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H&E Equipment Services (NASDAQ:HEES)
Q1 2020 Earnings Call
May 08, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to the H&E Equipment Services first-quarter 2020 earnings 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.

Kevin Inda -- Vice President of Investor Relations and Strategy

Thank you, Mark, and welcome to the H&E Equipment Services conference call to review the company's results for the first quarter ended March 31, 2020, 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 president; 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. Summary of these uncertainties is included in the safe harbor statement contained in the company's slide presentation for today's call and also include the risks described in the risk factors in 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.

Brad Barber -- Chief Executive Officer and President

Thank you, Kevin, and good morning, everyone. Welcome to H&E Equipment Services first-quarter 2020 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. Slide 4, please.

Given the unprecedented challenges that we're facing with the COVID-19 crisis, I'll begin my comments today addressing the actions our company has taken in response and the impact it is having on our business. I will briefly discuss our first-quarter performance, and then Leslie will review our financial results for the quarter in more detail, after we will take your questions. Slide 6, please. All of us are now dealing with the realities of COVID-19.

H&E has been in business since 1961, and since that time, we've seen it all. This includes hurricanes, floods, fires, earthquakes and blizzards, along with multiple recessionary periods, including the last major financial crisis beginning in 2008, with project work literally stopped for a lengthy period of time. The senior management team of H&E has more than 100 years of combined experience, not only within the industry, but specifically at H&E. Difficulty and challenging market conditions are not new to us.

However, this COVID-19 virus situation is unique in many ways, and we're treating it with respect and seriousness it deserves. We care deeply about our employees, our customers and the communities we serve nationwide. To this end, we took quick and strict action based on CDC and WHO recommendations to curtail illness in our workforce and reduce business interruption for our company and customers. We have been designated an essential business, and our branches remain open to serve our customers in each of our markets.

We are very focused on safely providing equipment, parts and service that customers need to perform their work. There have been project cancellations and delays as a result of COVID-19. While our business will continue to be impacted, activity remains for all of our services, albeit at much lower levels. We have taken and will continue to take the necessary actions to rightsize our business in this environment, which is evolving on a daily basis.

These actions include headcount reductions, modified work schedules, reducing hours where needed, furloughs in selected branch locations as well as appropriate adjustments to our capital spending plans. Slide 7, please. Our results for the first quarter were impacted by the ongoing rebalance of supply and demand, seasonality and the COVID-19 outbreak. Demand in our end-user nonresidential and other construction markets in January and February were softer than our expectations, pressuring fiscal utilization.

Wet weather was a headwind during the quarter, especially during January and February. In March, weather improved, but the negative effects of COVID-19 began to set in and additional pressure was quickly evident in all of our markets. As a result, our financial results were negatively affected from the top to the bottom line, with total revenues down 8.8% from a year ago. Let me highlight the impacts on two major business segments during the first quarter.

In terms of our rental business, physical utilization decreased 570 basis points to 64.3% from 70% a year ago. Rates were 4% lower than a year ago and declined 1.9% sequentially. As a result, rental revenues decreased 0.7% compared to last year, and dollar utilization declined to 33.1% from 35.2% a year ago. As expected in turbulent times, new equipment sales are often impacted more than our other revenue streams.

Customers are not as likely to commit to large capital purchase given today's uncertainty. Subsequently, new equipment sales were down 47.8% from a year ago, with cranes down 58.6% and earthmoving, down 42.8%. Given the significant weakness in the energy markets, let me remind everyone that our exposure to oil and gas remains low at 6% of total revenue on a last 12-month basis. This compares to 13% on a LTM basis in the fourth quarter of 2014, the last peak period.

Lastly, we have opened two new branch locations this year, adding a location in Birmingham, Alabama, and an additional Raleigh, North Carolina, location. I'll turn the call over to Leslie to discuss our first-quarter financial results in more detail. Leslie?

Leslie Magee -- Chief Financial Officer and Secretary

Good morning, everyone, and thank you, Brad. Let's proceed to Slide 12 for more details of our financial results. Before getting into the financials, I would like to briefly discuss the noncash goodwill impairment charge of $62 million identified in connection with the interim goodwill impairment test due to certain triggering events related to the impact to our business from the COVID-19 pandemic. The impairment charge will not result in any cash expenditure and will not affect the company's cash position, liquidity, availability or covenant cash under its senior secured credit facility.

As a result of various headwinds Brad just discussed, our total revenues decreased 8.8% or $27.7 million to $285.9 million compared to the same period a year ago. Our rental revenues decreased 0.7% to $158.6 million from $159.7 million a year ago. Our average time utilization based on OEC was 64.3% for the quarter compared to 70% a year ago. The size of our fleet increased by 3.3% or $61 million compared with the prior year comparable period.

Rental rates this quarter declined 0.4% year over year. Rents decreased 1.9% sequentially. Due primarily to significantly lower physical utilization, our dollar returns declined 210 basis points to 33.1% versus last year. Our new equipment sales decreased 47.8% or $28.2 to $30.9 million compared to $59.1 million last year with lower new sales in all product lines.

New crane sales were down $58.6 million or $11.9 million, and earthmoving sales decreased 42.8% or $9.8 million. Used equipment sales increased 5.3% or $1.6 million to $31.2 million, decreasing in all major product lines except earthmoving, which increased $4.2 million or 41.3%. Sales from our rental fleet comprised 93% of total used equipment sales this quarter compared to 96% a year ago. Our parts and service segment generated $46.6 million in revenue on a combined basis, up 1.3% from a year ago.

At this time, let's move on to gross profit and margins. Gross profit decreased 7.2% to $105.5 million from a year ago. Consolidated margins were 36.9% compared to 36.3% a year ago primarily as a result of the positive mix shift to rentals. Lower gross margins in certain business segments partially offset this positive mix shift.

For gross margin detail by segment, our rental gross margins were 46.1% during the quarter compared to 48.7% a year ago and were impacted by the 570 basis point decline in time utilization and pressure on rates. Margins on new equipment sales decreased 11.2% during the first quarter compared to 11.9% a year ago, largely due to lower new earthmoving and new crane margins. Used equipment sales gross margins were 35.5% from 35.8% last year primarily due to lower new margins, I'm sorry, lower used margins on earthmoving, material handling margins and used crane margins. Margins on pure rental fleet only sales were 36.4% compared to 37.5% a year ago.

Parts and service gross margins on a combined basis increased to 41.1% compared 40.7% a year ago. Slide 13, please. As a result of the $62 million impairment charge, loss from operations for the first quarter of 2020 was $31.9 million. Excluding the impairment charge, income from operations for the first quarter of 2020 decreased 15.7% to $30.1 million or 10.5% of revenues compared to $35.7 million or 11.4% of revenues in the prior year period.

The decline in income from operations and margins was primarily a result of lower gross profit and gross margins in the rental business, combined with higher SG&A costs. These declines were partially offset by a positive mix shift in revenue mix and an increase in gain on sales of property and equipment compared to the last year's first quarter. Proceed to Slide 14. Net loss was $37 million or $1.03 loss per share in the first quarter.

The effective tax rate was 21.9% in the first quarter of 2020. Adjusted net income was $10.8 million or $0.30 per diluted share in the first quarter of 2020 compared to net income of $14.2 million or $0.40 per diluted share in first quarter of 2019. The effective tax rate was 26.2% on an as-adjusted basis in the first quarter of 2020 compared to 26.4% a year ago. Please move to Slide 15.

Adjusted EBITDA was $99.2 million in the first quarter compared to $100.9 million a year ago, a decrease of 1.7%. Adjusted EBITDA margins expanded 250 basis points to 34.7% this quarter compared to a year ago primarily due to the shift in revenues to rentals and higher gain on sales of property and equipment. Partially offsetting these positive factors were higher SG&A costs versus a year ago. Next on Slide 16.

SG&A expenses for the first quarter of 2020 were $79.6 million compared with $78.6 million in the prior year, a $1 million or 1.2% increase. SG&A expenses in the first quarter of 2020 as a percentage of total revenues were 27.8% compared to 25.1% a year ago. Employee salaries, wages, payroll taxes, employee benefits and other related expenses decreased $1.7 million. Offsetting this decrease was a $1.5 million increase in excess liability insurance and a $0.9 million increase in outside services.

Expenses related to greenfield branch expansions increased $0.5 million compared to a year ago. Next on Slide 17. And on this slide, you'll find fleet capex and cash flow for the first quarter. And our gross fleet capex in the first quarter was $32.5 million, including noncash new and used inventory.

Our gross capex was down approximately 53% compared to the first quarter a year ago. Our net rental fleet FX for the quarter was only $3.4 million. Growth PP&E capex for the quarter was $10.1 million, and net was $3.2 million. Our average fleet age as of March 31 was 37.7 months.

Free cash flow for the first quarter of 2020 was $40.5 million compared to a use of $94.3 million a year ago, which should reflect the acquisition of We-Rent-it in February of last year. The increase in free cash flow was also due to lower net fleet investment this year. Next, Slide 18, please. At the end of the first quarter, the size of our rental fleet based on OEC was $1.9 billion, a 3.3% or $61.2 million increase from a year ago.

And average dollar utilization was 33.1% compared to 35.2% a year ago, reflecting lower time utilization and rates. Proceed to Slide 20, please. And lastly, we have a strong balance sheet with ample liquidity and no near-term maturities. At the end of the first quarter, the outstanding balance under the amended ABL facility was $184.9 million and is down $32 million since December 31.

We had $557.3 million of cash borrowing availability at quarter end, net of $7.7 million of outstanding letters of credit. Our excess availability was $994.4 million, which is the measurement used to determine if our springing fixed charge covenant is applicable. Our credit agreement requires $75 million of excess availability before this covenant would even spring. Therefore, with excess availability at March 31 of nearly $1 billion, we are in a very strong liquidity position, and we have no covenant concerns.

The company paid its 23rd consecutive quarterly cash dividend. And while dividends are always subject to approval by the Board of Directors, it is our intent to continue the dividend policy. So with that, let's now get into questions. And operator, if you would please provide instructions for the Q&A session?

Questions & Answers:


Operator

[Operator instructions] We can now pass to the first question from Seth Weber, RBC Capital Markets.

Seth Weber -- RBC Capital Markets -- Analyst

Hey, everybody. Good morning and hope you're doing well. A couple of questions this morning. I guess, maybe, Brad, you talked about January and February being a little bit softer than you expected.

Can you just give us any color why that — that's kind of pre-COVID, obviously. So can you give us any thoughts as to what may have caused the slower start to the year? And then as a follow-up, can you just talk about? Can you share any trends that you're seeing here in — that you saw in April? Did you see any stabilization across the month? Or anything that you could point to for more kind of recent update, kind of a real, more of a real-time update? Thank you.

Brad Barber -- Chief Executive Officer and President

Sure. Well, thank you, Seth, and we hope you're doing well also. So January and February were particularly wet months even by January and February standards, and we kind of called that out to some degree. That was a piece of it.

As we've talked for a couple of quarters now, we've stated we've seeing supply and demand coming into balance, and we thought people were acting rationally. So I would say that in early Q1, weather was a larger impact than we had planned, and we were still seeing some of the supply and demand imbalance in select markets. So we weren't way off of expectations, but we were a little softer than we had planned, and those were the primary drivers. As it pertains to are we seeing some stabilization? We should think we are.

Our utilization bottomed somewhere close to 56%. We're running more in the neighborhood of 59% to 60% today. We've seen some incremental improvement over the last few weeks. But I would tell you that it's really early, and it's difficult to project what utilization may do for the remainder of the year.

But we do think we've seen the bottom. We hope that this incremental improvement continues to occur. But the last two weeks have been positive. I'll tell you the feedback from our field is well more positive than what is evidenced in that utilization I just offered you to context, but that's where we are.

Seth Weber -- RBC Capital Markets -- Analyst

OK. And if I could just get a follow-up in there. Given your comments about supply/demand for the fleet and the industry, your gross capex, rental capex was down, I think, 55% or something like that. Is that the right way to think about it? I'm not asking for just a guide for the year, but just, directionally, is that how you're thinking about the fleet, your investment this year? And do you think fleet will be bigger or smaller by the end of the year versus last year? Thanks.

Brad Barber -- Chief Executive Officer and President

I think our fleet is going to be down a little bit by the end of the year, and we're going to be very disciplined with our capex. So I hope that's helpful to you.

Seth Weber -- RBC Capital Markets -- Analyst

Yes. That's perfect. Thank you very much, guys. Please stay safe.

Operator

We can now pass to the next question from Steven Ramsey, Thompson Research Group.

Steven Ramsey -- Thompson Research Group -- Analyst

Good morning. I guess, starting with kind of free cash flow expectations. Do you expect to be positive free cash for the year? Do you need or plan to sell fleet to do so? And in the event that you are positive fee cash? Would it be used for debt pay down? Or would you just kind of keep it around for safety and any opportunistic opportunities to come along?

Brad Barber -- Chief Executive Officer and President

Yes. Sure, Steven. So we do not have to sell down fleet to generate positive cash flow. And as is kind of always our policy as we collect this cash, we're going to pay down our ABL.

So that should answer both of those questions.

Steven Ramsey -- Thompson Research Group -- Analyst

Great. And then thinking about the Gulf Coast and the southeast, with those regions making up such a large percentage of sale, can you maybe talk to activity specifically in those markets through Q1 and into April? And is there enough activity maybe to warrant moving fleet into the area or some incremental capex into those branches?

Brad Barber -- Chief Executive Officer and President

So if we talk solely about our rental business, I would tell you that our utilization or our needs are pretty much the same across the footprint. If we were talking about the distribution business, then states like Texas may be more heavily impacted on crane sales and where we're the match dealer, we're down in Arkansas may be more heavily impacted with earthmoving sales. But as it pertains to rental fleet, there is no dramatic shift of product that's necessary. So no, we're not moving any unusual amount of fleet.

We're always managing fleet. That's part of our process, always will be, but nothing unusual there.

Steven Ramsey -- Thompson Research Group -- Analyst

Great. And then I guess somewhat similarly, maybe if you want to dig in on energy-exposed branches. Is there any difference there as far as moving fleet out of those branches? Or are you leaving it in the area to be positioned for any return of activity?

Brad Barber -- Chief Executive Officer and President

Sure. So as you know, it's about 6% of our overall revenue. We've spoken in other calls that our heaviest exposure relative to our exposure is probably in the Eagle Ford shale, and we've been moving fleet out of that market or those select locations for quite some time now. So we're where we need to be.

That's been a kind of a constant and ongoing process that we're kind of achieving what we need at this point, and will start to slow.

Steven Ramsey -- Thompson Research Group -- Analyst

Excellent. Thank you.

Operator

We may now pass to the next question from Steven Fisher, UBS. Please go ahead.

Steven Fisher -- UBS -- Analyst

Great. Thanks. Good morning, guys. Hope you're doing well.

Just to follow up on the comments that you made to Seth about color from feedback in the field, so what exactly are they telling you that gives you a little bit more confidence relative to what that initial utilization number is looking like?

Brad Barber -- Chief Executive Officer and President

Our operators are just generally very optimistic. Our customers are generally very optimistic. The thing that causes me a little pause on their optimism, while I appreciate it, is just the low levels we're operating from today as compared to where we were a year ago. But there are a lot of folks who see a silver lining.

And I think the prevailing sentiment of our customers and our operators, and I suspect our entire industry, is that this recovery is going to be well quicker than any other recovery we've seen from a soft point like this. The cadence that actually occurs on is we'll all get to watch it as it happens. But I can tell you that our folks and our employees and our customers, and I believe our sector, in general, is very optimistic about opportunity for things to continue to improve, and I think the question is around how rapidly.

Steven Fisher -- UBS -- Analyst

So I guess, just to follow up there, so is there any consistency as to how project is actually starting back up and what they're seeing? Is it really just in states that had closed down projects? Is it any particular end markets? Really just trying to get a sense of the extent of project activity that's starting back up now. And if there's any sort of rhyme or reason to how it's happening?

Brad Barber -- Chief Executive Officer and President

I don't think I can lead you to a rhyme or reason, that's a common theme across all geographies. What I could share is we have projects now that took a 6-, 8-week pause that are coming back online, and some of these with sizable amounts of product on them. So that's a positive, that's good news. We also, at the same time have projects that we were expecting to start over the last few weeks or maybe in the near term in the next few weeks that are either delayed or, in certain cases, have been canceled.

So there are puts and takes. It's across all geographies. There are certain segments, the convention services business, that's not going to be good for the rest of the year. We know that.

But generally speaking, these nonresidential commercial construction projects, it's a mixed bag of projects starting to come back online, but it's not one geography where an entire state was locked down. There have been many, most states we operate in have allowed construction activity to maintain at some levels, and some of them almost entirely. And then within that, you have certain customers or projects that have self-imposed shutdowns for a period of time for safety reasons.

Steven Fisher -- UBS -- Analyst

Got it. That's helpful. And then just based on what you've seen so far in the rate landscape, how would you say the industry, overall, is reacting? Is there — you saw some pricing softness. Are you seeing broad pricing declines out there? Or is it coming from a more limited section of the industry?

Brad Barber -- Chief Executive Officer and President

So there's certainly pricing pressure. Any time utilization fall to these levels and remains at levels other than typical, we're going to have pricing pressure. But I can tell you, we've seen a lot of discipline from our largest competitors. There have been isolated regional competitors who don't show the same discipline, but they're not large enough to disrupt the broader opportunity that exists.

That's a nuisance at this point. But our larger competitors that we run into every day on all of these projects, they're remaining disciplined.

Steven Fisher -- UBS -- Analyst

Very helpful. Stay safe. Thanks a lot.

Operator

We can now pass to the next question from Ross Gilardi, Bank of America. Please go ahead.

Ross Gilardi -- Bank of America Merrill Lynch -- Analyst

Good morning, guys. Brad, I'm just curious as cranes are stabilizing, are you getting that fleet back in the field with shorter duration rentals that give you less visibility? Or do you — like the very modest recovery you've seen off the bottom. Or is the duration of those projects kind of what you lost on the way down? I'm just trying to get a feel for if it's more like hand-to-mouth type business as you're bouncing off the lows here.

Brad Barber -- Chief Executive Officer and President

No. Ross, it's the same customers that called the machines off rent that are calling us to rent more machines. So we expect similar duration. There's no mix in project type or mix of product within project types.

It's business as usual to the extent that, that makes sense.

Ross Gilardi -- Bank of America Merrill Lynch -- Analyst

Got it. And then I don't know if this is for Leslie or for whomever, but what's the goodwill charge tied to? Was it tied to any specific acquisition or a region? Any color there you can provide?

Leslie Magee -- Chief Financial Officer and Secretary

So it's not tied to a specific acquisition because it's all accumulated together once it goes on the balance sheet. But we did an impairment test, an interim impairment test due to triggering events surrounding COVID and the decline in the economic conditions and the stock price and the industry and those sort of things, but it relates to a reporting unit of ours that is one of our rental components that includes branches that have a distribution component to it.

Ross Gilardi -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks. And in terms of time, you guys, I mean, if we're sitting here in the kind of 60% range in a couple of months deeper into the season, do you think that you or the larger players — I'm not asking you to speak for anybody else, but is it natural to believe that maybe folks are going to get more aggressive on selling down some fleet to shrink their fleets a little bit more as you get like more toward the end of the season? And what do you feel like a pricing perspective? I mean I realize that everyone's — the major players sound like they're being disciplined now. But the longer we go at depressed levels, is there a risk that price deteriorates kind of later summer and into the fall?

Brad Barber -- Chief Executive Officer and President

I guess, there's always a risk that pricing could deteriorate. It's not my opinion that it's likely to continue to deteriorate. With the strength of our balance sheet and I think our larger competitors, that discipline is easy to have. Now for companies that require heavy use of the auction process to liquidate assets, that's probably the riskiest component from a value standpoint.

Residual value, retail values are remaining steadier than auction values. And as you know, we will use the auction process in a isolated way, but that is not the big way we move product at H&E. We do it through our professional sales force. So I think that we're going to continue to see pricing similar to what we see today.

Leslie and I both went through what the margins were on used equipment sales. I think 93% of that is fleet sales. We talked about earthmoving. Earthmoving has really been the headline of the more depressed pricing at auction.

And we're still getting really good values. And I'd also remind you on top of the strength of our balance sheet, I mean, our fleet is 37 months old. We've got a really young fleet. We're just not going to give this product away.

And I think that you will continue to see discipline among our larger players in the same respect.

Ross Gilardi -- Bank of America Merrill Lynch -- Analyst

OK. Got you. And then just on the distribution business, if you guys could comment a bit. I mean you didn't have much of a recovery.

I mean you did in earthmoving for a bit. The cranes business has just been dismal now for years. And what are you guys thinking on the distribution business going forward and the future and just how are you managing that in the downturn? And any kind of glimmers of hope or what it would take to really turn it around?

Brad Barber -- Chief Executive Officer and President

Sure. Well, there are a lot of things I can say about distribution. I mean in some respect, it allows us to maintain our fleet at the high levels we do. I think our distribution business is very helpful to us in achieving the types of consistent price margins and value that we receive, particularly on earthmoving and crane products being sold out of our rental fleet.

That distribution piece is, in one respect, parts and services, the steadiest piece of our overall revenues, typically would have been the gross margin north of 40%. So there are a lot of good things. If we were to look at the volatility of the new sales piece alone, I would understand the concern of the question. But I would say to you that we're happy with the balance of what we have.

Where we are in the distribution business, we're not growing it. We don't have the opportunity to grow it. We're confined by geographical territory. And that focus does not dilute our focus on growing our rental business.

And so, like I say, there's some puts and takes within that relationship, but we like the balance that we have today.

Ross Gilardi -- Bank of America Merrill Lynch -- Analyst

OK. Got it. Our best, guys. Thank you.

Operator

[Operator instructions] We can now pass to the next question from Stanley Elliott from Stifel. Please go ahead.

Brian Brophy -- Stifel Financial Corp. -- Analyst

Hi. Good morning. This is Brian Brophy on for Stanley. Just wanted to ask about SG&A.

Given some of the cost actions you guys are taking, how should we be thinking about that into the second quarter and into the back half of the year? Thanks.

Leslie Magee -- Chief Financial Officer and Secretary

Yes. That's a good point. So I would not consider the SG&A dollars that we incurred in the first quarter to be so much the relevant run rate moving forward given the cost reductions that we've made. Instead, I would look to SG&A as a percentage of revenues.

And today, we expect SG&A as a percentage of revenue on a full-year basis in 2020 similar to what we saw in the first quarter. The various quarters throughout the year may have some slight ups and downs, but on a full-year basis, I expect it to be in line with what we saw in the first quarter.

Brian Brophy -- Stifel Financial Corp. -- Analyst

OK. Perfect. That's really helpful. And then focusing specifically on some of the large petrochem projects that you guys have exposure to, what are you seeing in this area? Are you guys seeing cancellations? Delays? And do you guys expect these projects to kind of go through when the economy starts getting going again?

Brad Barber -- Chief Executive Officer and President

Sure. So what we've seen at this point has been much more delays than cancellations. Keep in mind that there are a lot of products going on at all times. Some of them are traditional maintenance that occurs particularly this time of year, others are just new construction and growth.

And from a safety standpoint, many companies, many petrochemical refineries as well as the contractors themselves elected not to have that many folks aggregating in such tight quarters for health concerns. So we certainly have seen some delays, pauses. We're certainly seeing those folks go back to work literally as we speak and wrapping them up in what appears to be kind of waves or phases. Will we see cancellations or broad-based cancellations due to this? That's not what we're seeing at this point in time, but we're going to continue to pay attention.

John Engquist -- Executive Chairman of the Board of Directors

I would also point out that we've seen some of our big industrial contractors, the headcounts of their workers go way down, and we're starting to see those workers go back to work. So that's an encouraging sign for us.

Brian Brophy -- Stifel Financial Corp. -- Analyst

Perfect. That's really helpful. I'll pass it on. Thank you.

Operator

We may now pass the next question from Sean Wondrack, Deutsche Bank. Please go ahead.

Sean Wondrack -- Deutsche Bank -- Analyst

Good morning and I hope everybody is doing well. Just as you look at your exposure across your footprint, and it's great to hear that some of these industries are beginning to come back. When you think about oil and gas and you think back to kind of 2014, 2015 and what we saw there, were there some lessons learned there? And are there some ways to kind of get ahead of any potential weakness there? If you could provide some perspective, that would be helpful. Thank you.

Brad Barber -- Chief Executive Officer and President

Sure. Well, there were certainly some lessons learned. I think we peaked around 13% of our revenues, more than double where we are today, was from oil and gas. And so the lessons we've learned and kept in practice this entire time since that point in time have been to be more diversified, and when we're going to do business in those oilfield market or oilfield projects that our rate should be reflective or our return should be reflective of that activity and the volatility that can be associated.

But generally, I think what you've seen of running at 6%, 7% really since that peak time as a percent of revenues has been a byproduct of our lesson learned. We're not heavily weighted with any particular product. None of product that we offer the oilfield are specific to the oilfield. They're fungible in most any commercial construction project you would find in the U.S.

So we certainly learnt some things back then and adapted our business to mitigate that risk, and I think it's paying dividends for us today.

Sean Wondrack -- Deutsche Bank -- Analyst

And then because you have sort of shrunk it by more than half, what does that mean from kind of managing the fleet perspective, given that, that equipment is exactly fungible with everything? Does that alleviate the burden a lot on how you can handle that there?

Brad Barber -- Chief Executive Officer and President

Well, it's certainly helpful. I mean to have — I'm going to generalize here to have half of the inventory. We were only talking rental revenues, but if you only had half of your rental revenue coming from oil and it has a sharp downturn, as it has again, then it's much easier to move those assets. But generally, it's a nonevent within our company.

I don't want to make it sound as if we're not worried about oil and gas or the need to fleet manage. But the way we fleet manage, the method, the communications, our policies, our procedures, all of these things really are no different for the oil and gas markets. So when we see a downturn, we naturally respond in the same way, and it's just not an event internally for us anymore.

Sean Wondrack -- Deutsche Bank -- Analyst

OK. Thank you. And then just my last one. There's obviously been some rumblings about a potential infrastructure bill.

And I know it kind of comes in and out of the new, but can you just remind us what that would mean to your business, please?

Brad Barber -- Chief Executive Officer and President

It would be tremendous for our business. Every time — I think, sometimes, we don't get excited enough because we've heard about it for so long, but if there were a meaningful infrastructure bill, it will be outstanding for H&E equipment services.

Sean Wondrack -- Deutsche Bank -- Analyst

That's great. Good luck going forward. Hope everybody remains safe. Thank you.

Operator

We can now move to our next question from Seth Weber, RBS Capital Markets. Please go ahead.

Seth Weber -- RBC Capital Markets -- Analyst

Hey. Thanks for taking the follow-up. Just going back to Steve Fisher's question, Brad. In the context of products getting restarted, can you just talk about, has your equipment been parked? Is it idle at the project site? Or has it been returned to the depot, to the branches, and then it has to go be put back out? I'm just trying to understand how quickly you guys could start to see some of this restart activity? If the equipment is just sitting on the site already, that would obviously be a pretty quick turnaround.

Thanks.

Brad Barber -- Chief Executive Officer and President

Yes. So Seth, it's both. The projects that had the ability to secure the product are certainly doing so, and it's sitting there. We're tracking it there, and it's off rent there.

And I would also say that our largest projects that we're participating on in sheer volume of units on a project fall within that category, that product was not moved off of those projects. And so when they say we're going back to work, for a lot of them, flip the switch and put it back to work. Now on smaller projects, smaller customers have returned product to our yard, but we don't have any capacity issues on our yard. And our largest projects with the largest amounts of equipment, that product is still sitting there either going back on rent literally as we speak or waiting to go back on rent here in the very near term.

Seth Weber -- RBC Capital Markets -- Analyst

OK. That's all I had guys. Thanks again. Stay safe, folks.

Operator

There are no further questions at this time. I would like to hand the call over to Brad Barber, please.

Brad Barber -- Chief Executive Officer and President

Yes. I'd like to thank everyone for joining us on our quarterly call. And we look forward to speaking to you at the end of Q2. Thank you.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Kevin Inda -- Vice President of Investor Relations and Strategy

Brad Barber -- Chief Executive Officer and President

Leslie Magee -- Chief Financial Officer and Secretary

Seth Weber -- RBC Capital Markets -- Analyst

Steven Ramsey -- Thompson Research Group -- Analyst

Steven Fisher -- UBS -- Analyst

Ross Gilardi -- Bank of America Merrill Lynch -- Analyst

Brian Brophy -- Stifel Financial Corp. -- Analyst

John Engquist -- Executive Chairman of the Board of Directors

Sean Wondrack -- Deutsche Bank -- Analyst

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