Herc Holdings Inc. Earnings Call: Growth Amid Challenges

Herc Holdings Inc. ((HRI)) has held its Q3 earnings call. Read on for the main highlights of the call.

Herc Holdings Inc.’s recent earnings call conveyed a balanced sentiment, acknowledging significant progress in integration and growth in mega projects and specialty solutions, while also recognizing challenges in local markets and operational inefficiencies. The company emphasized its commitment to optimizing fleet management and improving margins amid cautious economic and market conditions.

Successful Acquisition Integration

Herc Holdings Inc. has successfully completed the full systems integration of a major acquisition in just 90 days, a remarkable feat compared to the typical timelines of 6 to 18 months. This rapid integration has allowed the company to expand its field operating structure and add key leadership roles, ensuring operational continuity and scalability.

Growth in Mega Projects and Specialty Solutions

The company reported a robust 30% year-over-year increase in equipment rental revenue, driven by strong contributions from mega projects and specialty solutions. This growth underscores Herc Holdings’ strategic focus on these high-impact areas.

Proactive Fleet Management

Herc Holdings has increased its gross CapEx seasonally and expanded its specialty equipment offering. The company has nearly doubled disposals on an OEC basis compared to the previous year, optimizing its larger general rental fleet post-acquisition.

Strong Safety Performance

The company achieved at least 97% perfect days throughout the organization, maintaining a total recordable incident rate better than the industry’s benchmark of 1.0. This highlights Herc Holdings’ commitment to safety excellence.

Local Market Challenges

Growth in local markets has been limited, as new projects in the commercial sector remain on hold due to the high interest rate environment. This presents a challenge that the company is navigating carefully.

Lower Margin from Used Equipment Sales

The adjusted EBITDA margin was impacted by a higher proportion of used equipment sold through the lower-margin auction channel, affecting overall profitability.

Sales Force Attrition and Customer Disruption

The company experienced sales force attrition prior to the acquisition close, which impacted customer relationships, particularly in local markets where disruptions occurred.

Forward-Looking Guidance

Looking forward, Herc Holdings Inc. is focusing on fleet management, network optimization, and expanding its specialty equipment offerings, aiming to increase its specialty network by 25% next year. The company is confident in achieving both cost and revenue synergies while continuing to focus on long-term growth strategies. The guidance for 2025 remains unchanged, with gross fleet CapEx expected to be between $900 million and $1.1 billion.

In summary, Herc Holdings Inc.’s earnings call highlighted a positive trajectory with significant achievements in integration and growth, despite facing challenges in local markets. The company’s forward-looking strategies and commitment to optimizing operations position it well for continued success.