainty. We can leverage that type of growth opportunities in that hypothetical example I just gave you.
Okay. Fair enough. Thank you.
Thank you. Ross.
The next question is from Steven Fisher of UBS. Please go ahead.
Thanks. Good morning, guys.
Good morning.
I just wanted to start off on the rates. I know you talked about stabilization, which is trying to frame the 4% decline. What was the exit rate on that as you left the quarter? Is that – was it still down year-over-year or were you actually flat or maybe up?
Well, sequentially, we’re down two-tenths over last quarter in our measurement. So that's probably the only information I have that I could give you that kind of guides directionally to what you're looking for.
Okay. I guess I'm just kind of curious if you're anticipating that we'll start to see those rates up on a year-over-year basis in the second quarter at some point?
Yes. Let me speak about sequential. And if you have other questions, I'd be happy to try to answer those as well. It is my anticipation, it is our anticipation that our rates will start to show sequential rate improvement on a quarterly cadence going over the near future. We had stepped down for a number of quarters. I think we were down four-tenths of a percent in Q4 over Q3, we're down two-tenths of a percent, or excuse me, at 20 basis points in Q1 over Q4, seasonally tough times. And we believe that that cadence will start to move in a positive direction. How long it takes us to intersect that year-over-year is a different question that I don't think I'm prepared to answer to, but we certainly will get back to previous rates.
And in eclipse previous rates, the question is, how long does it take us to do that with the current supply demand environment? Again, I'm making these comments just coming out of Q1 and now starting to get the real momentum within our rental business. With the current supply, demand environment and the discipline that I've seen from our competitors in the marketplace and the discipline exists in H&E, we're going to be optimistic that we can push those a little quicker, but rates are very much supply and demand driven. And the good news is, we're moving back into position where we're going to see sequential rate improvement. Give me a quarter or so, and I'll be able to guide you better on year-over-year.
Got it. That's helpful. And you talked a little bit before about some of the optimism out in the field. I guess, I'm just curious how you would characterize the visibility you have for the second half at this point and how it compares to the visibility that you would typically have at this time of year?
Well, there are few things. John Engquist, our President and Chief Operating Officer has been conducting regional meetings, sales meetings and otherwise. We're really talking more specifically within the customer size, small, medium, large, the diversification customers by SIC Code. We use a lot of data to support this. And then there's the anecdotal conversations that go along with our sales force, and of course, our – what we call, iConnect or CRM2. So that's all positive. It's probably more anecdotal. Something I can point out, it’s the number, it’s the statistic. Is that our physical utilization on earthmoving – Steven, you're familiar, we've talked about earthmoving as an early cycle indicator many times. Our earthmoving utilization is exactly the same it was at this point in time in 2019. Our fleet is not much larger. I think it's maybe $25 million larger than it was in 2019.
The point is that we did not decline that fleet to catch it. It's just been somewhat of a stable, slightly larger fleet, and that physical utilization matches 2019, which was a nice year. That is an outstanding indicator to us internally about what's going to come behind the earthmoving being done on these projects. So I don't want to oversell 2021, but the stability we see, I believe it's very real. And I think our opportunity for utilization to improve and rates to incrementally start to moves at right direction, it's painted on everything we look at.
Make sense. And then just lastly, you talked a little bit about infrastructure stimulus and how you're just kind of watching to see how that plays out, what would you have to see to really start putting the orders in or is trying to start fleeting up in advance of that, so you're prepared for those dollars to when they start flowing.
Yes. We would want to see the bill and understand where the dollars are going to be spent. We may have to do some estimates on how many of those dollars are within our 23 state geography. Since we're in most of the high growth markets, we would expect that a large percent of dollars would be. So there is a variety of things we would have to consider.
For this year, we still have an opportunity to bring on more fleet, if we want to. I would tell you that we're very focused on discipline, improving our returns in every sense. And it would likely be more of a 2022 scenario for us on the infrastructure bill just with the timing. I don't know that there are many shovel-ready projects as we sit here today.
Got it. Thanks a lot.
Thank you.
[Operator Instructions] The next question is from Barry Haimes of Sage Asset Management. Please go ahead.
Thanks very much. I had a couple of questions. So first one is, with the price of steel up a fair amount. You mentioned on your CapEx orders you've put in your price protected. But if you weren't, how much have prices gone up for equipment versus which you've got in your order book? And then how much would lease rates or rental rates have to go up to justify, you guys increasing fleet at those higher price levels. So that was the first question?
Sure. The price points really vary by the percent of steel in a particular product. I would generalize and say that we've probably seen 2.5% to 5% steel surcharges or had conversations around those levels with most of our manufacturers. That being said, some of them have maintained their position that they're still today is no steel surcharge. So there's a range.
To the second part of your question, if you just go down to the base level for every 1%, you pay more, you need to achieve 1% more rental revenue to obtain the return you were getting previously. And so obviously that has to flow through historically in the rental business.
The good news for us is there's a blend of older products as well as the newer products – the newest product and everything in between and so that's a target that moves over time. But you want to obtain the same rental revenue increase that you have in cost to protect your returns basically.
Great. Thanks. And then I had a question related to alternative energy. If you were to look at solar versus wind versus let's say a traditional gas-fired power plant. What would be the equipment intensity for the types of equipment you guys sell or rent in each of those three? Is it similar? Are there big differences? Just some sort of a feel for that. Thanks.
There are some differences. I'll tell you we're agnostic as far as what type of power project goes on. They all consume large quantities of products. There is a product mix issue related between solar. Solar is closer to the ground, while wind turbines are way up in the air. So there is some obvious differences in those types of products. I will tell you the products that we deliver to the energy field are the same products that we deliver to our commercial construction sites. We've talked about the fungibility of our products across all product segments many, many times. So we're not a specialist in any regard. And each of the three classifications you mentioned give us outstanding opportunity. We're participating on all of those today.
Great. Thanks very much. Appreciate the help.
Thank you for the question.
This concludes our question-and-answer session. I would like to turn the conference back over to Brad Barber for closing remarks.
We just want to thank everyone for taking the time to attend our first quarter 2021 earnings call. We look forward to revising this group next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.