2020 Third Quarter Highlights and Updated Guidance
– Equipment rental revenue was $402.3 million and total revenues were $456.7 million
– Net income was $39.9 million, or $1.35 per diluted share
– Adjusted EBITDA was $196.7 million; adjusted EBITDA margin improved 190 bps to 43.1%
– Full year 2020 adjusted EBITDA guidance was raised to a range of $655 million to $675 million from a range of $625 million to $650 million
BONITA SPRINGS, Fla.--(BUSINESS WIRE)-- Herc Holdings Inc. (NYSE: HRI) ("Herc Holdings" or the "Company") today reported financial results for the quarter ended September 30, 2020. Equipment rental revenue was $402.3 million and total revenues were $456.7 million in the third quarter of 2020, compared to $459.6 million and $508.1 million, respectively, for the same period last year. The Company reported net income of $39.9 million, or $1.35 per diluted share, in the third quarter of 2020, compared to $9.4 million, or $0.32 per diluted share, in the same 2019 period. Third quarter 2020 adjusted net income was $39.8 million, or $1.35 per diluted share, compared to $43.2 million, or $1.48 per diluted share, in 2019. See page A-5 for the adjusted net income and adjusted earnings per share calculations.
"Volume improved sequentially throughout the third quarter as many of our markets steadily recovered from the impact of COVID-19 and normal seasonality returned to the business," said Larry Silber, president and chief executive officer. "We continued to improve adjusted EBITDA margin as our operating efficiency and cost control initiatives reduced third quarter costs compared to the prior year. Despite the challenging business environment, our customer and industry diversification strategy continued to demonstrate the resilience of our business model.
"We continue to adhere to the Centers for Disease Control and Prevention's guidelines in our operations and interactions with customers and adapt to more stringent municipal and state mandates. Our highest priority is to ensure the health and safety of our team members and customers," Silber added.
2020 Third Quarter Highlights
2020 Nine Months Highlights
Capital Expenditures - Fleet
Disciplined Capital Management
Outlook for the Year
The Company raised adjusted EBITDA guidance for the full year.
| Old |
| New | |
Adjusted EBITDA: | $625 million to $650 million |
| $655 million to $675 million | |
Net fleet capital expenditures: | $190 million to $210 million |
| $190 million to $210 million |
"Our improving efficiency in the third quarter reflects our ability to manage through challenging times," said Silber. "We currently estimate fourth quarter fleet on rent is likely to decline approximately 4% to 6% and rental revenue to decline approximately 6% to 8% year-over-year. Adjusted EBITDA margin for the fourth quarter and full year should improve versus the comparable prior-year periods. Our strong free cash flow position for the nine-month period ending September 30, 2020, is already substantially higher than the amount we generated for the full year 2019, and should continue to improve during the remainder of the year. With reduced leverage and ample liquidity, we are well positioned for 2021.
"I'm proud of what our Herc team members have accomplished year to date. We know we have to prove ourselves every day and we are committed to helping our customers operate efficiently, effectively and safely," he added.
Earnings Call and Webcast Information
Herc Holdings' third quarter 2020 earnings webcast will be held today at 8:30 a.m.U.S. Eastern Time. Interested U.S. parties may call +1-877-883-0383 and international participants should call 1-412-902-6506, using the access code: 8030644. Please dial in at least 10 minutes before the call start time to ensure that you are connected to the call and to register your name and company.
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 90 days after the call. A telephonic replay will be available for one week. To listen to the archived call by telephone, U.S. participants should dial +1-877-344-7529 and international participants 1-412-317-0088 and enter the conference ID number: 10147636.
About Herc Holdings Inc.
Herc Holdings Inc., which operates through its Herc Rentals Inc. subsidiary, is one of the leading equipment rental suppliers with approximately 270 locations in North America. With over 55 years of experience, we are a full-line equipment rental supplier offering a broad portfolio of equipment for rent. Our classic fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting. Our equipment rental business is supported by ProSolutionsR, our industry-specific solutions-based services, which includes power generation, climate control, remediation and restoration, and studio and production equipment, and our ProContractor professional grade tools. Our product offerings and services are aimed at helping customers work more efficiently, effectively and safely. The Company has approximately 4,700 employees who equip our customers and communities to build a brighter future. Herc Holdings’ 2019 total revenues were approximately $2.0 billion. All references to “Herc Holdings” or the “Company” in this press release refer to Herc Holdings Inc. and its subsidiaries, unless otherwise indicated. For more information on Herc Holdings and its products and services, visit: www.HercRentals.com.
Certain Additional Information
In this release we refer to the following operating measures:
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, anticipated financing needs, business trends, the impact of and our response to COVID-19, liquidity and capital management and other information that is not historical information. Forward looking statements are generally identified by the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions. All forward-looking statements are based upon our current expectations and various assumptions and, there can be no assurance that our current expectations will be achieved. They are subject to future events, risks and uncertainties - many of which are beyond our control - as well as potentially inaccurate assumptions, that could cause actual results to differ materially from those in the forward-looking statements. Further information on the risks that may affect our business is included in filings we make with the Securities and Exchange Commission from time to time, including our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and in our other SEC filings. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
Information Regarding Non-GAAP Financial Measures
In addition to results calculated according to accounting principles generally accepted in the United States (“GAAP”), the Company has provided certain information in this release that is not calculated according to GAAP (“non-GAAP”), such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per diluted common share and free cash flow. Management uses these non-GAAP measures to evaluate operating performance and period-over-period performance of our core business without regard to potential distortions, and believes that investors will likewise find these non-GAAP measures useful in evaluating the Company’s performance. These measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to similarly titled measures of other companies. For the definitions of these terms, further information about management’s use of these measures as well as a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures, please see the supplemental schedules that accompany this release.
(See Accompanying Tables)
HERC HOLDINGS INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
Unaudited | ||||||||||||||||
(In millions, except per share data) | ||||||||||||||||
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Revenues: |
|
|
|
|
|
|
| |||||||||
Equipment rental | $ | 402.3 |
|
| $ | 459.6 |
|
| $ | 1,116.4 |
|
| $ | 1,244.8 |
| |
Sales of rental equipment | 45.3 |
|
| 35.4 |
|
| 116.7 |
|
| 171.8 |
| |||||
Sales of new equipment, parts and supplies | 6.2 |
|
| 10.0 |
|
| 20.2 |
|
| 34.1 |
| |||||
Service and other revenue | 2.9 |
|
| 3.1 |
|
| 7.6 |
|
| 8.2 |
| |||||
Total revenues | 456.7 |
|
| 508.1 |
|
| 1,260.9 |
|
| 1,458.9 |
| |||||
Expenses: |
|
|
|
|
|
|
| |||||||||
Direct operating | 169.4 |
|
| 197.7 |
|
| 503.3 |
|
| 575.3 |
| |||||
Depreciation of rental equipment | 101.9 |
|
| 102.7 |
|
| 303.7 |
|
| 303.6 |
| |||||
Cost of sales of rental equipment | 46.3 |
|
| 36.7 |
|
| 118.3 |
|
| 170.2 |
| |||||
Cost of sales of new equipment, parts and supplies | 4.4 |
|
| 7.2 |
|
| 14.6 |
|
| 25.8 |
| |||||
Selling, general and administrative | 61.0 |
|
| 76.2 |
|
| 187.6 |
|
| 221.2 |
| |||||
Restructuring | — |
|
| — |
|
| 0.7 |
|
| 7.8 |
| |||||
Impairment | — |
|
| — |
|
| 9.5 |
|
| — |
| |||||
Interest expense, net | 22.4 |
|
| 81.9 |
|
| 70.1 |
|
| 146.4 |
| |||||
Other expense (income), net | (0.3) |
|
| 0.5 |
|
| 4.0 |
|
| (1.8) |
| |||||
Total expenses | 405.1 |
|
| 502.9 |
|
| 1,211.8 |
|
| 1,448.5 |
| |||||
Income before income taxes | 51.6 |
|
| 5.2 |
|
| 49.1 |
|
| 10.4 |
| |||||
Income tax benefit (provision) | (11.7) |
|
| 4.2 |
|
| (10.9) |
|
| 2.0 |
| |||||
Net income | $ | 39.9 |
|
| $ | 9.4 |
|
| $ | 38.2 |
|
| $ | 12.4 |
| |
Weighted average shares outstanding: |
|
|
|
|
|
|
| |||||||||
Basic | 29.2 |
|
| 28.7 |
|
| 29.1 |
|
| 28.7 |
| |||||
Diluted | 29.5 |
|
| 29.1 |
|
| 29.3 |
|
| 29.1 |
| |||||
Earnings per share: |
|
|
|
|
|
|
| |||||||||
Basic | $ | 1.37 |
|
| $ | 0.33 |
|
| $ | 1.31 |
|
| $ | 0.43 |
| |
Diluted | $ | 1.35 |
|
| $ | 0.32 |
|
| $ | 1.30 |
|
| $ | 0.43 |
| |
A-1 |
HERC HOLDINGS INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
Unaudited | ||||||||
(In millions) | ||||||||
| September 30, 2020 |
| December 31, 2019 | |||||
ASSETS |
|
|
| |||||
Cash and cash equivalents | $ | 53.8 |
|
| $ | 33.0 |
| |
Receivables, net of allowance | 293.3 |
|
| 306.7 |
| |||
Other current assets | 37.9 |
|
| 60.0 |
| |||
Total current assets | 385.0 |
|
| 399.7 |
| |||
Rental equipment, net | 2,345.5 |
|
| 2,490.0 |
| |||
Property and equipment, net | 289.0 |
|
| 311.8 |
| |||
Right-of-use lease assets | 240.7 |
|
| 207.3 |
| |||
Goodwill and intangible assets, net | 383.0 |
|
| 385.1 |
| |||
Other long-term assets | 18.8 |
|
| 23.1 |
| |||
Total assets | $ | 3,662.0 |
|
| $ | 3,817.0 |
| |
|
|
|
| |||||
LIABILITIES AND EQUITY |
|
|
| |||||
Current maturities of long-term debt and financing obligations | $ | 17.7 |
|
| $ | 30.4 |
| |
Current maturities of operating lease liabilities | 31.9 |
|
| 30.5 |
| |||
Accounts payable | 132.7 |
|
| 126.5 |
| |||
Accrued liabilities | 119.4 |
|
| 135.7 |
| |||
Total current liabilities | 301.7 |
|
| 323.1 |
| |||
Long-term debt, net | 1,827.9 |
|
| 2,051.5 |
| |||
Financing obligations, net | 114.9 |
|
| 117.6 |
| |||
Operating lease liabilities | 218.3 |
|
| 182.2 |
| |||
Deferred tax liabilities | 469.5 |
|
| 459.3 |
| |||
Other long-term liabilities | 43.2 |
|
| 39.0 |
| |||
Total liabilities | 2,975.5 |
|
| 3,172.7 |
| |||
Total equity | 686.5 |
|
| 644.3 |
| |||
Total liabilities and equity | $ | 3,662.0 |
|
| $ | 3,817.0 |
| |
A-2 |
HERC HOLDINGS INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Unaudited | ||||||||
(In millions) | ||||||||
| Nine Months Ended September 30, | |||||||
| 2020 |
| 2019 | |||||
Cash flows from operating activities: |
|
|
| |||||
Net income | $ | 38.2 |
|
| $ | 12.4 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
| |||||
Depreciation of rental equipment | 303.7 |
|
| 303.6 |
| |||
Depreciation of property and equipment | 41.2 |
|
| 39.3 |
| |||
Amortization of intangible assets | 5.8 |
|
| 5.2 |
| |||
Amortization of deferred debt and financing obligations costs | 2.6 |
|
| 4.3 |
| |||
Loss on extinguishment of debt | — |
|
| 53.6 |
| |||
Stock-based compensation charges | 10.3 |
|
| 12.5 |
| |||
Restructuring | — |
|
| 5.5 |
| |||
Impairment | 9.5 |
|
| — |
| |||
Provision for receivables allowance | 28.2 |
|
| 40.2 |
| |||
Deferred taxes | 12.7 |
|
| (5.6) |
| |||
Loss (gain) on sale of rental equipment | 1.6 |
|
| (1.6) |
| |||
Other | 4.2 |
|
| 5.3 |
| |||
Changes in assets and liabilities: |
|
|
| |||||
Receivables | (14.5) |
|
| (37.0) |
| |||
Other assets | (4.4) |
|
| 2.8 |
| |||
Accounts payable | (1.9) |
|
| (1.6) |
| |||
Accrued liabilities and other long-term liabilities | (13.2) |
|
| 2.3 |
| |||
Net cash provided by operating activities | 424.0 |
|
| 441.2 |
| |||
Cash flows from investing activities: |
|
|
| |||||
Rental equipment expenditures | (273.2) |
|
| (506.7) |
| |||
Proceeds from disposal of rental equipment | 114.1 |
|
| 156.9 |
| |||
Non-rental capital expenditures | (32.0) |
|
| (34.9) |
| |||
Proceeds from disposal of property and equipment | 4.2 |
|
| 5.0 |
| |||
Proceeds from disposal of business | 15.3 |
|
| — |
| |||
Other | — |
|
| 4.0 |
| |||
Net cash used in investing activities | (171.6) |
|
| (375.7) |
| |||
Cash flows from financing activities: |
|
|
| |||||
Proceeds from issuance of long-term debt | — |
|
| 1,200.0 |
| |||
Repayments of long-term debt | — |
|
| (864.5) |
| |||
Proceeds from revolving lines of credit and securitization | 473.0 |
|
| 1,134.3 |
| |||
Repayments on revolving lines of credit and securitization | (694.7) |
|
| (1,465.5) |
| |||
Proceeds from financing obligations | — |
|
| 4.7 |
| |||
Principal payments under capital lease and financing obligations | (10.4) |
|
| (11.9) |
| |||
Debt redemption premium payment | — |
|
| (41.5) |
| |||
Other financing activities, net | — |
|
| (14.5) |
| |||
Net cash used in financing activities | (232.1) |
|
| (58.9) |
| |||
Effect of foreign exchange rate changes on cash and cash equivalents | 0.5 |
|
| 0.1 |
| |||
Net increase (decrease) in cash and cash equivalents during the period | 20.8 |
|
| 6.7 |
| |||
Cash and cash equivalents cash at beginning of period | 33.0 |
|
| 27.8 |
| |||
Cash and cash equivalents at end of period | $ | 53.8 |
|
| $ | 34.5 |
| |
A-3 |
HERC HOLDINGS INC. AND SUBSIDIARIES 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 merger and acquisition 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 September 30, |
| Nine Months Ended September 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Net income | $ | 39.9 |
|
| $ | 9.4 |
|
| $ | 38.2 |
|
| $ | 12.4 |
| |
Income tax provision (benefit) | 11.7 |
|
| (4.2) |
|
| 10.9 |
|
| (2.0) |
| |||||
Interest expense, net | 22.4 |
|
| 81.9 |
|
| 70.1 |
|
| 146.4 |
| |||||
Depreciation of rental equipment | 101.9 |
|
| 102.7 |
|
| 303.7 |
|
| 303.6 |
| |||||
Non-rental depreciation and amortization | 15.5 |
|
| 14.9 |
|
| 47.0 |
|
| 44.5 |
| |||||
EBITDA | 191.4 |
|
| 204.7 |
|
| 469.9 |
|
| 504.9 |
| |||||
Restructuring | — |
|
| — |
|
| 0.7 |
|
| 7.8 |
| |||||
Spin-Off costs | (0.1) |
|
| 0.4 |
|
| 0.4 |
|
| 0.7 |
| |||||
Non-cash stock-based compensation charges | 5.4 |
|
| 4.3 |
|
| 10.3 |
|
| 12.5 |
| |||||
Loss on disposal of business | — |
|
| — |
|
| 2.8 |
|
| — |
| |||||
Impairment | — |
|
| — |
|
| 9.5 |
|
| — |
| |||||
Other | — |
|
| — |
|
| 0.1 |
|
| 0.7 |
| |||||
Adjusted EBITDA | $ | 196.7 |
|
| $ | 209.4 |
|
| $ | 493.7 |
|
| $ | 526.6 |
| |
|
|
|
|
|
|
|
| |||||||||
Total revenues | $ | 456.7 |
|
| $ | 508.1 |
|
| $ | 1,260.9 |
|
| $ | 1,458.9 |
| |
Adjusted EBITDA | $ | 196.7 |
|
| $ | 209.4 |
|
| $ | 493.7 |
|
| $ | 526.6 |
| |
Adjusted EBITDA margin | 43.1 | % |
| 41.2 | % |
| 39.2 | % |
| 36.1 | % | |||||
A-4 |
HERC HOLDINGS INC. AND SUBSIDIARIES 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, 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 September 30, |
| Nine Months Ended September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||||||
Net income | $ | 39.9 |
|
| $ | 9.4 |
|
| $ | 38.2 |
|
| $ | 12.4 |
|
Loss on extinguishment of debt | — |
|
| 53.6 |
|
| — |
|
| 53.6 |
| ||||
Restructuring | — |
|
| — |
|
| 0.7 |
|
| 7.8 |
| ||||
Impairment | — |
|
| — |
|
| 9.5 |
|
| — |
| ||||
Loss on disposal of business | — |
|
| — |
|
| 2.8 |
|
| — |
| ||||
Spin-off costs | (0.1) |
|
| 0.4 |
|
| 0.4 |
|
| 0.7 |
| ||||
Other | — |
|
| — |
|
| 0.1 |
|
| 0.7 |
| ||||
Tax impact of adjustments(1) | — |
|
| (20.2) |
|
| (3.5) |
|
| (22.4) |
| ||||
Adjusted net income | $ | 39.8 |
|
| $ | 43.2 |
|
| $ | 48.2 |
|
| $ | 52.8 |
|
|
|
|
|
|
|
|
| ||||||||
Diluted shares outstanding | 29.5 |
|
| 29.1 |
|
| 29.3 |
|
| 29.1 |
| ||||
|
|
|
|
|
|
|
| ||||||||
Adjusted earnings per diluted share | $ | 1.35 |
|
| $ | 1.48 |
|
| $ | 1.65 |
|
| $ | 1.81 |
|
(1) The tax rate applied for adjustments is 25.7% and reflects the statutory rates in the applicable entities. Additionally, the tax benefit of $6.3 million recognized in the three and nine month periods of 2019 related to the debt transactions.
NET RENTAL EQUIPMENT EXPENDITURES | ||||||||
Unaudited | ||||||||
(In millions) | ||||||||
|
| Nine Months Ended September 30, | ||||||
|
| 2020 |
| 2019 | ||||
Rental equipment expenditures |
| $ | 273.2 |
|
| $ | 506.7 |
|
Proceeds from disposal of rental equipment |
| (114.1) |
|
| (156.9) |
| ||
Net rental equipment expenditures |
| $ | 159.1 |
|
| $ | 349.8 |
|
A-5 |
HERC HOLDINGS INC. AND SUBSIDIARIES 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 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.
| Nine Months Ended September 30, | ||||||
| 2020 |
| 2019 | ||||
Net cash provided by operating activities | $ | 424.0 |
|
| $ | 441.2 |
|
|
|
|
| ||||
Rental equipment expenditures | (273.2) |
|
| (506.7) |
| ||
Proceeds from disposal of rental equipment | 114.1 |
|
| 156.9 |
| ||
Net rental equipment expenditures | (159.1) |
|
| (349.8) |
| ||
|
|
|
| ||||
Non-rental capital expenditures | (32.0) |
|
| (34.9) |
| ||
Proceeds from disposal of property and equipment | 4.2 |
|
| 5.0 |
| ||
Proceeds from disposal of business | 15.3 |
|
| — |
| ||
Other | — |
|
| 4.0 |
| ||
Free cash flow | $ | 252.4 |
|
| $ | 65.5 |
|
A-6 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20201022005084/en/
Paul DickardVice President, Communications pdickard@hercrentals.com 239-301-1214
Elizabeth Higashi, CFA Vice President, Investor Relations ehigashi@hercrentals.com 239-301-1024
Source: Herc Holdings Inc.