HRI - Earnings call transcript Q1 2019

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Operator

Good day and welcome to the Herc Holdings Incorporated First Quarter 2019 Earnings Conference Call. Today's conference is being recorded and after today's presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Elizabeth Higashi. Please go ahead.

Elizabeth Higashi

Thank you, Savanna and good morning, everyone. welcome to to earnings first like call. conference would you our all quarter I

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

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

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

by the of website copy at SEC's the at of ir.hercrentals.com XX-K visiting Investors the section through access our can website sec.gov. or our XXXX You Form

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

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

We other call have the for not do permission of call. sanction of I approve any will this any given or call and Larry. recording over the turn now to not transcribing

Larry Silber

you, Elizabeth. Thank

results generally all morning. If strong being you with and turn that the be you to first very reported Combined confident with year. quarter. we the this operating XXXX will the We're five. slide for us we're continued economic another pleased thank And for in forecast, metrics improvement joining industry year-over-year positive

pricing contributed through equipment rental drove year-over-year. strategic growth the operating in expenses in controlling reducing to to program first flow we in our and the start and continue direct rental support in to control strong continue XXXX. progress currently we in quarter. Our the to and our ability initiatives are seeing strong to and in with ramp demand make seasonal and renewal for year, We And improve expect profitable the margins and utilization along the particularly The rates up expenses diversification SG&A. fleet dollar improve continue increase by we

across our strategic initiatives out team rental our last and made a support regarding annual annual demand the we Pro got all meeting the business senior suppliers. of by the please We from and equipment a I our regions was day-to-day array activities Now progress, our major turn from regional number performance. people guide discussions, to enthusiasm thrilled we XXXX long-term people customer for and heard to culture of of and of broad Pro Expo progress strategy about trends equipment at see our our positive slide new state and of gathering our staff. seeing second operations, members held sales, strategy the are our up the our Major initiatives, rolled industry. on is chance field energy initiatives and shared six. our of month. We an Expo of and

least a employees with XXX% of which perfect recordable number at Now we violations. with at treat incidence, no our the we the days we awareness motor fault please regions our means perfect of accidents, locations how customers. no concept OSHA seven. part DOT turn our operate, of all to days, in first work many focus vehicle and is a slide no a simple we our fundamental quarter Safety of XXXX, Throughout XX% how recorded In perfect reporting how first of day, locations our on quarter. and

all for of only expand continue to major our safety but the also basis. of members, part team and goal robust on day time we As our building programs. of a work for safety a perfect support Driver not safety our a culture, is personal hours, focus training

Our driving. just discourage particular, members eliminate texting drive strongly driving. distractions In while and team initiative encourages checking to we all email while

expand continue best sales, operations practices as to programs in and and to our generation programs well for next We leaders. develop identify as training

as the members about learning, Our team around entire continuous team company. other for from well is meeting opportunities the excited as

turn slide number to please Now eight.

year. Dollar first net the discuss prior improvement. SG&A increased per re-rent pricing reflecting increased margin call. expense. Mark, improved the in direct by with improvement operating primarily strategic results. X% financial total compared XX.X% in million, strong period share made illustrates these pricing Annual Let in of $XXX.X million, XX was of X.X% EBITDA year-over-year last improvements pricing On basis by specifics rental positive share, or net of savings our to on Adjusted from of the to number the to over the the or the and last in the $X.XX offset marking the $XXX.X improved year. per improvement. million. revenue growth in consecutive continuing quarter to loss with reported The compared a for utilization points revenue million results the XXXX, in X.X% to strong of $X.XX $XX.X the nine with with improvement. X.X% comparable summarize revenue XXth first a loss will We $X.X expenses, XXXX, a pricing, net We're of controlling report period XXXX. in fleet compared in $XXX.X in XXXX. first slide Equipment of in and increase same an later diluted and with million we reduction compared Average X.X% few improved increased quarter profitability diluted of a quarter to growth first grew XXXX XX.X% quarter in improved year-over-year pleased me reductions driven but quarter, in year,

also fleet OEC flat on during to XXXX of increased quarter for the first is strong compared improvement slide year-over-year XXXX. quarter last X% This fleet growth was year. the the first our the quarter what X.X% at most is in bodes year well Our quarter rest in on of seasonally rent. rent average last fleet pricing over the effective Average year shows of XXXX average

and utilization. year's lower you allowing this remind slightly last for full of X.X% expected than be year's increased is growth the improved that me to rate, us by Let XXXX, average OEC year fleet to focus we growth on

brands enhance efficiency fleet improve each continue additions equipment by quality to select of and our categories. of fleet fleet in on the focusing Our our

Now, number dollar to price The contribute please XX. improvement to turn overall to slide in the continued utilization.

about total of XX, with First the from the quarter and March fleet months for of at portion age for of was XXXX compared end ProContractor the equipment, utilization a performance $XXX year. with increase OEC Fleet That's value ProSolutions billion, X% months as million XX% in XX of our quarter of reached XXXX. same of an average in approximately XX the as XX.X%, last Together, now dollar up OEC fleet period quarter strong year-over-year. that first OEC $X.XX of XXXX. fleet, an account the of of or first of

first at on the emphasis we fleet, you America. We categories X.X% our equipment rates growth chart of to our of bottom growth, turn growth urban five turn have last province hand the we corner our our annual map Please of of on of XXXX. high adding markets Southwest increased fleet Through see XXX of four greenfield higher primarily locations moving breakout detailed and about our state is the to is our number the categories A the plan right, XX.X% major equipment slide and five pie over X.X% year. continues fleet the and end Southeast about largest Earth X% particularly number left slide North in aerial now had total in over expectations the XX.X%. strong ARA within on the from shows years. percentage The appendix. to fleet consists of the earth locations a from changed years. XX. six compact growth the graph fleet compound shows This our XX. with equipment categories. the in by as The can forecast While than Please in to next in next quarter,

our Our as mix. our well of strategy is markets as driving the industry customers diversification and further

related XX% represented in local first year-over-year of various oil to to but the decrease industries. quarter in National and X.X% XX% process that total revenue XXXX. in for rental year, about due with about of revenue the later. talk revenue grew and Bruce, revenue the rental First a more quarter, accounted declined XX% about gas last primarily will account

right rental represented and to hospitality, shown focused followed revenue entertainment which solid Contractors the We're and Growth composition accounts the upper with the maintaining XX%. customers rental commercial quite for for in and represented special equipment segment Other growth pipeline the industrial by first includes hand opportunities. major service, of chart posted equipment rental a be revenue customers XX% future retail in new of of rental corner Our quarter. revenue, in XX%. customer slide. revenue healthcare, continued at events government by XX% is on and strong recreation, throughout infrastructure a XXXX

short industry positive, slide March, was most Northeast, index the by to please showing XX States. and declines a X% Industrial remain West the for economic Now, of the index in Key XXXX United XX resume metrics the regional increased Midwest in number in plus level forecast over XX. regions while turn to later observers spending affected are billing and nearly spring. architecture the to the a generally and of XXXX. fell XXXX, increase XXXX slight over in Industry spending expect X% index of

XXXX growth with American few continues indicate customers continued robust, with for remains North growth growth rental X.X% of of Rental year-over-year projected revenue Association forecast X%. term, through compound increase a at the America Longer XXXX. with for for annual equipment spending conversations their next the industrial for spending U.S. over to also expectations Our Expectation confidence construction non-residential in healthy, be years. and rate

market growth Our urban strategy that the can cost accelerated use constraints. rental achieve we offset and as to focus rate on increasingly of has coverage space to customers further urban

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

Mark Irion

everyone. first you, quarter. We're we Larry with for pleased morning, results the good Thank reported the and

results. review X.X% but slide XXXX. reduction The offset first driven to continue to Year-over-year by million first Equipment On challenges start, our a growth in on in stage by XX, to $XXX.X of first the got particularly primarily quarter execute we revenue was pricing, million sets seasonal was grew good and the for revenue. to for off partially goals us improved $XXX.X re-rent can having quarter rental XXXX. from quarter always our represents a

down compared self-help our Re-rent first initiatives fleet our the with of to QX. million, depreciation $X.XX or the the of fleet. in $XX.X loss Total this of XX% million, revenues results XXXX. quarter $X.X a equipment, diluted net increased year’s of quarter diluted per of prior $X.X double-digit improved and rental we're growth. in share in compared loss our in or higher with or Net XXXX, the compared on $X.XX first which was million, Net re-renting in X% focused rental net results share $X.X or $XXX.X per year-over-year a XX.X% by by part As prior seventh year. reported million own We million to XXXX quarter increased less quarter were year. utilizing for first revenue of impacted

in our net benefited regarding results of to net included XXXX. Adjusted our the Appendix. of margin used quarter impacted over of primarily million and also internally is XX a improved the Adjusted we spin-off was rental which margin $XXX.X the year-over-year, focus the income first and same results, in operation rental and on decline sale of in the to XX.X% impact our More details increased by EBITDA operating from core million a costs basis quarter, a from period tax $X.X first EBITDA points benefit. First continue quarter supplies. measures on are of which REBITDA, equipment sales reduction bridge the in million $X XXXX why X.X% equipment, related in parts without the contribution

XXX.X%. first terms from focus in reflects revenues in and our quarter in QX of reported through cost The REBITDA benefited re-rent continued Flow-through the control. excellent of progress We low flow-through. on reduction flow margin

reconciliation Appendix first from during the these XX.X% a in the quarter Our an rose There’s measures of first the of points REBITDA which year, margin of XXXX. this increase in basis will operating metrics XXX quarter first grew summarize X% year. progress. the of the quarter useful average I over slide think our evaluating the bottom our you To in in to prior at the find operating OEC the

compared was focus million the XX utilization in from or total prices. focuses In in the million from sequentially primarily a in to in first XXXX increased the with strong in were Re-rent and equipment revenue for compared reflecting the revenue. equipment Equipment quarter for $XXX.X by reported in the to is rental grew increase us. XXXX. $XXX.X X.X% re-rent re-rent benefiting business improved period, first order XX Re-rent a $X X.X% we rate rentals not improvements competitor the rate offset excellent from X.X% a or XXXX million customer $X.X basis on Slide in year-over-year quarter rentals of represents revenue customer. the XX%. or reduction changes Own in rent may our million first revenues revenue XXXX. of results and to satisfy XX the Our by quarter of the basis QX low total up the increased the quarter $XX X.X% grew X.X%, prior and XX.X% re-rent to quarter. pricing and revenues in points year strategic of by we points quarter to we Dollar margin first pricing XX.X% available have on down million improvement delivered

and XX quarter. $XX.X frequently the by which of million transactions re-rent adjusted the million basically Bridge. equipment quarter on the focusing or the or EBITDA us XX.X% year. of $XXX.X and requested such at flow-through XXXX, requesting In equipment previous the quarter by with quarter as equipment to to the reductions of help with maintenance margin reducing took in we the deliberately costs long-term. strong unavailable with used been acquiring as location, was moving the as compared will fleet advantage compared delivery, of administrative during $X.X auction in have in QX to the of compared We of that largest the fell Direct bridge to our or portion time year. rental of first XXXX. The Those million maintain the offset branch to channels improve XXXX sales our first increased with a total fleet. costs proceeds and compared $XXX.X $XX.X prior X.X% improved largest year. costs for were approximately fourth the accounted year. Please volume increase freight expense. Adjusted revenue, the to of quality operating rental flat prior sales of of Selling, XX% to with million million, XXXX the first and with review of partially the EBITDA quarter facilities efficiencies We in compared quarter through operating OEC improve were of quarter general and age equipment The shows an million increased mix market for XX% the of the in $XX generated was re-rent turn contributor growth the slide rental first compared last XX% increased sales first went and lower

increases and in of and our and comparison of as the depreciation the excludes it expenses. We industry somewhat of payroll was policies. contribution parts impact core better without consulting REBITDA reduction rental sales other impact by supplies. professional our from offset believe provides with REBITDA business in fees the Our a measures peers, equipment,

First quarter XXXX. XXXX margin REBITDA of increase with flow-through basis improved XXX and of points XXX.X% drove compared XX.X%, of an QX

XX, a and on this billion in basis cost quarter. OEC also of OEC Turning quarterly the and balance quarter disposals to the of provided $X.XX is breakout the as rolling prior have slide expenditures was fleet fleet increased Total fleet. The at value fleet during rental March our broken of over the OEC OEC XXXX. XX, of of average our out total we X% information Appendix. The an year

with the of million used The fleet comparable in billion the strong $XX CapEx turn fleet as million. the substantial fleet $XXX about capital debt equipment quarter first previous prior previous year-over-year, of March for X.X totaled reduce with deck. quarter slightly Free age. and but XXXX months $X.X within of with X.X in age free expenditures improve of the a for took year, times reduced period year. disposals at at XX year XX the with XXXX same had OEC $XX.X the compared $XX.X the For and solidly to XXXX, flow million flow ample Appendix mix the down times. Net first compared the expenditures the in X.X was XXXX rental from the Total our quarter cash of year to about million months. the as million, $XX.X $XXX of a in improve approximately in million for year. $XX.X March XXXX. fleet Net was fleet year, expenditures flat slide $XXX.X last Please proceeds decreased range equipment as to of disposals a our is as prior to continued the million XX. was leverage the million, targeted of market were of quarter of improvement cash from months XX, We average the to equipment to XX, We million, of liquidity average of $XXX from XXXX. were first was end reconciliation XX advantage our age non-fleet Gross company the disposals

to continued on XXXX our disciplined to growth and utilization, to strategy on EBITDA $XXX leverage continuing our to are take million of or to we're $XXX for entirely financial a of our flow. year-over-year. strong in margin at operating of and demand cash focus with we dollar improvement an slide increase look We reduce can guidance guidance organic a based markets our continued our opportunities improve million fund XX, range operating expenses; focus manage affirming XX% adjusted X% On

capital over cash along to of expect generate spend prior with million reduction flow continue strong to the year million EBITDA the $XXX free improved in The continue $XXX for to capital to expectation year. should We net spending expenditures. fleet the

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

Larry Silber

Thanks, Mark.

We're let the our in balance summarize results Please to the pleased of me we the outlook slide today XXXX. with the we portion Before of the where points move reported call, of and few for journey. we a are Q&A XX. to turn

dollar utilization. to expected drive revenue both strategic and are in to initiatives Our growth continue

to XX% of to We throughout approximately XXXX. XX% REBITDA expect maintain flow-through

$XXX year $XXX expect increase adjusted year. And REBITDA to We over guidance utilization our we're and to million. steadily million finally dollar EBITDA of affirming margin

we open operator, Now to forward questions your the please look lines.

Operator

first will ahead. And take with Group. from Thompson Please Research Instructions] we question Steven [Operator Ramsay our go

Steven Ramsay

morning. Good

Larry Silber

How Steve. are morning, Good you?

Steven Ramsay

any Doing is local that at very of accounts level, wanted be XX%, optimal seasonality, that in Kind going to Is you an clearly, and dig near that on forward? great. high. to being would like reflect more local mix,

Bruce Dressel

there's that, Yes. customers. Bruce. looking a our some some as National some we're bit timing National say little Larry This seasonality spoke probably to down was that is a on I in the would comps just our for. large earlier LNG and business, seeing downstream Hi, year-over-year of And business Steve. that's due level

Steven Ramsay

they can figure And customer you accounts. industrial just contractors, type more more thinking Excellent. out they mix, weighted to the in to more weighted reflects talk of to high on local trying are even activity? to then local mix directionally how local that market Are

Bruce Dressel

tell smaller diverse about to government. base would customer you kind facility I from retail, talking base customer is to Yes, your to like contractor of management, local you're that broad

it's a urban customer local mix So market. just base within concentrated whole of that large

Steven Ramsay

these the or way if new that accounts. to Great. talk fleet that from than customers are that larger different Are accounts mix there for you And time. customer other winning And it's you last competitors new any is some in is have on rented to smaller? had to

Bruce Dressel

it's again, broad a So range of customers.

As executing a of environment. robust the a with on you of entering new from and kind we've out not in rental the this And there just ownership serving to base that marketplace. customers market there really out just way in rental just it's it's in conversion is pricing, lot where our been it a customer to a can see of competitive kind

Steven Ramsay

Great, thank guys. you

Operator

Go from will come question our next Brian ahead. Sponheimer Gabelli. from And

Brian Sponheimer

everyone. morning, good Hi,

Larry Silber

morning, Good Brian.

Brian Sponheimer

the decision. impact bit impact hoped revenue Is there the late. on to on a talk quantify wanted I year-over-year a on a just about EBITDA? to little I the bit little way year-over-year re-rent and

Larry Silber

it's it's on mean, of meaningful on necessarily not margin. Yes, I it's an more -- had impact either

win. can low in satisfy a $X huge then that throughout a million a margin, in not for that term that’s focusing a we're can re-rent, It's customer self-help. new use business, something if it's, really on reaching equipment, amount, the equipment if it's just also of it's we into customer if to or that's satisfy piece we own get then it win. Or our a revenue, but margin So, XX% terms longer of there

needs of our sure on own making the they fleet part to take we've come of as just it's got care of So that fleet, on up. utilization focusing customer hand and optimal maximizing really

Brian Sponheimer

Right.

question relative to lower we've that think, the I the far. three just from or the I quarter, peers two heard so I get guess guess in I is volume

You I'm business. that how strategic decision to just you've was much versus obviously just -- some made give volumes. of wondering a re-rent up general

Larry Silber

sure mean, case. some re-rent The I between re-rents can of supplanted the own an that -- fleet. XX of the the that's impact not bps maybe -- that the get extra of with gap rental growth. I'm Yes, of our

it's not driver. a So big

more on Our organic strategy is focused growth.

So I think expectations. that's impacted, activity it seasonally probably why you're no seeing in a with sort P&L. lower acquisition QX was our line growth rate of with in our

year So the into revenue we're rate the QX got especially tone we it's the and with positive and and happy XXXX. volume for a the in that going

Brian Sponheimer

the care. Take and profitability strategy. you. All on the Thank Congratulations rate great. look right. Now the

Larry Silber

Brian. Thanks,

Operator

go next comes Sachs. Patel Kamal with question ahead. our Please And from Goldman

Kamal Patel

trading those Hi, next prices. the call I are XXXXs to their and check potential Thanks bonds, above refi? are wanted good morning. in What's on for month respective time. thinking callable and the the your in XXXXs a the on latest both for

Larry Silber

immediate comfortable in of we're sheet any balance with needs as have terms No, is. don't We refinancing. it the

in the our committee in analyze to of with continue We and markets we're opportunities. terms finance discussion

the best over something no for come will they that's years, look we tackle couple those refinance continue the to immediate to as we next need of that anything up. do but opportunity to notes opportunistically and So there's

Kamal Patel

leverage you with upward coming the put some with results have potential any past the you've up front? Got good helpful. momentum on you. Moody's had conversations and quickly, down, agencies just quarters over the rating it, ratings thank recently, then is That's particularly as on few And

Larry Silber

part as as they sort to an have with normal of rapid We and you EBITDA, adjusting ongoing our function, do annual know I how treasury the conversations as well agencies leverage. are of ratings just

that's forward and look that it based conversations to internally. changing their we So steer their analysis something leisure at on

Kamal Patel

Appreciate so Thanks it. much.

Operator

Jerry question Goldman ahead with will Sachs. go Please next come our And from Revich

Ben Burud

of Ben for Jerry. everyone. morning, Good This is Burud

Larry Silber

Ben. Hey,

Ben Burud

Hey, good morning.

anything balance there so is your mind to pricing curious wanted I'm was over X.X% normal to touch grew keep seasonality the above just Just seasonality. normal year. in rental if well we sequentially, on need regarding the rates, you applying of which

So the typically that be And year to call implied seems the to things Larry on I sequential good strong X% mentioned improvement. come. XQ to start know the

Just to there was terms of sure normal mind make and puts in any to takes wanted keep seasonality. in if

Larry Silber

I Yes, think I quarter. some And QX points. is numbers impacted my bps a sequential There's not are real real QX I'm definitely to not the seasonal different last XX basis QX. was sure from year most of cadence like the -- seasonally looking of mean, rate, QX rate got sequential not there's XX too a I've really growth -- to

Having equipment old typically success. where back sets the steadily momentum at rent comes you it's then So that XXXX. new been through the of There's the once out challenging. a metric cadence on a X.X%, of an the at off rate goes of see can And impact as getting grid building a most got rate definitely tone it the bit we've for that flywheel you start getting continue success, sort rate. course positive can growth you just and is

rate look sort success, delivering continue to So us. to focus for great we forward We're through results on the focusing and it's good front a having key of and XXXX.

Ben Burud

not you of biggest piece then, know the business, Got it. things? on public what of give seeing And construction the I your but on it's you're us update can an side

Bruce Dressel

seeing well entire side. than industry And fact overall. go that bodes the Hi, for in funds infrastructure the of Bruce. would good additional towards Yes. the if in I environment kind in we're in that public then, stable, say is this infrastructure

Ben Burud

there business comes? there any of if cognizant are And increasing is it exposure or -- your just taking you you of kind

Larry Silber

we're it mix in the it's markets the takes tell fleet would we have, I the you and Well, currently in.

part begin our So, going we play overall. would not But, business work. it's towards type any that we of to benefit of from in additional dollars with, a huge that

Ben Burud

you. thank Great,

Mark Irion

operate will about in share you day impact be infrastructure there way. us. fair that our markets. in that spending in of the certainly we, since we’ll urbanized we If heard the Particularly participate Yeah. know, highly And concentrated other it will

Ben Burud

Understood, thank you.

Operator

to turn like our to the Elizabeth question-and-answer for would Higashi any that now And session remarks. conference concludes back over and closing I

Elizabeth Higashi

Thank thank on for joining call. us today’s you. all you And

any further questions soon. don’t care. as to always hesitate If look to We you have forward Take seeing please you me. all call

Operator

has you for now attending ended. the conference And Thank today’s presentation.

Herc (HRI) 2 May 192019 Q1 Earnings call transcript