Herc Holdings(US:HRI)2020-10-22 16:59Financial Data and Key Metrics Changes - Equipment rental revenue was $402.3 million in Q3 2020, a decline of 12.5% or $57.3 million compared to the prior year [19][45] - Total revenues in Q3 were $456.7 million, down 10.1% or $51.4 million year-over-year, primarily due to lower rental revenue [20][45] - Adjusted EBITDA was $196.7 million, a decline of 6.1% compared to the prior year, but an improvement from Q2 [21][48] - Net income increased significantly to $39.9 million, or $1.35 per diluted share, compared to $9.4 million, or $0.32 per diluted share in 2019 [21][46] - Adjusted EBITDA margin improved to 43.1%, up 190 basis points from the prior year [21][48] Business Line Data and Key Metrics Changes - The specialty ProSolutions business delivered double-digit year-over-year rental revenue growth in Q3, with a 14% increase compared to the prior year [16][26] - National account customers represented 44% of rental revenues, providing stability during the COVID-19 pandemic [14][38] - The company managed to maintain positive average rates for the first nine months of the year compared to last year [16] Market Data and Key Metrics Changes - The rental revenue from contractors represented 34%, industrial customers 29%, infrastructure and government 18%, and other customers 19% of total rental revenue [36] - The industrial manufacturing activity began to close the gap with pre-COVID-19 levels, indicating a recovery in that segment [38] Company Strategy and Development Direction - The company has made strategic investments in specialty equipment rental over the last four years, which have proven beneficial during the pandemic [13][32] - The company aims to continue expanding its footprint through new locations and high-growth urban markets [30][31] - The focus remains on maintaining a lean cost structure, improving margins, and providing excellent service to a diverse customer base [40] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the balance of the year, highlighting the company's resilience and ability to adapt to challenges [12][39] - The company expects a return to normal seasonality for the rest of the year, with a projected decline in rental revenue of 6% to 8% in Q4 compared to the prior year [41][68] - Management raised the adjusted EBITDA guidance for the full year 2020 to a range of $655 million to $675 million, assuming no further COVID-19 related shutdowns [67][68] Other Important Information - The company generated approximately $252 million in free cash flow year-to-date and increased liquidity to $1.4 billion by the end of Q3 [18][60] - Total debt was $1.8 billion as of September 30, 2020, a reduction of about $236 million from December 31, 2019 [61] Q&A Session Summary Question: What end markets are driving the sequential improvement into Q4? - The improvement is driven by a stronger comeback in non-residential commercial markets and emergency response markets due to hurricanes [80] Question: Can you elaborate on the EBITDA guidance for Q4? - Q3 is typically the seasonal peak in margin, and Q4 may see losses on equipment sales impacting EBITDA margins [84] Question: How does the fleet size impact utilization and market activity? - The company is working to close the gap to 2019 levels and can adjust fleet size based on actual demand [92] Question: What is the outlook for the entertainment business? - Visibility on TV and film is good, but live events remain uncertain due to the pandemic [113] Question: How significant were the unique factors like hurricanes and entertainment in Q3 results? - Revenue attributed to hurricanes and fires was only about 1% of the total third quarter revenue [126]