Herc Holdings(US:HRI)2022-04-20 16:00PART I. FINANCIAL INFORMATION Financial Statements Herc Holdings reported Q1 2022 revenues of $567.3M (25% YoY) and net income of $58.5M (77.8% YoY) Condensed Consolidated Balance Sheets Total assets grew to $4.72B by March 31, 2022, driven by rental equipment, with equity at $1.01B Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $4,717.6 | $4,490.4 | | Rental equipment, net | $2,792.2 | $2,665.3 | | Goodwill | $272.5 | $231.5 | | Total Liabilities | $3,705.9 | $3,513.5 | | Long-term debt, net | $2,142.1 | $1,916.1 | | Total Equity | $1,011.7 | $976.9 | Condensed Consolidated Statements of Operations Q1 2022 total revenues rose 25.0% to $567.3M, with net income surging 77.8% to $58.5M Q1 2022 vs Q1 2021 Performance (in millions, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenues | $567.3 | $453.8 | | Equipment Rental Revenue | $526.8 | $400.4 | | Income Before Income Taxes | $67.1 | $41.1 | | Net Income | $58.5 | $32.9 | | Diluted EPS | $1.92 | $1.09 | Condensed Consolidated Statements of Cash Flows Q1 2022 operating cash flow was $143.0M, investing used $346.7M, and financing provided $191.4M Cash Flow Summary (in millions) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $143.0 | $134.7 | | Net cash used in investing activities | ($346.7) | ($62.2) | | Net cash provided by (used in) financing activities | $191.4 | ($72.8) | | Net change in cash and cash equivalents | ($12.3) | ($0.1) | - The significant increase in cash used for investing activities was driven by rental equipment expenditures rising to $286.8 million in Q1 2022 from $90.9 million in Q1 2021, and $73.0 million spent on acquisitions in Q1 202229 Notes to Condensed Consolidated Financial Statements Notes detail revenue, Q1 acquisitions, $2.15B total debt, and the $175M Cloverdale acquisition Revenue Breakdown by Accounting Standard (in millions) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Topic 842 (Leases) | $496.3 | $379.5 | | Equipment rental | $476.5 | $364.8 | | Other rental revenue | $19.8 | $14.7 | | Topic 606 (Contracts) | $71.0 | $74.3 | | Delivery and pick-up | $30.5 | $20.9 | | Sales of rental equipment | $27.7 | $44.2 | | Sales of new equipment, parts and supplies | $7.7 | $6.1 | | Service and other revenues | $5.1 | $3.1 | | Total Revenues | $567.3 | $453.8 | - During the first quarter of 2022, the company completed three acquisitions: Southern Equipment Rental, Harris Diversified, LLC, and Kilowatt Boy, Inc., totaling 3 locations69 - In April 2022, subsequent to the quarter end, the company acquired Michigan-based Cloverdale Equipment Company for approximately $175 million112 Debt Composition as of March 31, 2022 (in millions) | Debt Instrument | Amount | | :--- | :--- | | 2027 Senior Notes (5.50%) | $1,200.0 | | ABL Credit Facility | $658.4 | | AR Facility | $250.0 | | Finance lease liabilities | $50.4 | | Total Debt | $2,152.9 | Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2022 revenue grew 25.0% from rental volume/pricing, with $1.1B ABL liquidity and increased capex Results of Operations Summary (in millions) | Metric | Q1 2022 | Q1 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $567.3 | $453.8 | $113.5 | 25.0% | | Equipment rental | $526.8 | $400.4 | $126.4 | 31.6% | | Direct operating | $246.2 | $183.0 | $63.2 | 34.5% | | SG&A | $89.4 | $65.5 | $23.9 | 36.5% | | Income before income taxes | $67.1 | $41.1 | $26.0 | 63.3% | | Net income | $58.5 | $32.9 | $25.6 | 77.8% | - The increase in equipment rental revenue was primarily due to a 29.0% higher volume of equipment on rent and a 4.3% increase in pricing compared to Q1 2021122 - Sales of rental equipment decreased by 37.3% as the company strategically managed its fleet to maximize size amid high utilization, but the margin on these sales improved to 33.2% from 13.1% due to strong used equipment pricing123125 Net Rental Equipment Capital Expenditures (in millions) | | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Rental equipment expenditures | $286.8 | $90.9 | | Disposals of rental equipment | ($28.8) | ($40.3) | | Net rental equipment expenditures | $258.0 | $50.6 | - As of March 31, 2022, the company had liquidity of $22.8 million in cash and approximately $1.1 billion in unused commitments under its ABL Credit Facility132 Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure (interest rates, FX, fuel) were reported from the 2021 10-K - As of March 31, 2022, there has been no material change in the company's market risk disclosures from its 2021 Annual Report on Form 10-K157 Controls and Procedures Disclosure controls were effective as of March 31, 2022, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective158 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2022159 PART II. OTHER INFORMATION Legal Proceedings Pending legal proceedings are detailed in Note 12, 'Commitments and Contingencies,' to the financial statements - Information regarding legal proceedings is available in Note 12 to the financial statements161 Risk Factors No material changes to risk factors were reported compared to the 2021 Annual Report on Form 10-K - No material changes to risk factors were reported compared to the 2021 Annual Report on Form 10-K162 Unregistered Sales of Equity Securities and Use of Proceeds No share repurchases in Q1 2022, with $395.9M remaining available under the repurchase program - No share repurchases were made during the three months ended March 31, 2022163 - As of March 31, 2022, $395.9 million remains available under the Share Repurchase Program163 Other Information No other information is reported under this item for the period - There is no information to report under this item164 Exhibits This section lists Form 10-Q exhibits, including officer certifications and XBRL data files