Herc Holdings Reports Strong First Quarter 2024 Results and Affirms 2024 Full Year Guidance
First Quarter 2024 Highlights
-
Record first quarter total revenues of
$804 million , an increase of 9% -
Net income decreased 3% to
$65 million , or$2.29 per diluted share -
Adjusted EBITDA of
$339 million increased 10%; adjusted EBITDA margin increased to 42.2% - Rental pricing increased 5.1% year-over-year
- Added 15 new locations through M&A and greenfield openings
-
Corporate credit rating upgraded by
S&P Global to BB
“We are off to a strong start in 2024, achieving record first-quarter revenue and adjusted EBITDA margin as we continue to capitalize on key growth markets, like semiconductor, data centers, renewables and public infrastructure, while also investing in our network scale through greenfields and acquisitions, and elevating our higher-return specialty product lines,” said
"We are making progress against each of our key 2024 priorities — enhancing our customer experience through our E3 business operating system, managing fleet efficiency and expenses with discipline, and scaling our network through greenfield locations and acquisitions in top 100 metropolitan markets," said Silber. "Based on this strong performance and current line-of-sight to market trends, we are affirming our annual performance targets, excluding
2024 First Quarter Financial Results
-
Total revenues increased 9% to
$804 million compared to$740 million in the prior-year period. The year-over-year increase of$64 million primarily related to an increase in equipment rental revenue of$65 million , reflecting positive pricing of 5.1% and increased volume of 8.0%, partially offset by unfavorable mix driven primarily by inflation. Sales of rental equipment decreased by$2 million during the period.
- Dollar utilization was 39.7% in the first quarter, flat over the prior-year period.
-
Direct operating expenses were
$307 million , or 42.7% of equipment rental revenue, compared to$281 million , or 43.0% in the prior-year period, reflecting better cost performance and fixed cost absorption on higher revenue despite increases related to additional headcount, facilities and maintenance expenses associated with strong rental activity and an expanding branch network.
-
Depreciation of rental equipment increased 5% to
$160 million due to higher year-over-year average fleet size. Non-rental depreciation and amortization increased 12% to$29 million primarily due to amortization of acquisition intangible assets.
-
Selling, general and administrative expenses was
$115 million , or 16.0% of equipment rental revenue, compared to$106 million , or 16.2% in the prior-year period due to continued focus on improving operating leverage while expanding revenues.
-
Interest expense increased to
$61 million compared with$48 million in the prior-year period due to increased borrowings on the ABL Credit Facility primarily to fund acquisition growth and invest in rental equipment and higher interest rates on floating-rate debt.
-
Net income was
$65 million compared to$67 million in the prior-year period. Adjusted net income decreased 3% to$67 million , or$2.36 per diluted share, compared to$69 million , or$2.35 per diluted share, in the prior-year period. The effective tax rate was 20% compared to 11% in the prior-year period.
-
Adjusted EBITDA increased 10% to
$339 million compared to$308 million in the prior-year period and adjusted EBITDA margin was 42.2% compared to 41.6% in the prior-year period. Continued focus on improving operating leverage while expanding revenues resulted in the improvement in margin year-over-year.
Rental Fleet
Net rental equipment capital expenditures were as follows (in millions):
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
Rental equipment expenditures |
$ |
181 |
|
|
$ |
332 |
|
Proceeds from disposal of rental equipment |
|
(61 |
) |
|
|
(49 |
) |
Net rental equipment capital expenditures |
$ |
120 |
|
|
$ |
283 |
|
-
As of
March 31, 2024 , the Company's total fleet was approximately$6.4 billion at OEC.
- Average fleet at OEC in the first quarter increased 10% compared to the prior-year period.
-
Average fleet age was 47 months as of
March 31, 2024 and 2023.
- The Company completed 4 acquisitions with a total of 11 locations and opened 4 new greenfield locations during the quarter.
-
Net debt was
$3.7 billion as ofMarch 31, 2024 , with net leverage of 2.5x which is unchanged from the same prior-year period. Cash and cash equivalents and unused commitments under the ABL Credit Facility contributed to$1.4 billion of liquidity as ofMarch 31, 2024 .
-
The Company declared its quarterly dividend of
$0.665 , an increase of$0.0325 or 5%, paid to shareholders of record as ofFebruary 21, 2024 onMarch 7, 2024 .
Outlook
The Company is affirming its full year 2024 equipment rental revenue growth, adjusted EBITDA, and gross and net rental capital expenditures guidance ranges presented below, excluding
Equipment rental revenue growth: |
|
7% to 10% |
Adjusted EBITDA: |
|
|
Net rental equipment capital expenditures after gross capex: |
|
|
As a leader in an industry where scale matters, the Company expects to continue to gain share by capturing an outsized position of the forecasted higher construction spending in 2024 by investing in its fleet, optimizing its existing fleet, capitalizing on strategic acquisitions and greenfield opportunities, and cross-selling a diversified product portfolio.
Earnings Call and Webcast Information
Those who wish to listen to the live conference call and view the accompanying presentation slides should visit the Events and Presentations tab of the Investor Relations section of the Company's website at IR.HercRentals.com. The press release and presentation slides for the call will be posted to this section of the website prior to the call.
A replay of the conference call will be available via webcast on the Company website at IR.HercRentals.com, where it will be archived for 12 months after the call.
About
Founded in 1965,
Certain Additional Information
In this release we refer to the following operating measures:
-
Dollar utilization: calculated by dividing rental revenue (excluding re-rent, delivery, pick-up and other ancillary revenue) by the average OEC of the equipment fleet for the relevant time period, based on the guidelines of the
American Rental Association (ARA).
- OEC: original equipment cost based on the guidelines of the ARA, which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized refurbishment costs (with the basis of refurbished assets reset at the refurbishment date).
Forward-Looking Statements
This press release includes forward-looking statements as that term is defined by the federal securities laws, including statements concerning our business plans and strategy, projected profitability, performance or cash flows, future capital expenditures, our growth strategy, including our ability to grow organically and through M&A, anticipated financing needs, business trends, our capital allocation strategy, liquidity and capital management, exploring strategic alternatives for
Information Regarding Non-GAAP Financial Measures
In addition to results calculated according to accounting principles generally accepted in
(See Accompanying Tables)
CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited (In millions, except per share data) |
|||||||
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
Revenues: |
|
|
|
||||
Equipment rental |
$ |
719 |
|
|
$ |
654 |
|
Sales of rental equipment |
|
69 |
|
|
|
71 |
|
Sales of new equipment, parts and supplies |
|
9 |
|
|
|
8 |
|
Service and other revenue |
|
7 |
|
|
|
7 |
|
Total revenues |
|
804 |
|
|
|
740 |
|
Expenses: |
|
|
|
||||
Direct operating |
|
307 |
|
|
|
281 |
|
Depreciation of rental equipment |
|
160 |
|
|
|
152 |
|
Cost of sales of rental equipment |
|
46 |
|
|
|
46 |
|
Cost of sales of new equipment, parts and supplies |
|
6 |
|
|
|
5 |
|
Selling, general and administrative |
|
115 |
|
|
|
106 |
|
Non-rental depreciation and amortization |
|
29 |
|
|
|
26 |
|
Interest expense, net |
|
61 |
|
|
|
48 |
|
Other expense (income), net |
|
(1 |
) |
|
|
1 |
|
Total expenses |
|
723 |
|
|
|
665 |
|
Income before income taxes |
|
81 |
|
|
|
75 |
|
Income tax provision |
|
(16 |
) |
|
|
(8 |
) |
Net income |
$ |
65 |
|
|
$ |
67 |
|
Weighted average shares outstanding: |
|
|
|
||||
Basic |
|
28.3 |
|
|
|
29.0 |
|
Diluted |
|
28.4 |
|
|
|
29.4 |
|
Earnings per share: |
|
|
|
||||
Basic |
$ |
2.30 |
|
|
$ |
2.31 |
|
Diluted |
$ |
2.29 |
|
|
$ |
2.28 |
|
A - 1 |
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) |
|||||
|
|
|
|
||
ASSETS |
(unaudited) |
|
|
||
Cash and cash equivalents |
$ |
63 |
|
$ |
71 |
Receivables, net of allowances |
|
560 |
|
|
563 |
Other current assets |
|
67 |
|
|
77 |
Current assets held for sale |
|
27 |
|
|
21 |
Total current assets |
|
717 |
|
|
732 |
Rental equipment, net |
|
3,831 |
|
|
3,831 |
Property and equipment, net |
|
486 |
|
|
465 |
Right-of-use lease assets |
|
721 |
|
|
665 |
|
|
1,033 |
|
|
950 |
Other long-term assets |
|
10 |
|
|
10 |
Long-term assets held for sale |
|
409 |
|
|
408 |
Total assets |
$ |
7,207 |
|
$ |
7,061 |
|
|
|
|
||
LIABILITIES AND EQUITY |
|
|
|
||
Current maturities of long-term debt and financing obligations |
$ |
19 |
|
$ |
19 |
Current maturities of operating lease liabilities |
|
37 |
|
|
37 |
Accounts payable |
|
201 |
|
|
212 |
Accrued liabilities |
|
194 |
|
|
221 |
Current liabilities held for sale |
|
23 |
|
|
19 |
Total current liabilities |
|
474 |
|
|
508 |
Long-term debt, net |
|
3,753 |
|
|
3,673 |
Financing obligations, net |
|
103 |
|
|
104 |
Operating lease liabilities |
|
705 |
|
|
646 |
Deferred tax liabilities |
|
750 |
|
|
743 |
Other long term liabilities |
|
48 |
|
|
46 |
Long-term liabilities held for sale |
|
66 |
|
|
68 |
Total liabilities |
|
5,899 |
|
|
5,788 |
Total equity |
|
1,308 |
|
|
1,273 |
Total liabilities and equity |
$ |
7,207 |
|
$ |
7,061 |
A - 2 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (In millions) |
|||||||
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
65 |
|
|
$ |
67 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
Depreciation of rental equipment |
|
160 |
|
|
|
152 |
|
Depreciation of property and equipment |
|
19 |
|
|
|
17 |
|
Amortization of intangible assets |
|
10 |
|
|
|
9 |
|
Amortization of deferred debt and financing obligations costs |
|
1 |
|
|
|
1 |
|
Stock-based compensation charges |
|
5 |
|
|
|
4 |
|
Provision for receivables allowances |
|
12 |
|
|
|
13 |
|
Deferred taxes |
|
9 |
|
|
|
3 |
|
Gain on sale of rental equipment |
|
(23 |
) |
|
|
(25 |
) |
Other |
|
3 |
|
|
|
2 |
|
Changes in assets and liabilities: |
|
|
|
||||
Receivables |
|
(7 |
) |
|
|
13 |
|
Other assets |
|
(6 |
) |
|
|
(2 |
) |
Accounts payable |
|
(2 |
) |
|
|
8 |
|
Accrued liabilities and other long-term liabilities |
|
(6 |
) |
|
|
(27 |
) |
Net cash provided by operating activities |
|
240 |
|
|
|
235 |
|
Cash flows from investing activities: |
|
|
|
||||
Rental equipment expenditures |
|
(181 |
) |
|
|
(332 |
) |
Proceeds from disposal of rental equipment |
|
61 |
|
|
|
49 |
|
Non-rental capital expenditures |
|
(30 |
) |
|
|
(33 |
) |
Proceeds from disposal of property and equipment |
|
2 |
|
|
|
3 |
|
Acquisitions, net of cash acquired |
|
(148 |
) |
|
|
(138 |
) |
Net cash used in investing activities |
|
(296 |
) |
|
|
(451 |
) |
Cash flows from financing activities: |
|
|
|
||||
Proceeds from revolving lines of credit and securitization |
|
385 |
|
|
|
640 |
|
Repayments on revolving lines of credit and securitization |
|
(302 |
) |
|
|
(347 |
) |
Principal payments under finance lease and financing obligations |
|
(5 |
) |
|
|
(4 |
) |
Dividends paid |
|
(20 |
) |
|
|
(20 |
) |
Repurchase of common stock |
|
— |
|
|
|
(44 |
) |
Other financing activities, net |
|
(10 |
) |
|
|
(23 |
) |
Net cash provided by financing activities |
|
48 |
|
|
|
202 |
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
— |
|
|
|
— |
|
Net change in cash and cash equivalents during the period |
|
(8 |
) |
|
|
(14 |
) |
Cash and cash equivalents at beginning of period |
|
71 |
|
|
|
54 |
|
Cash and cash equivalents at end of period |
$ |
63 |
|
|
$ |
40 |
|
A - 3 |
SUPPLEMENTAL SCHEDULES
EBITDA AND ADJUSTED EBITDA RECONCILIATIONS
Unaudited
(In millions)
EBITDA and adjusted EBITDA - EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of transaction related costs, restructuring and restructuring related charges, spin-off costs, non-cash stock-based compensation charges, loss on extinguishment of debt (which is included in interest expense, net), impairment charges, gain (loss) on the disposal of a business and certain other items. EBITDA and adjusted EBITDA do not purport to be alternatives to net income as an indicator of operating performance. Additionally, neither measure purports to be an alternative to cash flows from operating activities as a measure of liquidity, as they do not consider certain cash requirements such as interest payments and tax payments.
Adjusted EBITDA Margin - Adjusted EBITDA Margin, calculated by dividing Adjusted EBITDA by Total Revenues, is a commonly used profitability ratio.
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net income |
$ |
65 |
|
|
$ |
67 |
|
Income tax provision |
|
16 |
|
|
|
8 |
|
Interest expense, net |
|
61 |
|
|
|
48 |
|
Depreciation of rental equipment |
|
160 |
|
|
|
152 |
|
Non-rental depreciation and amortization |
|
29 |
|
|
|
26 |
|
EBITDA |
|
331 |
|
|
|
301 |
|
Non-cash stock-based compensation charges |
|
5 |
|
|
|
4 |
|
Transaction related costs |
|
3 |
|
|
|
2 |
|
Other |
|
— |
|
|
|
1 |
|
Adjusted EBITDA |
$ |
339 |
|
|
$ |
308 |
|
|
|
|
|
||||
Total revenues |
$ |
804 |
|
|
$ |
740 |
|
Adjusted EBITDA |
$ |
339 |
|
|
$ |
308 |
|
Adjusted EBITDA margin |
|
42.2 |
% |
|
|
41.6 |
% |
A - 4 |
SUPPLEMENTAL SCHEDULES
EBITDA, ADJUSTED EBITDA AND ADJUSTED REBITDA
EXCLUDING STUDIO ENTERTAINMENT RECONCILIATIONS
Unaudited
(In millions)
EBITDA, Adjusted EBITDA, REBITDA, Adjusted EBITDA Margin,
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||
|
Herc |
Studio |
Ex-Studio |
|
Herc |
Studio |
Ex-Studio |
||||||
Equipment rental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
804 |
|
30 |
|
774 |
|
|
740 |
|
20 |
|
720 |
|
Total expenses |
723 |
|
21 |
|
702 |
|
|
665 |
|
28 |
|
637 |
|
Income (loss) before income taxes |
81 |
|
9 |
|
72 |
|
|
75 |
|
(8 |
) |
83 |
|
Income tax (provision) benefit |
(16 |
) |
(2 |
) |
(14 |
) |
|
(8 |
) |
2 |
|
(10 |
) |
Net income |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
Income tax provision |
16 |
|
2 |
|
14 |
|
|
8 |
|
(2 |
) |
10 |
|
Interest expense, net |
61 |
|
— |
|
61 |
|
|
48 |
|
— |
|
48 |
|
Depreciation of rental equipment |
160 |
|
— |
|
160 |
|
|
152 |
|
8 |
|
144 |
|
Non-rental depreciation and amortization |
29 |
|
— |
|
29 |
|
|
26 |
|
1 |
|
25 |
|
EBITDA |
331 |
|
9 |
|
322 |
|
|
301 |
|
1 |
|
300 |
|
Non-cash stock-based compensation charges |
5 |
|
— |
|
5 |
|
|
4 |
|
— |
|
4 |
|
Transaction related costs |
3 |
|
1 |
|
2 |
|
|
2 |
|
— |
|
2 |
|
Other |
— |
|
— |
|
— |
|
|
1 |
|
1 |
|
— |
|
Adjusted EBITDA |
339 |
|
10 |
|
329 |
|
|
308 |
|
2 |
|
306 |
|
Less: Gain (loss) on sales of rental equipment |
23 |
|
— |
|
23 |
|
|
25 |
|
— |
|
25 |
|
Less: Gain (loss) on sales of new equipment, parts and supplies |
3 |
|
1 |
|
2 |
|
|
3 |
|
— |
|
3 |
|
Rental Adjusted EBITDA (REBITDA) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin |
42.2 |
% |
33.3 |
% |
42.5 |
% |
|
41.6 |
% |
10.0 |
% |
42.5 |
% |
|
|
|
|
|
|
|
|
||||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Sales of rental equipment |
69 |
|
— |
|
69 |
|
|
71 |
|
— |
|
71 |
|
Less: Sales of new equipment, parts and supplies |
9 |
|
1 |
|
8 |
|
|
8 |
|
— |
|
8 |
|
Equipment rental, service and other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equipment rental, service and other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted REBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted REBITDA Margin |
43.1 |
% |
31.0 |
% |
43.6 |
% |
|
42.4 |
% |
10.0 |
% |
43.4 |
% |
A - 5 |
SUPPLEMENTAL SCHEDULES
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER DILUTED SHARE
Unaudited
(In millions)
Adjusted Net Income and Adjusted Earnings Per Diluted Share - Adjusted Net Income represents the sum of net income (loss), restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, impairment charges, transaction related costs, gain (loss) on the disposal of a business and certain other items. Adjusted Earnings per Diluted Share represents Adjusted Net Income divided by diluted shares outstanding. Adjusted Net Income and Adjusted Earnings Per Diluted Share are important measures to evaluate our results of operations between periods on a more comparable basis and to help investors analyze underlying trends in our business, evaluate the performance of our business both on an absolute basis and relative to our peers and the broader market, provide useful information to both management and investors by excluding certain items that may not be indicative of our core operating results and operational strength of our business.
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net income |
$ |
65 |
|
|
$ |
67 |
|
Transaction related costs |
|
3 |
|
|
|
2 |
|
Other |
|
— |
|
|
|
1 |
|
Tax impact of adjustments(1) |
|
(1 |
) |
|
|
(1 |
) |
Adjusted net income |
$ |
67 |
|
|
$ |
69 |
|
|
|
|
|
||||
Diluted shares outstanding |
|
28.4 |
|
|
|
29.4 |
|
|
|
|
|
||||
Adjusted earnings per diluted share |
$ |
2.36 |
|
|
$ |
2.35 |
|
(1) The tax rate applied for adjustments is 25.5% in the three months ended |
|||||||
A - 6 |
SUPPLEMENTAL SCHEDULES
FREE CASH FLOW
Unaudited
(In millions)
Free cash flow represents net cash provided by (used in) operating activities less rental equipment expenditures and non-rental capital expenditures, plus proceeds from disposal of rental equipment, proceeds from disposal of property and equipment, and other investing activities. Free cash flow is used by management in analyzing the Company’s ability to service and repay its debt, fund potential acquisitions and to forecast future periods. However, this measure does not represent funds available for investment or other discretionary uses since it does not deduct cash used to service debt or for other non-discretionary expenditures.
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net cash provided by operating activities |
$ |
240 |
|
|
$ |
235 |
|
|
|
|
|
||||
Rental equipment expenditures |
|
(181 |
) |
|
|
(332 |
) |
Proceeds from disposal of rental equipment |
|
61 |
|
|
|
49 |
|
Net rental equipment expenditures |
|
(120 |
) |
|
|
(283 |
) |
|
|
|
|
||||
Non-rental capital expenditures |
|
(30 |
) |
|
|
(33 |
) |
Proceeds from disposal of property and equipment |
|
2 |
|
|
|
3 |
|
Free cash flow |
$ |
92 |
|
|
$ |
(78 |
) |
|
|
|
|
||||
Acquisitions, net of cash acquired |
|
(148 |
) |
|
|
(138 |
) |
Increase in net debt, excluding financing activities |
$ |
(56 |
) |
|
$ |
(216 |
) |
A - 7 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240423584287/en/
Senior Vice President Investor Relations, Communications & Sustainability
leslie.hunziker@hercrentals.com
(239) 301-1675
Source: