Core Insights - Investors in Herc Holdings Inc. (HRI) should monitor stock movements due to high implied volatility in options, particularly the Jun 20, 2025 $90.00 Call option [1] - High implied volatility indicates market expectations of significant price movement, potentially due to an upcoming event [2] Company Analysis - Herc Holdings is currently rated as Zacks Rank 3 (Hold) in the Transportation - Equipment and Leasing Industry, which is in the top 30% of Zacks Industry Rank [3] - Over the past 60 days, one analyst has raised the earnings estimate for the current quarter from $2.98 to $3.11 per share, with no downward revisions [3] Trading Strategy - The high implied volatility suggests a potential trading opportunity, as options traders often seek to sell premium on such options to capture decay [4]

Group 1 - The article emphasizes the importance of strong foundational companies in the technology, industrial, and conglomerate sectors for long-term success [1] - It highlights the dual approach of analyzing financial data while narrating the stories and strategies of businesses to provide insights into market performance [1] - The focus on both quantitative analysis and qualitative storytelling reflects a commitment to understanding and explaining the financial landscape [1]

Core Insights - Herc Holdings reported quarterly earnings of $1.30 per share, missing the Zacks Consensus Estimate of $2.51 per share, and down from $2.36 per share a year ago, representing an earnings surprise of -48.21% [1] - The company posted revenues of $844 million for the quarter, surpassing the Zacks Consensus Estimate by 0.31%, and up from $804 million year-over-year [2] - The stock has underperformed, losing about 41.1% since the beginning of the year compared to the S&P 500's decline of -12.3% [3] Earnings Performance - Over the last four quarters, Herc Holdings has not surpassed consensus EPS estimates [2] - The current consensus EPS estimate for the upcoming quarter is $2.92 on revenues of $873.26 million, and for the current fiscal year, it is $12.07 on revenues of $3.53 billion [7] Market Outlook - The estimate revisions trend for Herc Holdings is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell), indicating expected underperformance in the near future [6] - The Transportation - Equipment and Leasing industry is in the bottom 12% of Zacks industries, suggesting that the outlook for the industry can significantly impact stock performance [8]

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) Herc Holdings reported Q1 2022 revenues of $567.3M (25% YoY) and net income of $58.5M (77.8% YoY) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) 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](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) 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](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) 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 2022[29](index=29&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) 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 locations[69](index=69&type=chunk) - In April 2022, subsequent to the quarter end, the company acquired Michigan-based Cloverdale Equipment Company for approximately **$175 million**[112](index=112&type=chunk) 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](index=26&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) 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 2021[122](index=122&type=chunk) - 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 pricing[123](index=123&type=chunk)[125](index=125&type=chunk) 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 Facility[132](index=132&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) 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-K[157](index=157&type=chunk) [Controls and Procedures](index=31&type=section&id=ITEM%204.%20Controls%20and%20Procedures) 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 effective[158](index=158&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2022[159](index=159&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=33&type=section&id=ITEM%201.%20Legal%20Proceedings) 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 statements[161](index=161&type=chunk) [Risk Factors](index=33&type=section&id=ITEM%201A.%20Risk%20Factors) 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-K[162](index=162&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) 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, 2022[163](index=163&type=chunk) - As of March 31, 2022, **$395.9 million** remains available under the Share Repurchase Program[163](index=163&type=chunk) [Other Information](index=33&type=section&id=ITEM%205.%20Other%20Information) No other information is reported under this item for the period - There is no information to report under this item[164](index=164&type=chunk) [Exhibits](index=34&type=section&id=ITEM%206.%20Exhibits) This section lists Form 10-Q exhibits, including officer certifications and XBRL data files