Herc Rentals Posts Rental and Total Revenue Increases in the First Quarter

Herc Holdings reported $320.6 million in rental revenue in the first quarter compared to $307.8 million for the same period last year, a 4.2-percent increase. Total revenues were $389.4 million compared to $365.6 million a year ago, a 6.5-percent jump.

Pricing improved 1.1 percent in the first quarter of 2017 compared to the year-ago quarter. Rental revenues in key markets, excluding currency, increased 8.5 percent and pricing improved 1.7 percent compared to the first quarter of 2016.

Herc reported a net loss of $39.2 million in the first quarter, compared to a net loss of $1.5 million in the year ago period. The net loss this year reflected an increase of $31.3 million in interest expense related to debt issued in June 2016, stand-alone public company and other costs, and continued weakness in upstream oil and gas markets.

“Our revenues and pricing were strong in the first quarter despite the industry’s normal seasonality and continuing headwinds in upstream oil and gas,” said Larry Silber, president and CEO. “Rental revenue growth in key markets was particularly robust, and we remain confident in our strategy. The continuing progress we are making in expanding our customer base and increasing revenue in key markets was offset by the impact of stand-alone public company costs, certain business transformation and other costs, and investments in our sales organization and branch operations.

“Our strategy is on track as we continue to shift our fleet mix to include a greater variety of higher dollar utilization fleet. In addition, net fleet capital expenditures reflect our disciplined approach to capital management through well-managed fleet rotation. We expect to deliver improved EBITDA margins over time as our expansion in high-growth, urban markets offers opportunities to outperform overall equipment rental industry growth rates.”

Adjusted EBITDA in the first quarter was $97.8 million in 2017 compared to $107.8 million in the first quarter of 2016, primarily because of additional stand-alone public company costs, professional fees related to the company’s year-end 2016 filing, business transformation costs, and lower contributions from upstream oil and gas markets. These impacts offset improvements in the results of sales of revenue earning equipment and improvements in key markets.

Average fleet unavailable for rent was 13 percent in the month of March 2017, compared to 12.4 percent in March 2016, primarily reflecting the timing of seasonal equipment coming off rent in Canada because of an early spring this year. Dollar utilization of 32 percent in the first quarter was nearly flat compared to the year-ago frame, reflecting continuing headwinds in upstream oil and gas markets.

Direct operating expenses were $169.1 million in the first quarter of 2017, compared to $158.7 million in Q116. Approximately half of the increase was because of higher personnel-related expenses while the remainder was increases in fleet and facility expenses, including the opening of three new locations during the first quarter.

In regard to expectations for 2017, Silber noted: “We are affirming our 2017 adjusted EBITDA and net fleet capital expenditures guidance, which, as we indicated previously, is based on a 3.5 percent growth rate in the North American equipment market.” He added adjusted EBITDA is expected to be in the range of $550 million to $590 million for the year, and net capital expenditures are expected to be between $275 and $325 million.