Herc Holdings(US:HRI)2022-10-20 15:29Financial Data and Key Metrics Changes - Third quarter total revenue, rental revenue, and adjusted EBITDA reached all-time quarterly highs for the company [10] - Equipment rental revenue increased by 36% year-over-year, driven by strong core business performance and acquisitions [15][44] - Total revenues grew by 35%, impacted by lower sales of used equipment due to tight supply of new equipment [16] - Adjusted EBITDA increased by 40% year-over-year, with adjusted EBITDA margin improving by 160 basis points to 46.3% [16][46] Business Line Data and Key Metrics Changes - ProSolutions business delivered double-digit growth year-over-year, indicating strong demand for targeted solutions [28] - The average OEC fleet increased by 35% compared to the previous year, reflecting significant investment in fleet expansion [26][51] - Specialty equipment now represents about 24% of the total fleet, with room for growth [31] Market Data and Key Metrics Changes - The North American rental market is estimated to be $61 billion, growing by about 13% in 2022 [22] - Industrial spending is forecasted to grow by 6.3% in 2022 and 6.5% in 2023, indicating strong demand in key markets [60] - Non-residential construction activity is expected to increase by 19% in 2022, with additional growth of 2% in 2023 [61] Company Strategy and Development Direction - The company aims to sustain growth and expand market share through targeted acquisitions and greenfield operations in high-growth markets [12][23] - The strategic focus is on increasing the local customer base to 60% of revenues while maintaining national account business at 40% [34] - The company is committed to operational excellence and safety, with a focus on achieving 100% perfect days [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the business and raised guidance for adjusted EBITDA to $1.22 billion to $1.25 billion, reflecting a 36% to 40% increase over 2021 [13][65] - The company is experiencing a robust operating environment, with strong demand for rental services and ongoing supply chain challenges benefiting the rental business [43][64] - Management noted that the secular shift from ownership to rental is expected to continue, driven by supply constraints and rising costs for customers [101][102] Other Important Information - The company has completed 16 acquisitions in 2022, spending $441 million, with a solid pipeline for future acquisitions [54] - The company maintains a conservative leverage ratio of 2.4x, within the targeted range of 2x to 3x [57][109] - The company continues to pay a quarterly dividend of $0.575 per share, indicating a commitment to returning value to shareholders [57] Q&A Session Summary Question: Can you discuss the implied fourth quarter EBITDA guidance? - Management indicated that storms typically generate $5 million to $6 million in EBITDA, but the growth is primarily from fleet growth and acquisition activity [76] Question: What are the pricing trends in the quarter? - Pricing increased by 6.2% year-over-year, with expectations to maintain high pricing into 2023 [49][80] Question: What is the CapEx outlook for 2023? - Planned CapEx for 2023 is $1.5 billion, with flexibility to adjust commitments to vendors if necessary [81] Question: How is the supply chain expected to change in 2023? - Supply chain constraints are expected to persist into next year, with no significant loosening anticipated [85][87] Question: What is the rationale behind targeting a specific customer mix? - The company aims to shift towards a higher margin local customer base while maintaining growth in national accounts [93] Question: How does the current environment affect the shift from ownership to rental? - The current environment is driving an increase in the secular shift towards rental, which is expected to continue [102] Question: What is the outlook for acquisitions? - The acquisition pipeline remains robust, with no significant changes in multiples or seller willingness expected [124]