Herc Holdings(US:HRI)2022-07-21 15:48Financial Data and Key Metrics Changes - The company reported a 35% increase in rental revenue for Q2 2022, totaling $605.4 million compared to the previous year [12][18] - Total revenue grew by 30% to $640.4 million, impacted by lower sales of used rental equipment [18] - Net income increased by 53% to $72.2 million, or $2.38 per diluted share, compared to $47.1 million, or $1.55 per diluted share last year [18] - Adjusted EBITDA grew by 37% to $284.2 million, with adjusted EBITDA margin improving by 210 basis points to 44.4% [19][53] - The company updated its 2022 adjusted EBITDA guidance to a range of $1.195 billion to $1.245 billion, implying a 34% to 39% increase over 2021 results [16][72] Business Line Data and Key Metrics Changes - The ProSolutions business continued to show strong double-digit growth year-over-year, contributing to overall revenue growth [29] - Local rental revenue represented 58% of total rental revenue, up from 56% in the same quarter last year [40] - The specialty fleet now accounts for 24% of total OEC, nearing the goal of 25% to 30% [36] Market Data and Key Metrics Changes - The North American addressable market size is estimated to be $60 billion, growing by about 15% in 2022 [22][66] - The company anticipates continued growth opportunities through 2023 and 2024, driven by infrastructure projects and pent-up demand [43][71] Company Strategy and Development Direction - The company plans to capitalize on market opportunities through organic growth supplemented by acquisitions [23][60] - A focus on expanding the specialty branch network to enhance customer response capabilities [37] - The company aims to maintain debt levels within a targeted range of 2x to 3x net leverage while pursuing growth [15][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong operating environment and ongoing demand for rental equipment [48][67] - The company is prepared to navigate potential economic downturns, leveraging lessons learned from past experiences [96][99] - Management noted that the current inflationary environment is manageable, with expectations for continued rate increases [56][57] Other Important Information - The company completed the acquisition of six additional companies in Q2, with a total of nine locations [12][60] - The company plans to repurchase shares under its stock repurchase program, with a remaining authorization of $395.9 million [14][64] - The company reported negative free cash flow of $197 million before acquisitions, indicating significant investment in fleet growth [62] Q&A Session Summary Question: Potential for improving time utilization and operational metrics post-acquisition - Management acknowledged opportunities for improving time and dollar utilization through acquisitions, though the extent is not tremendous [82][84] Question: SG&A costs and inflation impact - Most SG&A increases are attributed to strategic investments for growth, with pure inflation impacts in the mid-single digits [86] Question: Alignment with large infrastructure projects - Management feels well-positioned to capitalize on infrastructure spending, particularly in urban markets [89] Question: Fleet cost expectations for next year - Fleet costs are expected to be higher than mid-single digits in 2023, with current inflationary pressures manageable [90][91] Question: Operating leverage in a potential downturn - Management indicated that the current momentum would help mitigate negative operating leverage in a downturn scenario [96][98] Question: Mix impact on dollar utilization - Mix challenges were noted, primarily due to relative growth rates in different business segments [100][102] Question: Business trends and customer sentiment - Strong business trends were reported, with positive customer sentiment and ongoing construction activity [108] Question: Margin impact from acquisitions - Acquisitions are expected to be margin neutral initially, with potential for margin expansion through synergies over time [110]