HRI - Earnings call transcript Q3 2018

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Operator

Good morning, ladies and gentlemen, and welcome to the Herc Holdings Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded. At this time, I would like to turn the conference over to Elizabeth Higashi, Vice President of Investor Relations. Please go ahead, ma'am.

Elizabeth Higashi

good all and you. Denise, you, morning of to Thank third everyone conference I'd welcome our quarter like to to earnings call.

The our the Our press and page will prepared Please on Vice morning Larry Slide joined and X. our Bruce President out and went will will the and review They the Senior at This Officer. as which of quarter turn Operating Irion, Chief by Events morning, Mark industry to release and Dressel, Officer; followed both President presentation Financial outlook. are and slides remarks Executive be Q&A IR President an well ir.hercrentals.com. as Chief website Officer. Senior open by I'm Vice this Silber, posted include Chief also

the there items Larry, turn I are to over like I'd call few cover. to a Before

X of statements. of company's XX-K and that today's and are statements Securities harbor additional annual the actual it about and complete made statements. this the that caution contains Please call based we call. our forward-looking information on section will business. XXXX, Form and ended, could you Factors X on uncertainties. risks therefore, for First, include see forward-looking uncertainties filed for report on Slide year materially December with the safe from as our the impact Risk risks XX, could The was presentation which differ to involve would today, Exchange environment These through statements our Commission conference I results refer the our

through the third XX-Q website expect websites. related the copy at XXXX to sec.gov. On we available Investors our a either of will later by SEC's file the XX-K at our visiting of access our be which Form can website You ir.hercrentals.com today, quarter or through matter, section Form

can our non-GAAP be for to of in company's discussing at conference presented found the closest useful performance. evaluating are Reconciliations call measures information SEC were basis, our the be the in the financial X-K on operating with believe material, non-GAAP morning Form will on equivalent addition we and to which results the section ir.hercrentals.com. posted these GAAP this the GAAP Investors we a website that is furnished to also In

replay can dial-in through morning. website. a be call our of this a Finally, release this via Replay on or our included were accessed webcast instructions earnings in

of given any of recording not approve this have not We do other transcribing call permission the for or sanction and call. any

Now, to call I'll over Larry. the turn

Lawrence Silber

this earnings Elizabeth. we with Please third Thank to us conference And this on #X. joining We're turn you, very call. morning's this everybody morning. quarter morning Slide pleased reported for results thanks strong the

margin flow-through. price improved strong announce EBITDA continue drive The $XXX million Revenues; in turn adjusted Diversify range expect full to Improve Therefore, in and million. XX% strategy: The reflects raised focused we Management; XX% of $XXX Expand shareholder EBITDA And we Capital recorded our an to Enhance in since guidance to we achieved we Our Slide XXXX new Effectiveness; ROIC XXXX. we and Customer initiatives have efforts to blueprint These company. and over initiatives and volume, rental adjusted have value. that the continue operating from EBITDA our year which to remained pleased range to third Disciplined increase #X. last Operating growth. expenses, our constant We improve our Experience; to $XXX pillars to Please the year's been and and forward. of direct our enhance strategic quarterly four becoming highest metrics both to are and reduced recorded public drove going a million standalone improve strategic dollar utilization SG&A quarter. revenue compared with increases controlled growth, adjusted We mix

at is Safety we do. #X. Slide to turn please center everything Now, the of

how dictates awareness safety employees before, times many how customers. how work we we operate, our and with our treat said we I As

with TRIR to or excellent in Incident last Recordable make continue Total Rate our progress We year. compared

simple performance XXXX, which we motor no very months not a a continued the locations for TRIR Perfect of the accidents of to vehicle violations. Our impressive improve least recorded Perfect with incident, concept means no year-over-year. at Throughout OSHA XX% decline recordable X% accomplishment. Day, DOT first Each a at on our focus regions Days of fault X and our of

to new improve to training We promote Rentals make make and our programs our of to want to Herc safety We thinking #X. encourage that XXX is within and just not Perfect please been have aim a XX/X continue we culture continue overall everyone And safety investments brand turn a day team to action, XXX% Slide our Days to that make initiatives We everyone sure safety and safety customers. and metric. an branches. for for to implementing awareness always a all now, safety our is

equipment that mix period. volume. to Here grew tough the was driven third of the pleased X.X% and against growth We're in for the quarter. improved The in million of rental we XXXX some outline very by results year $XXX prior comps to quarter million revenue increased report $XXX.X the pricing,

in fleet Pricing in accounts. Our both prior local average only the grew the X.X% third year. improved X.X% OEC and were and year-over-year over quarter strong national

million in Canada year-on-year net share the by million third income compared share, $XX.X gains is results. the continue quarter per net included XXXX. with in million which the with to quarter diluted $XX.X or We diluted per also improved in income We year-over-year $XX.X or third of our $X.XX of $X.XX in see

point million sequential improvement the compared last quarter, Third and EBITDA or Adjusted a quarter third XX to XX points the major a was increase XX% as margin to compared in from $XXX.X customer XX.X% basis margin. year-over-year XX% increased adjusted EBITDA in quarter's as X.X% XX.X% year. third in from quarter Dollar million improved increased and pricing utilization the well basis second $XX.X increase with $XXX.X the to mix. XXXX fleet XXXX, benefitting million of

nine are increase increasing to for million the $XXX $XXX million, million we in million to quarter, XX% from range XX% remarks, in from result $XXX guidance XXXX. to adjusted expectations of mentioned EBITDA our my month our I for and XXXX an As now million based $XXX our fourth $XXX on our to earlier results

also of end million. the to from $XXX for million, a top net expenditures our million are capital million range range guidance $XXX narrowing $XXX to full-year fleet We $XXX to of

increased prior please Equipment This Now, that we're third over to slide improvements the in #XX. each the Slide rental the activity comps million prior the included to turn against quarter year. continuing positive some quarter illustrates tough $XXX from year. making X.X% revenue hurricane

of improvement. in which rate quarter, X.X% increased third consecutive marked pricing year-over-year Our the quarter our XXth year-over-year

success our Optimus for tool, broad-based quarterly pricing operations rental our experienced proprietary fleet team OEC on reflects shows improvement XXXX slide XXXX. and the the of This our the rate basis strong for at in average equipment. our also growth Our market demand and

new During average improving by substantial the reflecting investment to our fleet OEC our continue we year-over-year at fleet X.X% mix this third the quarter, equipment year increased age. and

fleet and increase year. a the the on for quarters. Our improved basis to last last on X.X% In consecutive as continued rent compared third six year-over-year rent fleet with on increased quarter,

from quarter hurricane activity equipment reminder, As to rent of year. XXXX the of third last benefited due higher volume a on

return invested have further Given our this opportunity and to fleet capital. year, additions we our on improve efficiency our fleet

XX% dollar to with to consecutive year-over-year and of mix of in on fleet was the increase the improvement end our that Together, ProContractor September compared contribute please XX year. for average as age ProSolutions same of of of with our overall million of the the of Now OEC XX Slide improvement. quarter approximately of $XXX the an improvement utilization, of in increase $X.XX equipment The that's or #XX. in and to period the volume portion XXXX as the about XX, value in turn last billion fleet of months six continued XXXX fleet account for third Fleet of X% price months OEC and year-over-year. quarter an total now OEC

us. you compact As Earthmoving equipment continue in percentage are investments at consists opportunity and XX%. dollar lower the in higher categories building which the of targeted year. our fleet the our detailed our deck. improving about #XX. fleet favor for appendix XX% scale the of Slide of to increased A fleet of from footprint broad to North from about is hand earthmoving equipment see equipment, in fleet to aerial urban left onto the breakout utilization of our been We've in Compact X.X% turn largest we equipment our can corner, by of is Please the markets. X.X% last chart American

as market over areas. standalone XXXX closed we've The remained out fill Our many five North by we've branches and added projected state major to growth ARA from as of about compound branches XXXX number by America defined annual the map about total to province. of same rates years has as

grow to projected are Louisiana, open years. the in new the of growth outside Metropolitan We Louis location Florida, in States, opened Western market the and supporting a of part the St. the of Peters, several see, St. X% Washington. and can also Covington, Seattle, over annual you new over Metropolitan the location As Atlanta we compound next at recently market, Georgia, rate Missouri

markets we equipment wider categories. have our range customers a large on Our our of with supports clustered also focus urban the and fleet provide way to

best profit the with practices dollar across learning highest We to rollout regions, and continue centers those our urban utilization contributions. from

maintenance costs rentals expect from and ownership customers to storage will way continue secular and rental as to service as conversion to #XX. staff. Please that Slide turn utilize the trend in reduce urban requirements eliminate We a

third is Our stable XX% XX% in represents XX% total and the accounted account the strategy further rental revenue mix. driving rental for revenue Local grew was year-over-year of the of market total. XXXX. our of and our customer National about revenue of quarter diversification now about

the strong growth slide. future chart XX% commercial entertainment XX%; and hospitality, segment a was by about by events continued corner were to and special infrastructure throughout Our is total, new opportunities. accounts right other customer composition rental recreation, which major include in customer service, was in XX%. followed of our industrial for quite retail maintaining quarter, rental customers, revenue at the healthcare, government solid be hand Growth potential XX%; and pipeline the the and upper in of shown Contractors revenue

turn please to #XX. Now, Slide

and We the this enhanced in savings improving cost recovery our program as mile distance us expenses We to manage cost better through Our and with per to direct controlling long third all logistics in operating delivery. to for our portal to XPO began of quarter. of online year. focus SG&A A reductions delivery. well and cost customers' and August fuel transportation local out rolled revenue branches recovery related as and tools gain on new States in United equipment external specific both delivery improved back-office enables better operating improved to in the traction track reducing

bi-weekly tools and helping revenues. recover activities reporting quote and transportation ancillary are us costs improve new Our transportation

to helps and new the continuing number shortages non-residential secular customers forecast as progress. X.X% last it XXXX compound easier as We protection increase and initiative, significantly are in we U.S. yes. during for the bulk equipment also rental existing mentioned our construction industry XXXX. Expectations to as the continue program, new annual projected the XXXX of both the say at Architecture Index, ARA with remains to third in introduced the industry year-over-year robust be is we reducing expand shift and September. rental expected the of XX plan term, And be Longer to Please Slide just drive ownership The in is finding through XXXX fuel to healthy turn forecast our quarter. X.X% workers. call, remained The residential evidenced solid metrics growth for despite expected over and simpler as remain by process us spending continue rental fuel Growth now to from to Industrial have #XX. time. positive over minimize growth cost. vendors equipment remain Key XXXX. and for over rental spending to through construction continued economic segments to Billings which in year higher

space to we likely growth urban the constrained encourage market strategy on requirements which of more Our should to focus by cost rental and versus could markets, rate further be are accelerate that ownership. achieve that density urban in

our will executing we're and we about the favorable operating up strategy he more economic me the financial And and details in questions. before to We let Then driving look performance. our improvements much call are Mark CFO, in summarize indicators to quarterly now, continue turn making future over growth and to on line our progress great Key open opportunities. Irion, detail. I'll our optimistic discuss

Mark Irion

excited to about continue made Thank the you, margin a refocus are Larry, and stages pleased of to and we we reduced I'm progress good but in with everyone. our SG&A. are flow-through. a We the we morning, know this as quarter operating with progress better improvement line direct expenses have early journey, this improve we top on made and the manage quarter began

contribution finalize initial share million. tax better We or year of $XX.X due $XXX.X our operating of the our impact the for REBITDA. that the we and will $XX.X for to profitability the quarter $X.XX EBITDA million, changes. net to couple X.X% for to quarter. that you compared the year's new revenues period of booked of Cuts sales continue increased you REBITDA per increased $XXX metrics period. our already margin last I rental we turn of is measures focus This highlights. was this of quarter would socialize an the forward. impact we of quarter improvement better $X.XX improvement reported rental XX% has walk the of results like to income and same margin going core without and benefit in revenue provided equipment as of improved improvement the our quarter. around third diluted in Larry to of with the total our of quarter Slide to QX will XXXX. Tax year-over-year our calls, in as we process to $XX we operations reiterate define business. and year-to-date per terms XXXX of concept financial If a I rental Act term million XX, income Adjusted million over Then $XXX.X review In estimates share and refer I'll to XX.X% of diluted or third million year-over-year on Internally, the future equipment analyze will the key Jobs million third third The basically is and through net and a rental way the the of to key is here XXXX, overview grew summary. primarily the as third while XX.X% analyze this in XXXX success margin improvement from the December rental

We business we financial industry, over improvement assumptions operating also are an depreciation utilize a is report on on others to We the margin add sales in in margins rental rental our may on the time. our impact primarily value will statements. and different which business rental our equipment the than of in

in in XXX to our to there such, that margins As performance rather than likely XXX is nature be a adjusted EBITDA basis point driven. structural is gap

able on have this reason, For REBITDA we our goal will focus internal our we'll couple gap the our managing margins and be next and years. the over of in of close versus peers the that to terms flow-through, EBITDA

third from through Due we basis in to of our For quarter flow car during an to quarter we've of our of pleased the business XXX with the rental increase to strong the current progress third mentioned quarter, this made points improvements rose of very margin the in REBITDA. are of year, as REBITDA XX%, terms XX% XXXX.

XXXX. improvement compared margin useful evaluating XX, quarter year. appendix XX.X% $XXX.X points to progress. our is XXXX that a these with revenues $XX was in in can XX.X% XXXX Slide XXX the which $XXX.X XX, third in months, measures think nine Page quarter million third turn reconciliation or you'll of last operating the compared to to the the XX.X% the of we basis in on of in For Please to million see the million grew There I total find in

increase results partially and rental same due revenue increase revenue improved to remainder and in year-over-year rental X.X% pricing, improved last to The other. mix accounts and reflected a lines period the growth from X.X% $XX.X the The from equipment mix volume, currency, with or local is ProSolutions of increased Excluding compared X.X% ProContractor in year. million higher revenue the business.

increase primarily a flow Net $XX.X was to the third and sales equipment quality and of Larry progress revenue in rental increased out revenues of earlier. bridge. and we pointed expenses operating quarter expense equipment in on to as the the XXXX revenue go $XX.X regarding of and $XX the as million improvement our and as in QX this improve and an third with our to for we and the Income XXXX adjusted as of our forward. to expense XX% bridge XXXX costs our full rental same related third Slide EBITDA $XX of over out to the a operating for in million. $XX.X primarily be review increased expenses third achieved the revenue third partial local over - our to estimate quarter quarter improvement costs approximately XX And the Slide continue out Larry a to compared reduce third quarter the for grow auction account the control The third rolled quarter sales XX% to sales benefit Interest due adjusted to XX% of XX% XX%, of approximately redemption administrative about quarter. $X.X related the last estimate increases proceeds million as the on to XXXX, the We the The reported was year-over-year. to with to focus in million Please as and $XX.X second through improve mix due due to to revision EBITDA an mentioned and contribution in offset the largest XXXX, year of Act. to tax flattening XX% the and effective quarter In million $X.X quarter XXXX rate outstanding transition largest well an third of equipment notes or the maximize of now ongoing related commissions towards prior related third year. Interest and income period related were increased X%. compared the in of interest contributor related payroll personnel of quarter improved through number prior quarter result increased the the shows improvement of $X.X our decrease and to that million rental as Please to was We this sales accounted made maintain over We $XXX.X initiatives of the channels that maintenance EBITDA of turn Tax million reflected transportation higher primarily increased total in to by we've of for generated and lower turn mix portion Selling, which to $X.X million, was million to secured in senior the fuel, year or one-time compared tax volume went $XXX.X age taxes the income slightly, fleet net growth general sales XX. average our compared quarter third OEC growth. approximately of rental XXXX. million, of XXXX in fleet. Adjusted increase a decreased progress our priority million represented XX% offset partially good year. expense XXXX. the costs during local such the our notes. payroll of and margin order and Direct million borrowings in activity cost to under quarter expenses.

The facility are the from the the the prior we composed of third $XX.X the included have improved and our floating facility reflects million million cost category components broken the in operating just OEC improvement from credit notes, fleet. the and during appendix. a for to in full quarter - OEC increased plus the to as to our and at a of be million. XXXX A costs September disposals on OEC we revolving for as $XX of $XX The of breakout earlier on results the for about quarter expected is of to credit average on X.X% quarter XXXX are $XX.X prior expenditures $X.X Spin-off an declined now value On also of the our all total information OEC had appendix. Slide comprised fleet out million year, rate in year, million from also basis we Details the provided is average million our million quarter $XX this redemption the quarterly borrowings the compared increased rental fleet revolving did the year's billion of was XX, fleet X.XX%. of the $X.X XX, during of of that as While of over year. year decline estimated accounted our prior the LIBOR average the rolling is Total interest quarter. other $X.XX and rate balance XXXX. benefited the

on of were fleet million average the the XXXX, For months. age the billion and from disposals XXXX, XX improved last in in OEC at third Free flow in of or of in an nine our We months the fleet end for million to the to $XXX.X negative third XXXX our a approximately at capital increased million. nine Total $XX.X XXXX expenditures XX the quarter fleet XX of the third XXXX. $XXX as average third compared flow were $XXX debt XXXX. the $X.X XX, from months $XXX.X expenditures from quarter increase quarter increase. of in was of XX, $XXX in in operations Net improved $XXX.X year, $XX.X the age from million proceed of year. July million X.X% the We The of comparable disposal liquidity in to reconciliation free cash in X.XX% amount million the of of due as redemption enabled and $XX with aggregate in million position principal of notes had financial in negative the XX, the in $XX a appendix strong notes approximately a the limit redemption XXXX In due securitization of of our we $XXX $XXX borrowed up us maximum To $XXX in of September our is $X will interest ample revolving period million of annualized September XXXX, in deck. closed XXXX. which our rate this of result and the month A XXXX LIBOR of September receivable the was Net months of same also for plus fund fleet flow we $XXX.X on September quarter year-end million has facility facility, to notes, one XXXX partial with million $XXX ended credit X.XX% an million cash initial million approximately million million. an to months on from and was XXXX. of of accounts to cash million commitment million. period savings

We are flow. with continuing strategy cash leverage to to financial disciplined growth reduce organic operating to focus on a and fund our opportunities

than As year. we've as this fleet are in said cash On Page on have to positive repositioning previously, XX. we capital Net to lower free fleet to flow made drive this expenditures we our - expect anticipated be turn XXXX. Slide XXXX

ratio with of we range Also, are of our adjusted the adjusted earlier, XX% million million increase for XXXX compared with $XXX expenditures year, million. reduction XX% our continue of mentioned million to EBITDA the million to guidance our our Larry narrow to raising expect an end projected or As leverage XXXX, fleet net $XXX range to EBITDA $XXX we year. $XXX $XXX of to in calendar net by capital this

turn our Our it back to growth, our expected provide customers our to value liquidity create now, is fund I'll to ample margins, and financial Larry. improve overall to and strategy for flexibility serve our shareholders. to strategic to continue And operating the

Lawrence Silber

our of X.X% We Mark. strength consecutive continuing in quarters pleased pricing line Thank with XX We price increased the the of growth. you, our year-over-year of top increases. very run were quarter,

higher We mix volumes also the and improved XX%, ancillary increased prior revenue drove year. over

EBITDA company. Our a achieve levels, adjusted public we become highest reach utilization and our cost the standalone control and results to programs dollar begin margin separate since

increased of ProContractor X% last X%. over continue fleet ProSolutions fleet OEC at average the the diversification as carefully growing we fleet Our with year our and

open rate-driven on We operator, question so, And we we are your and on and out growth look to lines. the expansion. please margin execute five-year continue few revenue now, years ago plan laid forward the focused to

Operator

you, sir. Thank

question-and-answer first the of begin come now The Instructions] session. from will ahead. will Please Neil We [Operator Buckingham question go Research. Frohnapple

Neil Frohnapple

great good Hi, morning. quarter. a of Congrats

Lawrence Silber

Good morning, Neil. How you? are

Neil Frohnapple

incremental can I of margin cost EBITDA Now until is think mean, that think initiatives framework Mark, at there guidance taking forward? EBITDA going an won't unreasonable margin any going XX% REBITDA to realize the us Good. XX% least rental to what help is out? you've incremental you of are you March, with forward give some now, laid hold, but I of reason

Mark Irion

goal stated continue to Yeah, before for up flow-through now, in challenging market is execute year-over-year XXX certainly terms ourselves points our And continue we also REBITDA. conditions basis, on XX% our be sort as a we and XX% our current basis if we of improvement of to to on plan.

Neil Frohnapple

You Mark, the XXX will basis points hope. in be XXXX said,

Mark Irion

on guidance, basis. but not challenge That's that's our internal go-forward a

Neil Frohnapple

down, help be, call I XX% the, in somewhere mean, be fleet you any call there? give then, say fleet-spend mentioned let's okay. And it, if versus Can would range, Right, the X% growth X% CapEx, next year? sense XXXX. still to was to lower switching growth you mean, us a of would it, I just fleet what

Mark Irion

math. at the the I we had than mean, I fleet beginning year. a of think We've that's bigger the of sort got

top on X%-plus result to CapEx is of in less fleet we less that this fleet growth and going quarter. So that generated

a will less than X% of forward CapEx with So going indicate sort less the fleet math in growth net XXXX.

Neil Frohnapple

thanks. pass Great, I'll it Okay. on.

Mark Irion

Sure.

Operator

will Seth Please RBC. from go ahead. Weber question next The of be

Seth Weber

morning. Hey, good

Mark Irion

Good morning.

Lawrence Silber

Seth. Good How are morning, you?

Seth Weber

Thanks. fine. Doing

Yourself?

Lawrence Silber

Great.

Seth Weber

business dollar trying utilization. so expectations all. the very returns I'm I about rate but up just understand strong. not thought. for - going for you're But forward. ask utilization year-over-year, to frame managing and Rental want was is kind as as of to And much we utilization I Dollar dollar

there, high in fourth very up too I of rates are be year-over-year But it is continue to think be we the quarter. though said You even should the our strong. kind expectations

I'm you that's going could the there, just sort understand So dynamic of if on us help Thanks. -

Mark Irion

you to tough continued on the with XXXX size. less we mentioned, going fleet the move, continued number into as quarter. a think as But not were We I and I it's we with denominator perhaps got the given growth the rate CapEx Yeah, see with a mean, expect to there. focus that just growth, do this pleased improvement

continue metric are did forward. So hurricane sort where gains way, QX. moving a in on consistent dollar we a a in move are quarter we But in with comps focused we It's and last looking substantial some the activity tough tough have year on for it to utilization. will we of and

Lawrence Silber

so Yeah, the has the is on the of Denominator only even The utilization numerator, fleet we completed not We're where and additions, and rotation our while relative some of the we were numerator denominator the control sins fleet is talked right, third half of denominator. still remember, that the activity. year way We and - about we're the in cost OEC of the past. through current of the dollar based fleet. to the

we as improvement an will effect. roll to forward, So that have continue

Seth Weber

Okay.

Mark, it XX do kind to is think a right think improvement basis you about year-over-year the way going point So, of like forward?

Mark Irion

We growth more of expectation would than have it until that. an

Seth Weber

Super. auction trying like that's question quarter, picked then, a I'm to here sounds And you Thanks. if my the we which demand, auction into the up in end full, used use understand signaling in just anything getting Okay. channels channel It is retail equipment bit sales. the follow-up increased on sales quite as as should seeing third of quarter? read that market in the you're the here far anything that

James Bruce Dressel

still And market, strong a overall anomaly But Yeah, seeing hi, shift what robust the there is strong in This think Bruce. we We're market. mix is demand. quarterly equipment kind strong real of hey. a sold. just used I

Seth Weber

Okay. appreciate you, it. Thank I guys.

Lawrence Silber

Sure.

Operator

Sponheimer will go ahead. from GAMCO. Please of question Brian next The be

Brian Sponheimer

everyone. morning, Good

Lawrence Silber

are How morning, Good Brian. you?

Brian Sponheimer

differently can do of apples-to-apples color the quarter. up on EBITDA that Theoretically, Really I something terrific. with peers? so year-end Is industry. the equipment guys a look depreciate and adjust that you catalyst. rest value nice idea basis at is to the the the put Mark, and the the you yourself that to REBITDA a Correct? I'm and extra your at of that than rest brought on maybe potentially take an the you on appreciate your market be going opportunity would EBITDA,

Mark Irion

the quite And some a number through. It's is review. sort It's change will that something something stage necessarily going we just of bit in at parties that an be look of immediate forward. with way estimates, of which can there not our the work conversations takes

We're change don't think with that, sort think, So a REBITDA that this I going schedule and we But expecting. comfortable short-term to we is review. and forward that the be variance something with that communicate depreciation we can highlighting year it's will of on. we're are I

Brian Sponheimer

Understood.

the on equipment CapEx you're end, guidance high selling down the bringing or that is Just more? buying less

James Bruce Dressel

deflating do We I categories, in up would frankly. heavy also brought we we we've a the taken had opportunity ample of market so. year, by felt we where been and quite absorbing say loaded and that both we've advantage in strong used bit robust the fleet some of early to the equipment it's

Brian Sponheimer

Understood. congratulations Well, see later. and to you look forward

James Bruce Dressel

Thanks.

Mark Irion

Thanks, Brian.

Operator

The next Jerry Revich of from Sachs. be Goldman ahead. Please go question will

Jerry Revich

everyone. morning, good Hi, Yes.

Lawrence Silber

morning. Good

Jerry Revich

you pointed Or to how heading rent? nice and costs in performance operating fleet earlier about, in operating thinking deliver in the of it you be out, as call? about You the thinking Can relates or sequentially the from had you're XXXX strong place how pickup really pure seasonal top cost leverage we folks, with on here structure should rent. flat as leverage into to about that cost rental talk the just cost you to alluded line type

Lawrence Silber

possible. question. to revenue we our got And on deliver through if this going is in on quarter And Good cost XXXX DOE, last levels said growth. focus low-single-digit able through we do to our to have we're concentrate delivered quarter. out to We I flatten be going certainly on structure similar cost the in the what be flow Yeah. I margins. focus mean, concentrate think to place REBITDA at our to now, SG&A on to what improve structure continued we've reducing

Jerry Revich

cash positive, me, And cash free - cash excuse for next negative year. free terms the flow flow free Mark, of outlook flow in

Is in Given me as, tend build capital CapEx you're unless year-over-year XX% you be the to call outlook that down I comment there the just that there? levers going you implies get to free that the business, think, pulling. Can that see other that I working to positive right? we XXXX give around as context mentioned. significantly much the of could cash some Is down flow be are CapEx, guess, it,

Mark Irion

something I in There's model capital working there year-end No. year-end from don't - this wrong big not a with business. build to your might there. be

builds fleet QX. QX quarter during in the in middle as something see you and saw year and accounts of up then gets or payable into during in paid building up in, do the comes QX. the we So the our like releasing That's just

to So into big current a capital in in you'll levels and is up, that not working see revenues that receivables. continue increase this from translate with reduction year-end. significant year-end year-end to But really a is build

decrease. think, and net working But a operating from model, - into will XXXX, flow a from will have flattish I of reduction be it the of bit there cash EBITDA, doubt I with quite slight a squeeze increased CapEx out flow. - will free to XX% cash your combination capital you So you in

Jerry Revich

All you. right. Thank

Mark Irion

you. Thank Sure.

Operator

Rob Wertheimer Melius. question from Please ahead. of go next will The be

Rob Wertheimer

fleet know, give working around an of driving two the those can background questions. on year thoughts with just And you to next you Operationally, non-depreciating cost second hear rental seems be your color us stuff? talked to your good about had morning. what by, Thank Maybe now something. then and and I X% the on you into tariff I but on good expenses guess, all I X.X% inflation rent right pretty up then up equipment little update. sort you're improvements. just just like past, operationally I the in a

James Bruce Dressel

flat, more cost Yeah, stated as very holding that getting improvements - so Mark DOE efficiencies, so of driving is this and on highly and just the Larry Bruce, that the we're as on focused operational efficient, stated.

Mark Irion

discussed going X% we've expectation the as so - is running of forward. year, inflation X% [ph] inflation next in fleet is sort for to the And of balanced sort

Lawrence Silber

with the suppliers. our, I negotiations call, stated XXXX all our QX And of, all now on as completed we kind partner of

what anticipating. So we less X% or is are

Rob Wertheimer

Perfect. Thanks.

Operator

will go of ahead. Kathryn The Please Research next question Group. from Thompson Thompson be

Lawrence Silber

Good morning, Kathryn.

Steven Ramsey

Good does in come slowness morning. OEMs guidance, being not with to of slowing XXXX? This this for able is reflect any potentially does reflect On your Steven outlook reduced to end in in markets it any CapEx orders And for on confirm, Kathryn. just backed up?

James Bruce Dressel

Bruce. feel on market the and their improved from still Absolutely We And not. have customers intel This our out very delivery. a actually, the and of kind there, suppliers see says same. robust is any

we think, long-term XXXX I the of from that to saw we're in kind the supplier going see So don't base. any

Steven Ramsey

to see seeing in then, coming Great. benefit hurricanes? are any and And storms in quarters you from or QX expect

Lawrence Silber

we storm previously look, year in certainly activity Yeah, we - had some reported. QX, both which last QX we and in

million million fair been bit little EBITDA. in We'll amount a $X.X QX, has have $X our in in within which about QX, have of QX, a current activity of We in worth activity about incorporated of which resulted of activity guidance.

Steven Ramsey

Great. you. Thank

Operator

question The Baird. Mastoris ahead. from of next will be Bill Please go

William Mastoris

premium. into you. your we're I Mark, in follow-up. realize a Would become But fairly year, say second it in trades costs then at here. a it which have that next looking size reducing called to Thank interest the that you callable. far future that lien X.X%s, be next And of year? your I do fair interest be bond fact the have decent will

Mark Irion

based be call we call analysis I analyze next It will call we get it. that will safe we'll say period. we to think - structure won't to on conditions year. Well, the an it our don't financial I as it's closer market or

is expense levels. that interest we're something these at comfortable So with

sort a in environment rising interest historically. well very performs of business Our

growth effective for us. major our management where concern. our structure. value we fleet driving it's and managing and game So business. on create this our focused not through It's of That's rate We're a utilization not really revenue sheet in cost balance

William Mastoris

of cash reduction lead allocation other the indicated next free debt as leverage range? flow, you targeted cash priority towards Okay. above would flow towards you On free that debt get some And first there be of reduction end or the you maybe then, lower would your that expect priorities year.

Lawrence Silber

I debt the cash of free primary flow use think be will reduction.

William Mastoris

have seen from either Bruce, end-user on any for, think, rates interest in any may Bruce. of differed, all a then, your Okay. impact delayed I And rise where or question impact finally, And the any projects at you markets, be that there? is,

James Bruce Dressel

we're No, one that's to rate is I've business. markets of the since our customer. we The market service strongest and see. I've the nothing why been delivering strong. in on And It's seen focused

William Mastoris

Okay. very in seeing And, All thank you much. Larry, right, nice you Berkley.

Lawrence Silber

likewise. Yes,

Operator

Sachs. be will question from Revich ahead. next follow-up a Please the Goldman Jerry And go of

Jerry Revich

thanks Yeah, the for taking follow-up.

comments expectations your you the Can being dollar time utilization Can the I talk within maybe folks was fleet due utilization fit XXX in You on just the mix? below exactly imply quarter. how by much basis year-over-year. to numbers, How points you what that about of mix? on this was down about spoke just guess, is utilization disappointing time that expand

James Bruce Dressel

where I'm you're see quite on. points do year-over-year. being the at. time XXX there came Bruce. how of in basis sure areas in, it improvement focused on we're down with is We we're this not doing satisfied came math you time so But Yeah, that

hard of this, utilization. overall, the So think, Mark one the on or mentioned comp activity. hurricane We Larry with I all a hit did that the up dollar things against pretty

utilization Mark for what So he we're what But here. we improvement we internally in accomplished. kind are EBITDA - about same of talked on talked margin. about satisfied dollar the pretty we our with Then that improvements on focused

Jerry Revich

because is mix and X%. points, UT time is tough your $ about just contribution, Well, be up We're get yeah, X%, only is unless it's was strong We over basis revenue points. up you said down so pricing ancillary so, year-over-year. a to is pricing more, $ can say to Bruce, up XX talking UT up XX just positive, and basis UT

James Bruce Dressel

I XXX would with was not comp you And say, against mix up were time hurricanes. points. a basis the then UT the down tick, but hard

Jerry Revich

you comps then, against comp you run It set, pricing to right? XQ. And as industry from way it Is drive of Okay. tougher of long to a the ahead able And pricing past like industry to up looks is from pricing have well been year. be folks how from ahead the able here, be over you folks deliver might the see the pricing as in here? the that opportunity look folks you at you for

Lawrence Silber

market be able and continues continue are to on as robust as seeing we'll we'll it, remain the price to continue long price drive look, Well, to to we as improvement. predicting focus and

has But good have about that good pretty has that well. be I don't - up as that. feel opportunity market against And I there or we tougher comps also be yeah, see we storm So this in will tougher will that comps.

James Bruce Dressel

near pile And but against price an up price were the performed. unbelievable our and right, to executed comps tough really on and Larry We focused kind any pricing well. continue don't team us do optimist we'll as we tool, not stated, on, that QX in And out been would in things not of with and pretty see to always on there. the we've environment optimizing It's we continue allow term to And that. that.

Jerry Revich

thanks. right, All

Operator

conference And back ladies hand would our conclude for Herc I this to and gentlemen, like the to will remarks. session. question-and-answer closing their

Lawrence Silber

Thank you. call on us everybody the And today. joining for thank you

or we've to our improvements. adjusted EBITDA and our strong on stated, based million XX% million, $XXX increased for to $XXX we've improvement broad-based over market million demand XXXX, to $XXX XX% guidance As XXXX operating continuing

major narrowed with million, our to we've made on expect fleet $XXX fleet as this to net Additionally, guidance and expenditure year year. million repositioning our less strides we on $XXX capital spend next to to then We gap steady public peers. we're track close we contribute to improvement on believe financial that our initiatives strategic continue will to continue and our metrics, in our the as

New always Year. look If you in forward have to And you of further seeing all any please contact as we Elizabeth Higashi. questions, the

Operator

conference concluded. Thank disconnect you presentation. sir. lines. the you for may Ladies gentlemen, today's At this and your attending you, time, has Thank

Herc (HRI) 8 Nov 182018 Q3 Earnings call transcript