Second Quarter 2020 Highlights
– Equipment rental revenue of $327.6 million was comprised of sequential monthly improvement from April to June; total revenues were $368.0 million
– Pricing remained flat in the quarter compared with the same prior-year period
– Net income was $2.0 million, or $0.07 per diluted share
– Adjusted EBITDA was $149.4 million; adjusted EBITDA margin improved 380 bps to 40.6%
– Company issues 2020 adjusted EBITDA guidance 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 June 30, 2020. Equipment rental revenue was $327.6 million and total revenues were $368.0 million in the second quarter of 2020, compared to $407.6 million and $475.1 million, respectively, for the same period last year. The Company reported net income of $2.0 million, or $0.07 per diluted share, in the second quarter of 2020, compared to $9.7 million, or $0.33 per diluted share, in the same 2019 period. Second quarter 2020 adjusted net income was $7.3 million, or $0.25 per diluted share, compared to $16.0 million, or $0.55 per diluted share, in 2019. See page A-5 for a description of the items excluded in calculating adjusted net income and adjusted earnings per share.
"We maintained rates and did an excellent job of controlling costs in a challenging quarter," said Larry Silber, president and chief executive officer. "We took actions in 2019 to focus on disciplined capital expenditures and margin improvements, and with these programs in place, we were in a good position when the COVID-19 pandemic hit to intensify our cost control initiatives in line with business conditions. Despite the significant impact to our revenues, we were able to improve adjusted EBITDA margin by 380 basis points to 40.6% in the second quarter compared to the prior-year period.
"Our highest priority remains the safety of our employees and our customers and we have continued to maintain strict adherence to the Centers for Disease Control and Prevention's guidelines in our operations and interactions with customers. Our strategy to diversify our customers and fleet through specialty services has partially offset the overall impact of the pandemic on rental revenue. We are very pleased with the performance of our ProSolutions® team in particular, as they continued to generate strong year-over-year growth during this healthcare crisis," Silber said.
Second Quarter Highlights
First Half Highlights
Capital Expenditures - Fleet
Disciplined Capital Management
Outlook for the Year
While fleet on rent has increased from the trough in April, future business conditions related to COVID-19 are uncertain. Nonetheless, the Company estimates the volume of fleet on rent in the second half is likely to decline approximately 8% to 13% year-over-year, as the typical seasonal ramp is starting from a lower base going into the balance of the year. As a result, the Company estimates equipment rental revenue in the second half will be down about 10% to 15% year-over-year. Assuming these levels of volume and rental revenue, fiscal year 2020 estimates are as follows:
Adjusted EBITDA: | $625 million to $650 million | |
Net fleet capital expenditures: | $190 million to $210 million |
"Our leadership team's experience contributed to better than anticipated second quarter operating results and reflect our ability to manage through challenging times," said Silber. "Construction and business activity began to improve in early June and continues to trend slowly upward. We have managed our costs and taken steps to substantially reduce our capital expenditures to conserve capital. We generated free cash flow of approximately $179 million in the first half of 2020 and as of June 30, 2020, we had ample liquidity of $1.2 billion.
"Our Herc Rentals team continues to demonstrate their professionalism and resiliency as we serve our customers every day. We are ready to support our customers in whatever capacity they need, with the understanding that we must prove ourselves every day," he added.
Earnings Call and Webcast Information
Herc Holdings' second 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: 9309863. 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: 10145061.
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 50 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 4,800 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 June 30, |
| Six Months Ended June 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Revenues: |
|
|
|
|
|
|
| |||||||||
Equipment rental | $ | 327.6 |
|
| $ | 407.6 |
|
| 714.1 |
|
| $ | 785.2 |
| ||
Sales of rental equipment | 31.4 |
|
| 51.3 |
|
| 71.4 |
|
| 136.4 |
| |||||
Sales of new equipment, parts and supplies | 7.0 |
|
| 13.2 |
|
| 14.0 |
|
| 24.1 |
| |||||
Service and other revenue | 2.0 |
|
| 3.0 |
|
| 4.7 |
|
| 5.1 |
| |||||
Total revenues | 368.0 |
|
| 475.1 |
|
| 804.2 |
|
| 950.8 |
| |||||
Expenses: |
|
|
|
|
|
|
| |||||||||
Direct operating | 144.7 |
|
| 188.5 |
|
| 333.9 |
|
| 377.6 |
| |||||
Depreciation of rental equipment | 101.4 |
|
| 100.9 |
|
| 201.8 |
|
| 200.9 |
| |||||
Cost of sales of rental equipment | 29.6 |
|
| 50.0 |
|
| 72.0 |
|
| 133.5 |
| |||||
Cost of sales of new equipment, parts and supplies | 5.1 |
|
| 10.4 |
|
| 10.2 |
|
| 18.6 |
| |||||
Selling, general and administrative | 56.8 |
|
| 73.5 |
|
| 126.6 |
|
| 145.0 |
| |||||
Restructuring | 0.7 |
|
| 7.8 |
|
| 0.7 |
|
| 7.8 |
| |||||
Impairment | 3.2 |
|
| — |
|
| 9.5 |
|
| — |
| |||||
Interest expense, net | 23.3 |
|
| 31.6 |
|
| 47.7 |
|
| 64.5 |
| |||||
Other expense (income), net | 3.1 |
|
| (2.6) |
|
| 4.3 |
|
| (2.3) |
| |||||
Total expenses | 367.9 |
|
| 460.1 |
|
| 806.7 |
|
| 945.6 |
| |||||
Income (loss) before income taxes | 0.1 |
|
| 15.0 |
|
| (2.5) |
|
| 5.2 |
| |||||
Income tax benefit (provision) | 1.9 |
|
| (5.3) |
|
| 0.8 |
|
| (2.2) |
| |||||
Net income (loss) | $ | 2.0 |
|
| $ | 9.7 |
|
| $ | (1.7) |
|
| $ | 3.0 |
| |
Weighted average shares outstanding: |
|
|
|
|
|
|
| |||||||||
Basic | 29.1 |
|
| 28.7 |
|
| 29.0 |
|
| 28.6 |
| |||||
Diluted | 29.2 |
|
| 29.1 |
|
| 29.0 |
|
| 29.0 |
| |||||
Earnings (loss) per share: |
|
|
|
|
|
|
| |||||||||
Basic | $ | 0.07 |
|
| $ | 0.34 |
|
| $ | (0.06) |
|
| $ | 0.10 |
| |
Diluted | $ | 0.07 |
|
| $ | 0.33 |
|
| $ | (0.06) |
|
| $ | 0.10 |
| |
A-1 |
HERC HOLDINGS INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
Unaudited | ||||||||
(In millions) | ||||||||
| June 30, 2020 |
| December 31, 2019 | |||||
ASSETS |
|
|
| |||||
Cash and cash equivalents | $ | 83.2 |
|
| $ | 33.0 |
| |
Receivables, net of allowance | 247.0 |
|
| 306.7 |
| |||
Other current assets | 44.6 |
|
| 60.0 |
| |||
Total current assets | 374.8 |
|
| 399.7 |
| |||
Rental equipment, net | 2,396.7 |
|
| 2,490.0 |
| |||
Property and equipment, net | 296.7 |
|
| 311.8 |
| |||
Right-of-use lease assets | 241.0 |
|
| 207.3 |
| |||
Goodwill and intangible assets, net | 383.5 |
|
| 385.1 |
| |||
Other long-term assets | 19.0 |
|
| 23.1 |
| |||
Total assets | $ | 3,711.7 |
|
| $ | 3,817.0 |
| |
|
|
|
| |||||
LIABILITIES AND EQUITY |
|
|
| |||||
Current maturities of long-term debt and financing obligations | $ | 18.9 |
|
| $ | 30.4 |
| |
Current maturities of operating lease liabilities | 31.8 |
|
| 30.5 |
| |||
Accounts payable | 138.1 |
|
| 126.5 |
| |||
Accrued liabilities | 121.7 |
|
| 135.7 |
| |||
Total current liabilities | 310.5 |
|
| 323.1 |
| |||
Long-term debt, net | 1,931.3 |
|
| 2,051.5 |
| |||
Financing obligations, net | 115.8 |
|
| 117.6 |
| |||
Operating lease liabilities | 218.5 |
|
| 182.2 |
| |||
Deferred tax liabilities | 459.9 |
|
| 459.3 |
| |||
Other long-term liabilities | 41.7 |
|
| 39.0 |
| |||
Total liabilities | 3,077.7 |
|
| 3,172.7 |
| |||
Total equity | 634.0 |
|
| 644.3 |
| |||
Total liabilities and equity | $ | 3,711.7 |
|
| $ | 3,817.0 |
| |
A-2 |
HERC HOLDINGS INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Unaudited | ||||||||
(In millions) | ||||||||
| Six Months Ended June 30, | |||||||
| 2020 |
| 2019 | |||||
Cash flows from operating activities: |
|
|
| |||||
Net income (loss) | $ | (1.7) |
|
| $ | 3.0 |
| |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
| |||||
Depreciation of rental equipment | 201.8 |
|
| 200.9 |
| |||
Depreciation of property and equipment | 27.7 |
|
| 26.2 |
| |||
Amortization of intangible assets | 3.8 |
|
| 3.4 |
| |||
Amortization of deferred debt and financing obligations costs | 1.7 |
|
| 3.3 |
| |||
Stock-based compensation charges | 4.9 |
|
| 8.2 |
| |||
Restructuring | — |
|
| 5.5 |
| |||
Impairment | 9.5 |
|
| — |
| |||
Provision for receivables allowance | 23.5 |
|
| 25.2 |
| |||
Deferred taxes | 1.0 |
|
| (1.3) |
| |||
Loss (gain) on sale of rental equipment | 0.6 |
|
| (2.9) |
| |||
Other | 5.7 |
|
| 3.4 |
| |||
Changes in assets and liabilities: |
|
|
| |||||
Receivables | 32.3 |
|
| (12.7) |
| |||
Other assets | (2.6) |
|
| 13.1 |
| |||
Accounts payable | (16.1) |
|
| 11.7 |
| |||
Accrued liabilities and other long-term liabilities | (11.7) |
|
| (14.4) |
| |||
Net cash provided by operating activities | 280.4 |
|
| 272.6 |
| |||
Cash flows from investing activities: |
|
|
| |||||
Rental equipment expenditures | (161.5) |
|
| (257.1) |
| |||
Proceeds from disposal of rental equipment | 67.9 |
|
| 123.7 |
| |||
Non-rental capital expenditures | (25.5) |
|
| (20.5) |
| |||
Proceeds from disposal of property and equipment | 2.2 |
|
| 4.1 |
| |||
Proceeds from disposal of business | 15.3 |
|
| — |
| |||
Other | — |
|
| 1.9 |
| |||
Net cash used in investing activities | (101.6) |
|
| (147.9) |
| |||
Cash flows from financing activities: |
|
|
| |||||
Proceeds from revolving lines of credit and securitization | 388.0 |
|
| 253.1 |
| |||
Repayments on revolving lines of credit and securitization | (507.7) |
|
| (374.5) |
| |||
Proceeds from financing obligations | — |
|
| 4.7 |
| |||
Principal payments under capital lease and financing obligations | (7.4) |
|
| (8.0) |
| |||
Other financing activities, net | (1.6) |
|
| (0.3) |
| |||
Net cash used in financing activities | (128.7) |
|
| (125.0) |
| |||
Effect of foreign exchange rate changes on cash and cash equivalents | 0.1 |
|
| 0.4 |
| |||
Net increase (decrease) in cash and cash equivalents during the period | 50.2 |
|
| 0.1 |
| |||
Cash and cash equivalents cash at beginning of period | 33.0 |
|
| 27.8 |
| |||
Cash and cash equivalents at end of period | $ | 83.2 |
|
| $ | 27.9 |
| |
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 June 30, |
| Six Months Ended June 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Net income (loss) | $ | 2.0 |
|
| $ | 9.7 |
|
| (1.7) |
|
| 3.0 |
| |||
Income tax provision (benefit) | (1.9) |
|
| 5.3 |
|
| (0.8) |
|
| 2.2 |
| |||||
Interest expense, net | 23.3 |
|
| 31.6 |
|
| 47.7 |
|
| 64.5 |
| |||||
Depreciation of rental equipment | 101.4 |
|
| 100.9 |
|
| 201.8 |
|
| 200.9 |
| |||||
Non-rental depreciation and amortization | 15.7 |
|
| 14.6 |
|
| 31.5 |
|
| 29.6 |
| |||||
EBITDA | 140.5 |
|
| 162.1 |
|
| 278.5 |
|
| 300.2 |
| |||||
Restructuring | 0.7 |
|
| 7.8 |
|
| 0.7 |
|
| 7.8 |
| |||||
Spin-Off costs | 0.4 |
|
| 0.3 |
|
| 0.5 |
|
| 0.3 |
| |||||
Non-cash stock-based compensation charges | 1.7 |
|
| 4.3 |
|
| 4.9 |
|
| 8.2 |
| |||||
Loss on disposal of business | 2.8 |
|
| — |
|
| 2.8 |
|
| — |
| |||||
Impairment | 3.2 |
|
| — |
|
| 9.5 |
|
| — |
| |||||
Other | 0.1 |
|
| 0.4 |
|
| 0.1 |
|
| 0.7 |
| |||||
Adjusted EBITDA | $ | 149.4 |
|
| $ | 174.9 |
|
| $ | 297.0 |
|
| $ | 317.2 |
| |
|
|
|
|
|
|
|
| |||||||||
Total revenues | $ | 368.0 |
|
| $ | 475.1 |
|
| $ | 804.2 |
|
| $ | 950.8 |
| |
Adjusted EBITDA | 149.4 |
|
| 174.9 |
|
| 297.0 |
|
| 317.2 |
| |||||
Adjusted EBITDA margin | 40.6 | % |
| 36.8 | % |
| 36.9 | % |
| 33.4 | % | |||||
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 June 30, |
| Six Months Ended June 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
Net income (loss) | $ | 2.0 |
|
| $ | 9.7 |
|
| (1.7) |
|
| 3.0 |
| |||
Restructuring | 0.7 |
|
| 7.8 |
|
| 0.7 |
|
| 7.8 |
| |||||
Impairment | 3.2 |
|
| — |
|
| 9.5 |
|
| — |
| |||||
Loss on sale of business | 2.8 |
|
| — |
|
| 2.8 |
|
| — |
| |||||
Spin-off costs | 0.4 |
|
| 0.3 |
|
| 0.5 |
|
| 0.3 |
| |||||
Other | 0.1 |
|
| 0.4 |
|
| 0.1 |
|
| 0.7 |
| |||||
Tax impact of adjustments | (1.9) |
|
| (2.2) |
|
| (3.5) |
|
| (2.3) |
| |||||
Adjusted net income | $ | 7.3 |
|
| $ | 16.0 |
|
| $ | 8.4 |
|
| $ | 9.5 |
| |
|
|
|
|
|
|
|
| |||||||||
Diluted shares outstanding | 29.2 |
|
| 29.1 |
|
| 29.0 |
|
| 29.0 |
| |||||
|
|
|
|
|
|
|
| |||||||||
Adjusted earnings per diluted share | $ | 0.25 |
|
| $ | 0.55 |
|
| $ | 0.29 |
|
| $ | 0.33 |
|
NET RENTAL EQUIPMENT EXPENDITURES | ||||||||
Unaudited | ||||||||
(In millions) | ||||||||
|
| Six Months Ended June 30, | ||||||
|
| 2020 |
| 2019 | ||||
Rental equipment expenditures |
| $ | 161.5 |
|
| $ | 257.1 |
|
Proceeds from disposal of rental equipment |
| (67.9) |
|
| (123.7) |
| ||
Net rental equipment expenditures |
| $ | 93.6 |
|
| $ | 133.4 |
|
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.
| Six Months Ended June 30, | ||||||
| 2020 |
| 2019 | ||||
Net cash provided by operating activities | $ | 280.4 |
|
| $ | 272.6 |
|
|
|
|
| ||||
Rental equipment expenditures | (161.5) |
|
| (257.1) |
| ||
Proceeds from disposal of rental equipment | 67.9 |
|
| 123.7 |
| ||
Net rental equipment expenditures | (93.6) |
|
| (133.4) |
| ||
|
|
|
| ||||
Non-rental capital expenditures | (25.5) |
|
| (20.5) |
| ||
Proceeds from disposal of property and equipment | 2.2 |
|
| 4.1 |
| ||
Proceeds from disposal of business | 15.3 |
|
| — |
| ||
Other | — |
|
| 1.9 |
| ||
Free cash flow | $ | 178.8 |
|
| $ | 124.7 |
|
A-6 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200723005034/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.