HRI - Earnings call transcript Q2 2020

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Operator

Good day, ladies and gentlemen. And welcome to the Herc Holdings Second Quarter 2020 Earnings Conference Call and Webcast. All participants will be in listen-only mode [Operator Instructions] After today's presentation, there will be an opportunity to ask questions [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Elizabeth Higashi. Thank you and over to you.

Elizabeth Higashi

Spencer. you, Thank for our all conference this and morning Thank quarter joining and to second earnings first welcome you us half call. XXXX were and our slides our the IR today, release, ir.hercrentals.com. filed of XX-Q with at Earlier Events page the all are press SEC, website posted on and presentation Financial by Silber, Senior and President Officer; Mark Irion, Chief Chief morning and Officer; Aaron This Operating Larry I'm Executive President Officer. and Chief Vice joined Vice President Birnbaum, Senior and of the view and We'll our review our the outlook. industry strategic quarter, will prepared Q&A. The by be remarks followed an open

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

section statement on I conference call our actual caution on ended Safe could XXXX today's refer see as the statements Please as you differ our for our December statements. These results we forward-looking call. complete the materially Factors this are our slide uncertainties. based presentation it on XX-Q. to as today, First, reports involve statements would the quarterly include year the therefore made well environment the and XX-K for will of of that annual on Harbor Form and from XX, X Risk forward-looking Form and report risks

be for In Reconciliations will these addition GAAP company's non-GAAP useful in is financial the information conference found on that believe the performance. basis, presented measures be GAAP a to the results we we non-GAAP call the can equivalent discussing in operating materials. closest evaluating

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

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

Larry Silber

Elizabeth, and you good Thank everyone. morning

deal impact We on any the pandemic. of shut the as resulting downturn any with our mitigate business most all economic us major to experienced. a immediacy weeks team one The instead and shutdowns in was put quickly matter. the were to America level to of quarter metropolitan impact that usually mandated our experience of The impact unlike and has the businesses in takes place to play COVID-XX the senior playbook field previously from the second activity areas the like have to had react of maturity or out. Our at really both North the had two over the it business recession recession to down proven that years two of experience in the in management

years initiatives able industry Our out control to new cost guidelines for we're disease prevention following operating roll the Presidents of Regional experience XX centers and and averaged safety. rapidly control Vice and for implement procedures

open an equipment where with essential service and business and our we locations for as provider, As provide rental to customers our able needed. were remained

We team to the unprecedented are with third investments strategic specialty proud tier, we a and responded top were wide our the largest together. placed of to a range customers the well provide that In in the out America capital of time company years broad of supports serving response. and made terms four We've challenges resources in investments sudden terms rental how resources our scale these build and the North of we overcame to pandemic that last equipment and variety over the of industries. and rentals are

approximately X% fleet. grew rental our OEC, of representing of nearly fleet year-over-year XX% Our $XXX total specialty million to

the business. to strategic other parts diversification Our helped seen customer business has fleet the we've of slowdown and in offset

are also essential account services national active remained have and customers weighted towards many during shutdowns. Our the

average for relationship are XX customers Herc an accounts rental Our our of a with years. XX% national advantage represents over These of revenues. strategic

our revenue service to a We significant customer and stability providing are excellent of and committed to portion consistency providing base.

provides also a customer-centric customers Our safety culture keep as safe. team strong priority we communities serve and and our foundation high our and for

month was and began April steady see May biggest effect and in June. improvement with in shutdown our and slow to operations the mid-March, of the Our impact the have a revenues, to we the seen rental

challenging to As our been organization environment the ever. adjust evident and this operating we new strength our and more has of than business

in and prudently positioned have difficult to our are our We managed with liquidity operations environments. leverage balance sustain and sheet ample well modest most even the

to turn number please Now, four. slide

and second our continue enhanced remotely XX% challenging infection guidelines procedures work and our at for the contact office customers support of this staff report communities. field our and and safety frequent reinforced communications environment, and most washing, social Perfect across to CDC an all operations Perfect to follow of operate in with control continue travel. restricted of the the we the to all XX% during operational part, quarter. to average We year-to-date. our regions And and for least hand Days and six in months continued And in Days while We non-essential distancing,

our supporting customers, resilience And what have together new professionalism highest priority, We're members continue health throughout and we to communities equipment I and and of communities. and essential team Herc accomplished for of to pandemic want been every demonstrated and critical Rentals proud the safety have environment. of of by our required this as work and and we each the this customers thank customers. team we've to crisis. while remains the services Our operating adjusting The provide team, one our our

turn number five. Now, slide please to

about and the rent rental end weekly to equipment results compared rates and trough rental June. Our of mid-April on from revenue in were prior the We maintained the through year. sequentially flat increased fleet the during quarter

intensified of the and many we costs, controlled consulting last improved in that quarter services were and professional successfully employee year initiatives and transportation our introduced recovery, cost-saving the second reduced on focus fees. Our

million of billion approximately increased and second end generated also the liquidity to our We quarter. $X.X free year-to-date $XXX flow by cash the in

or quarter equipment. and the of declined Total million on $XXX.X slide income quarter. on business were sales lower to a XXX the despite million, And of prior in $XXX.X management for due revenue adjusted prior of costs, margin an our overview second year's million of $XXX of revenue rental XX.X% in in share XXXX. million successful of $X.XX $X points is the six compared over of lower to Equipment activity XX.X% XX.X% of Now, in per the declined $XX the the number million diluted results. XX.X% the COVID-XX of year. financial XXXX of or in EBITDA the compared second than impact or improvement as the per quarter million $X.X to EBITDA reported revenues contributed rental to brief net a second Adjusted basis million quarter share XXXX or We margin. revenue lower to second $X.XX an quarter, year, used XX.X% decline primarily to $XXX.X prior diluted the result the

current discuss Now, here operating the I'm going to second performance up pick Aaron and to our Aaron? ask quarter from Birnbaum environment. to

Aaron Birnbaum

Thank customers, past you, to and to communities customers. slide remain members We keeping our our thank eight. to quarter would turn our their pushed safe. committed team like families, to Larry. Please I as our through this serve have our team, they

before, an and this downturns so. to through been was period have unusual be exceptionally We but continues

strategy. operating challenging our manage our in and business sales reinforced this operations to ability commitment our environment initiatives outreach Our to

new and needs, operating streams. enhancing our business are new and focused locations, revenue greenfield efficiently, to on and sales opening We customers' generate specialty initiatives

help joined sales our industries, severe meetings virtual and meetings sales or customer virtually. offset many and of customers our our base getting can leaders for are senior good teams We base segments We a served all strategic as times. and a customers, at effects strive at broad have seasonal diverse with of

to improve mitigate capital. of managing our Our turn impact diversity the Please return and on helping and focused we some to costs to are remain fleet controlling of slide business business our X. growing slowdown COVID-XX and specialty the on

branches to costs hours to costs, last as and weekly are initiatives in dramatically XXXX, Through also acceleration by variable travel operating with introduced cost in our and quarter continuation we transportation, operations or of compared overtime. variable branch year. a a schedule. our other the normal reduced branch make assessment, All on in costs controls such continue adjustments and open of we which control But to

are operations to other we'll utilization We reviewing final fleet branch and and trends, our metrics continue transaction regularly necessary. activity revenue rental as adjust volume key

predominantly $XXX branches XXXX. of have of in our We total form operations over XXXX to this million OEC as our or XX% work of to comparable had and When have or XX% to approximately economic reduced X% year's to paid about the are now QX business the of operations. in Some period of in activity current XXXX reported The but end on of on furlough group you fleet and small we ProSolutions the crisis, XX. markets some investments have returned slide includes or of center even a entertainment rent furloughed trends for our environment. in surpassed adjust XX% today those turn we and are ProContractor an Specialty quarter, about really workforce we closely fleet, March XX now our flexibility Please challenging accounts made to our these improves. of as and levels. and of first last have monitor on specialty the at of developing increase off since operating the only

as service providing Our white to has advantage support, of in key proven in key grew and challenging markets. customers business XX% be their in they navigate and environment various the a quarter to the ProSolutions strategic our many glove solutions end

broken handling, fleet earthmoving trailers and trucks also aerial, the out core Our are of and slide. material on

OEC $XX up targeted of lower customer meet second million sold fleet were disposals at Expenditures were Our than prior specific the OEC year. of last significantly $XXX requirements. and quarter, million quarter. the pre-COVID year's were million lower $XX the made fleet expenditures to orders in OEC than we some

CapEx the part Our the was XX% Approximately fleet to down channels as sales XX% of majority the quarter. replacement in through approximately were minimize second with of and wholesale auction sold of vast were of retail avoid and the strategy OEC. Proceeds representing our markets. disposals auction

March XX, and still continue this most implement Phase been municipalities the from XX. June, of that left allow III slowly slide reopen bit. began remains total turn information the activity A age young sites By back enough improving year. a our is XXXX balance and is on idle young, along April sites started to rolling to beginning period with the fleet down to Business construction rent. trending as Construction the to shut sweat appendix. to to in the of states months lower on that Please breakout openings. April, June fleet for Our fleet XX were in and of of was than had was but the last quarterly ending also us fleet

the rental serve quarter average out to construction that the experience offset other revenue nearly back the perk entertainment business year-over-year. revenue expansion nonresidential content create our downturn four-month helped health Our started and and in we after certain stood care productions our verticals network in rent spending. cable The as film, of studios the part improved ProSolutions industry on to and a in fleet and July in The business early hiatus. up business of government

We large customer sectors. account have operating diverse business many mix of essential national our with in a customers

ground remained providing activity, the efficiency for force on improved model through mapping quarter activity. and and Our data enhanced new QX, drive CRM our to support locations in open to the opportunities customer and team is communities. our We project sales our sales our with looking

American sales at opportunities launched connecting also the our through across program landscape. CRM of share a lead the We quarter North new our end

second represented rental left followed of rental revenue represented of and side total revenue. the with total. of on XX% is in XX%. National quarter with of second represented Infrastructure revenue government segment account by now Our XX% customer XX% the XX% industrial slide. revenue the the equipment revenue of about with customers local the Contractors the by customers chart on representing shown total rental other quarter at major the XX%

in customers advantage well segment Our our Herc. major and strategic been as as as resilient a are COVID-XX national such healthcare, This of businesses more has warehousing of utilities include distribution. a key accounts business lot government considered is as energy, the they primarily essential slowdown business, and industrial and

new Our sales revenue new remained slowdown virtual in double-digit a range. to revenue new organization as the is rental the encouraged of difficult assist Despite a programs environment. staying that organization techniques. activity, in We sales we're in overall percent our account in in our sales training focused invested sales

now to phone out or Ours organization is via and customers, solution in call with meeting relationship and I'll a potential virtual business despite on is touch And Mark. on staying call the sales to customers shelter new mandates. our pass the any and our replaced focused reaching

Mark Irion

Thanks quarter of summary XX Aaron shows and good morning everyone. results. the second Slide financial XXXX our

volume a a with scale a pleased quarter. resilient have pleased challenging in rental business margins and performance structure that and were operating our of in to and Despite of a than environment. business actually This we to generally the revenues drop team is I'm quarter, other our a cost our demonstrate were our XX% in adjust to already margin rental model a margins. addition EBITDA REBITDA April XXXX. that rapidly COVID-XX year-over-year the current Equipment lot sequentially we each able revenues strategy. the time in over Herc and the less lot initiatives are is the declined was that toughest We business the We XX.X% to the with other rent volatile $XXX.X were grow industries adjusted implementing testament and decline improved in measures. improvement revenue in the the accelerating in in furloughs month then. cost-saving already focused of month of quarter to and revenues place control by $XXX.X on from to on since of rental quickly rental have terms shutdowns in million and second

lower rental COVID-XX $XXX equipment the million remain were of sales declined for shutdowns Total and revenue person the primarily due to Most the sales equipment. markets some and cover will rental next the in slide. We including channel in lower the rental used of to of auction live impacted by auctions closed. drivers revenues revenue

want wait can market our equipment our choose conditions is stabilize we to for liquidity used will auction. to sufficient normal Our to back that moving volumes we with and before go-to-market we when

of We incurring in plan share of net second substantial in We our increases fleet have quarters. ability or income diluted to the age our per couple reported this the million $X and the costs without is quarter. maintenance next for $X.XX

costs diluted diluted and the income compared details a XX.X% declined effectively last second million net shut our XXXX non-GAAP margins. Based resulting quarter possible income REBITDA wherever turn the with of XXXX. second year-over-year with of during bridge Our net share of basis of actually second or much or to and our for per improved the key adjusted included share Adjusted of $XX.X basis was over in was markets in metropolitan down $XXX.X points per to same in improved points are $XX EBITDA EBITDA the to Adjusted in margin reconciliations we year. million in the declines improved XXXX million as the More XXX revenue and or the income result margin aggressive management to quarter. XXX appendix. $X.X net by the REBITDA quarter XX.X% and $X.XX million in XX.X% $X.XX $XXX.X period second quarter. our quarter regarding

rates the and pricing pricing likely were of demand, basis able the only were challenges pleased impacted to we by residual to our were last As that year. was the a on upper left XX%. decremental with exceeded Despite XX marginal reflecting pricing XX cost is with still we graph our maintain rental our a and only with quarter actions. the result that initiatives, environment government with of the demand On quarter decline margin control illustrates flow-through Slide for highlight related we latest we effects with pricing COVID-XX utilization. expectations year-over-year remain The year-over-year. dollar of points faced flattish The challenging lower

focused quarter last amount down fleet year current focused rate with We and decent remain on prior in team shelter became price X.X%. over The and flat pricing cycles discipline more a on average industry our mid-March in initiatives top general experience CapEx Herc by possible. the the on be utilizing in disciplined had to second period on cycle. tools we hold of and However right place The was maintaining to appears is delivered the wherever the our about comparable about before chart of the shows impact apparent. price the

incurred scheduled to rest of continuing net million CapEx for the the of the expenditures net and that are of half cut year. in began around below results. June, the of compared CapEx be Rental XXXX clearly and more trend May we but to was lower XXXX. see with you somewhere fleet In to XX.X% volume in the prior chart, volume positively expect rental can quarter prior and down we As about right-hand $XXX we you the in most were year know, was QX year's capital the

slowdown by and the lower year-over-year year to from We of the in dollar quarter $XXX.X experiencing lower rental declined slide million back half adjusted with terms impact starts a of are of over levels, or down currently XX% to utilization XX.X% current seasonal likely lower second $XX.X $XX.X decrease year's on the second which XXXX. go of flattish time this a of to we second remain from into down last year. a rental COVID-XX the but rates. compared volume base rental with we year in was revenue shows volume. are as in waterfall The impacted of The evident million equipment million bridge quarter prior EBITDA XX was quarter $XXX.X the utilization The XX.X% million ramp-up

year. million SG&A by costs $XX expenses, to sales we our efforts primarily fuel costs successful by and fees prior in in the expenses delivery, of with million freight $XX.X due the professional are reductions to are clear direct reduced quarter second personnel-related and well XXXX, strategic operating over manage also as personnel-related Our costs. managed and costs re-rent down down

better activity a at especially The focus in margin discussed normal margin a in dramatic sales the well XX.X% affected. our to year. REBITDA the core maintaining last was parts peers service As without team's excludes to want customer of pleased that XX% as equipment, $XXX.X I'm was and the business react a is industry sales job with to rental and for on for of timely the believe in million, decline with in the compared supplies. an not management our measures our we REBITDA from the contribution to and change REBITDA as team business for We comparison out the contribution supporting our to of I their the environment provides very as it levels. impact of impact or and as becomes effective previously, to we an team like superior this of well importance have of of clear a contributions REBITDA when $XX.X such great million REBITDA seamless whole communities depreciation equipment with extraordinary improvement getting our results policies. managing expenses varying XX.X% XX.X% operating not operations with thank a environment as expenses quickly to field support manner. customers of operating as and

note support remotely will last slide weeks now earlier that remained year. has You Please Most customers. branches mid-March. field productive effective and providing of staff we XX. we report and white our turn We to than been service committed and cloud our did two to working since to

the cash free XXXX, flow million. $XXX.X was XX, at impressive For June months six ended

X.X decreased compared business reacted clear Our to that as leverage it would year X.X impact targeted end times. model end a range shutdowns is soon markets. resilient times capital Net times and X.X to lower became to ago our X.X we our at our of the times as with cutting of quickly COVID-XX expenditures

actions steer our to the the ample and near-term at of as this positioned credit we year debt million refinance took well solid XX, ratings time. maintained have December reduction our of B+. sheet a XX, liquidity June challenging The billion through to a and With was maturities, XXXX, into for about balance we addition, no $XXX future. last $X.X year BX In from XXXX. were Total us

of on and ABL our covenants have of We the and as billion no AR to until material our cash $XXX $XX.X We securitization million. $X.X availability notes on credit material cash total comprised $X.X equivalents below of of tested June covenants be on liquidity $XX.X no XX% the million. XX, is billion or and ABL senior million XXXX facility, on availability had

in to On little of the looking the taking macroeconomic we XXXX a fleet current XXXX to And $XX This a rental we not industry half XX% the expenses, be the economy CapEx are revenues American of rental resilient. estimation to and down flow a Coming adjustments free year. North the This is in reducing positive result levels upper so a in subject before on XXXX variable and latest in to cash back rental modern reasonable assuming North no than to worst by more to XXXX. the forecast be cash -- look free a experienced we XXXX. consumer wide revenues downturn like model for is and With in at rental off revenues forecasting as the back shutdowns are and to generate XXXX will shape, and further of and the to capital in rental best XXXX recovery, is apply industry slide levels our take the XXXX, economic remain updated environment final in XX, We business Nike account cash history, ARA forecast levels we the forward still made should revenues quarters continue would American to our significant in there flow everyone revenue of debt. XXXX cautious billion. what pay allocation usual of looks returning based XXXX American trends, latest rental Swoosh. reset into a the revenues bit from for Our of and to down far have to forecasts. bit estimation quarter the The the supposition. probably fluid to North amount look bit able

to XXXX will target, plenty activity of to there of certainly amount for certain there the Now to the although XXXX reduction and industry new the be be a worst years rental fleet to Herc in rental adjust not be were required environment. and will

as as in times these can ownership the rental such serve trends accelerate some to when of resilient is customers and benefit tends secular industry in ways recessionary capital. Our to

support any one as market also on geographically market. and Our to both customers, an repair restoration industry well We emergency not governments, freely where is the is fleet nonresidential can move customers, industrial demand maintenance third better construction. rental Bigger we'll challenging national Herc a in take the of a and environment. operator relationships is largest the and long footprint also a of with to And end as local by able established as end and Rentals growth to and be advantage response, capital share. the grow dependent and customer history has opportunities

leadership steadily that heard and We our the that and stairs industry then. induced and of of team market so to customer since strategy remains top take so been increasing fast rental looks was and April have and to to revenues a taking capabilities elevator seasoned scale On like shutdowns it's XX, veterans back our penetrate like we we market. same. analogy month advantage the have broad and the our footprint The target in have rental intend COVID-XX taking is developed in volumes service I slide expand the our up. the It line worst best down the experienced impact our

the still is strategy Our same.

a However, service and margins providing our rental we base. excellent equipment customer structure, to improving diverse will on cost customer and our focus lean

the a in good the a through have flow times. cost tough to amount costs extent mitigate limits we times fixed can certain model of We regenerating business of amount and

We conditions. our year current expectations. to of for the manage rest given exceeded Our margin and the improvement quarter we in continue believe both the second EBITDA margins REBITDA in

second to as from fleet lower increased going trough conditions to is XX% we in the year-over-year has to of starting balance typical rent is Nonetheless, future decline seasonal the the estimate on are fleet a uncertain. X% COVID-XX half year. approximately ramp into in from While a base on rents related the April, business likely

result, down a to estimate XX% revenue half about equipment will second rental XX% we As the year-over-year. in be

have reissuing are to With substantially we've XX, spent slide on and XXXX. guidance to returning reduce -- of update. CapEx XXXX expenditures half our XXXX. XX On guidance what we we a our to reduce net stability outlook, for taken certain discussed, business about amount in As to action we plan page a net of comfortable capital

shutdowns, be to no Assuming EBITDA XXXX. COVID-XX-related adjusted range $XXX currently estimate fiscal $XXX million wide year of million economy to further a we in in

continue have this XXXX is to in we we spent be $XXX to flow, million of scenario, will CapEx we expected apply cash half discussed, of which As to previously in we to generate free debt. reduce about over what the are XXXX that In the $XXX we team net remain range rapidly million. difficult of I likely has of Larry. to through way And Herc, the to pass call proud and will choice. operating environment. We're employer, changing investment managed the Herc making now And a supplier and the committed to

Larry Silber

Mark. Thanks

our to challenging are we let me customers future. challenging this healthy Before and Q&A, safe on to in environment. dedicated, will go communities, number Throughout slide a where we period, stick committed XX. a environment, equip support team purpose. brighter to we summarize in today and to that our We to with our this intend a customers And and that is build is

changing to response out environment Our the believe has well. swift four business executed model strategy is resilient. And and committed this to years our ago. We been we we're laid

costs capital We to taken reduce cut have and steps requirements.

as in We're like employees value We have liquidity, customers Question-and-Answer balance shareholders, sheet no ample Mark long-term. for and goals lines Session you questions. the open intend through our outlined sticking execution. for solid to we the a And we'd operator, to with near-term And with solid to now stated maturities. our improve

Operator

you. Thank

line from America. from question-and-answer the question ahead. begin comes The Instructions] of session. first Please [Operator now Gilardi Ross will Bank go of We the

Ross Gilardi

Thanks. Good morning everybody.

Mark Irion

Good morning, Ross.

Larry Silber

Hi, Ross. Good morning.

Ross Gilardi

you quarter. Thank performance of all And you glad and are congratulations on well. – very this resilient the

fleet year-on-year on first finish Your all, with you that that? CapEx with seems guidance you XXXX at agree it of about billion do about to if imply $X.X flat OEC

Mark Irion

of good coming end trend limited Yeah. with year. in slightly I back mean, it's down the for the to CapEx

Ross Gilardi

XX% And in saying third to Okay. you second X% Where -- the the this broadly in and fleet speaking exit XX% QX down, I'm the into your for flat down into fleet rate pricing a to Are guess obviously to -- half. I QX, down on I'm XX% get level CapEx that QX. that on XX% you is go all, to that that of X% next running the you're And so, utilization going in a -- what roughly the Thanks. would first what trying demand X% implies that is of sense what's down on rent, you're versus amount. utilization to trying what math just is you implied of XXXX X% second XX%, if down Because or more still is probably down and is XXXX? it with rents get with like quarter high and -- the in just on really down or the are the the time half? composition suggest fair year? down fleet -- I'm to in at on on

Mark Irion

Right.

we're is the think of commentary I So hole a out coming in that, QX.

-- are typical ramping seasonality. But with We normal off our with coming lower up we're base. a

we're And currently gap likely of year, end than to So year. closing we'll now year going a we do. And end be of lower between that gap the at the prior have in XXXX, QX. steadily and the on that have the into

Ross Gilardi

seeing other of of down mostly calling out it month-to-month, second exit it the rate you're pricing, what XX% fleet down got coming mix residual XX%. you're just rental Is or was Okay. some And Great. rent just it, to revenue Got I'm on type what the quarter? or adjustment? is total X% XX% Mark. and on pricing curious to the then pricing

Mark Irion

business, some is, gap which there. to with in most mix, than specialty of changes just than mix volumes So much the of is the out pricing coming of more due the

of changes. the some year-over-year And

as to to opposed opposed pricing. as mix-related mostly -- it's So

Ross Gilardi

Okay, in COVID interesting. that the any seen activity Florida, on carrying spikes states in you Any just it. month. big in off just lastly, then activity any last there And what have Texas, comments got deferrals And are on would states? really XXXX? seen color California, and into Have cases, those project new the level of you be

Aaron Birnbaum

now the and recent resurgence are behaving coming out Aaron. this Yes the the back they differently moving pretty some crisis way of some with we've beginning and markets really markets back behaved as Ross, of is right same of all At all balanced as down. upwards. cases, up, went gradually and the COVID been But the even

other cases really our slowed the rebound the and in words, Florida in Texas recent hasn't troughs. So from

Ross Gilardi

turn I will over. Thanks got very it. Okay, much. it

Aaron Birnbaum

Ross. Thanks

Operator

from Thank next from you. Please Goldman go Sachs. comes the of Revich ahead. question Jerry line The

Jerry Revich

morning Good everyone.

Larry Silber

are How Jerry. morning Good you?

Jerry Revich

Doing well, thanks. And you Larry?

Larry Silber

fine. Just

are sound. and safe We

Jerry Revich

structure in see Good it's to hear start not the than down it. more business we just I'm side, operating cost if wondering that in we a revenue costs often your downturn. temporary stay the come will actions how parts talk by that you of with travel operating Can decline back much us? was of that that and furlough reduction should any about versus cost on

Mark Irion

the Yes. we Right. Jerry quarter it No there. really got We're on cost good with was happy results very control. a

a lot I think tools of the already out. were

that the already an So of we're of acceleration kind strategy working it's on.

have really to work to didn't just what we So we what we already had to sort the do accelerate and go book doing. were of to out

furloughs QX. were The going roll to and that away So does the will year. cost through go a something that lot into QX control of continue

So towards won't back of of likely XX% decremental these continue sort -- in to XX% zone, that's part trend sort that more to XX%. we margins of

and So maybe control came to half the of dramatic part culture from operated a way continue likely going will XX% our the we of the of of cost forward. as changes to sort sort and about furlough

Jerry Revich

on talking at XQ fleet on normal big laid a out have what gross Mark margin XQ versus in in And typically look based we an you step-up earlier. seasonality about on seasonality and based just inflection you rent as we're

So sequentially costs no we are I'm and in if moving there it improvement meaningful should you cadence that their notwithstanding, be with and track margin but confirm other keep with got on could right pieces just coming wondering mind? sounds that we like we should back in

Mark Irion

I -- margins QX that balance maintaining we But off are We in QX the I Yes. margins will mean at the mean, their widen focused on directionally, of we're there and maintaining way looking QX. through in the year. on way one-offs were some forward. going

Jerry Revich

not you can if talk increases? up standpoint, but very -- implementing normal is utilization pricing a high about base. sequentially Obviously, you're at rate seasonal from then And it's a Okay. picking

you seasonal uplift normal July are So August? you in the would or get normally getting rate that

Mark Irion

current out in Jerry. normal There's not much environment there the

lot focus rate any that's a time with and the sort -- volumes rates holding big a The fines. to more of down. and challenging So is we're to team on focused hold seem minimize it be rate of on industry environment our rate is does around maintaining this rate management and focused really and

Jerry Revich

be at lastly And year-over-year levels declining Okay. obviously utilization much quarter, too detail, we those still talk early about fourth of the should up if potentially in 'XX similar rent to entering 'XX year year? fleet holds this but moving or with through we in about about demand looking steady your think next Any helpful? color how would And that thinking scenario to needs? moves be higher should on if there replacement CapEx

Mark Irion

next would lot And just but down in So is can looking. probably as will 'XX's very couple as down early. as real will sort where I tight XXXX. of months it's say we of the XXXX about get. yes be a buttoned tight buttoned tight, terms as tight you learn over of But still XXXX not

be in between to CapEx than expect. XXXX demand would stronger XXXX flexibility and adjust start somewhere thinking. probably if in where So we'd got We've comes we off

So could up we environment. if program in to with a flex any of CapEx conservative sort necessary and go

Jerry Revich

discussion. Appreciate Okay. the Thanks.

Mark Irion

you. Thank Okay.

Larry Silber

Thanks, Jerry.

Operator

Dobre Mig Please next comes The question ahead. you. from Thank Baird. go from

Mig Dobre

what that Yes. April, XQ. Good guess, taking little more you to is morning. on posted XX% color revenue is in and for trended I down I XX%. here seeing Thank mean business were question. looking what into recollection you XX%. My rental you're I'm has for seeing quarter the a how you through down my

down pace it it's look sort half And $XX things curious obviously in as QX. of, have million I $XX market seen million, then May. better. guidance June improvement the at from maybe at gotten versus what to I'm for we've your So a second call But

So how outlook you are live that do you seeing confidence the you think appropriate? And give about you what getting right markets in that now is do this what versus there QX -- QX?

Mark Irion

the I if right. the down, taking hit steps we I took is elevator we've analogy think, been back up. mean, we the the right All basement and in April

slow improvement. So steady incremental it's a

that's more experienced June our going to into and we've And how As and July and work kind that's out of to people of, expectations sort get economy what and the and May in work reopen. back kind forward. to businesses of open starts

favor is lower it's coming So operating we've lower off seasonal a but The got our off terms trajectory base. business similar a seasonality than base. in a of in it usually does, just

slow head into seasonality into slowing on the off December from and a So out the here steady as our when and November we winter. starts expectations improvement through

Mig Dobre

fine just this, too at looking talking or however you it step-up or the require point define this are additional down to as because year-over-year July in on but not guess not XX% an I that this put does here right? year-over-year number? I to to mean, number is you a yet you're to exiting QX, activity of month seasonality want XX%, we're close a

Mark Irion

Yes. No, you're right.

the So in -- year steady on last we're against gap improvement so as rent that a But through we expect. there's close continues sequential net seasonality -- gap volume to up coming the year's well. that

the of gap the sequential the sort shrink go and as continue So growth trends year. I year-over-year to we think through both

Mig Dobre

really line a less little Understood. be Obviously, in I'm for the good Then clarity performance item one last this question I expected for on a SG&A to flexible. perhaps looking if little you would. quarter. more for me.

item to EBITDA you as as the you your a give guidance? So as the think the sense of what's in can far overall to year us embedded half about contribution as back you. Thank this line

Mark Irion

been it of, think SG&A has pre sort post, our been and kind flattish. remains post-COVID. on I focused of We've guidance

into Some of going quarter to that second necessarily went the aren't recur. items line the

So you how of of, can through into sort QX. maybe a to, trends for and QX QX QX and sort feeling that average out get

Mig Dobre

the for you amount year-over-year progression? averaging QX to Just talking the be clear dollar are about and or QX

Mark Irion

dollars right. Fixed

is SG&A improve next couple flattish to for flat to for -- in next sort the holding flattish the approach -- the margins just our just flat of direction. that years of So

Mig Dobre

Thank Understood. you.

Operator

the Thank Sponheimer Please you. from Gabelli question line comes Funds. next go The from Brian of ahead.

Brian Sponheimer

everyone. Hey

Larry Silber

Good morning.

Brian Sponheimer

a job. go some in you as debt you out come great yards said position I flexibility little there whether any of will curious improvement? Another an along as need yourself those from reduction. components towards purchasing thoughts cash Any external this. an And growth that lines may are real I for to flow more some put that opposed operational help guess mean from just standpoint. you internal M&A other perspective I'm on

Larry Silber

Look focused as would not part we on have M&A of that Yes. really the I say strategy. overall

to greenfields our the direction maintain relative for will year. We

greenfield opening continue to we'll We are area. still and that focus in in perspective target on from our X% a XX% range that

the last of during completed our quarter sale business. the Chinese have We

more. look density. want But clean certainly And the if not the large which frankly look as jump in areas or through off the America. opportunities we at area of as might certainly a year so on operating now the we over that that And is that's on really and add we metropolitan to North quite one moment mind. have to our we'll a opportunities COVID, We'll in grow geographic result our million first it's at within of people terms go footprint environment them. We'll themselves there are any table of defined present balance

the demonstrated. business the and quarter is mind we've results been the as First our last forth putting for operating we've on doing as

Brian Sponheimer

general et the world. a events, and there or goes live goes obviously of about If of film, fleet thinking what's in engaging this you're XXXX on point that events your fleet customers thought on you're the into co-television at TV, as other the lot planning rent with the towards cetera your

that thought So, business? just thoughts your on any small of -- particular any part

Aaron Birnbaum

as Yes, said break feature at film side, of parts. Brian. starting that segment. we like beginning is production From back percolate it's July. the it we the would This I to two in Aaron, TV

stairs come back. to starting gradually started the there. is to volume -- come We're that back So, taking

visibility On And if don't happened. how the -- side, on we'd next expect of don't half good don't be to surprised year event I year. going work event it that's that music return first or have to the the we at all really this in

the So, prepared TV began percolate back we'd for the to it side, is if to but commercial event part it that bigger be on come is and film really starting back side up.

Brian Sponheimer

good back of and much luck for the the very you year. half Thank

Larry Silber

Thanks.

Aaron Birnbaum

you. Thank

Operator

ahead. go Research. comes Please next Wertheimer Melius Rob from question from you. Thank The

Rob Wertheimer

morning see. everybody. It's results. impressive good Exceptional very to Hey,

Larry Silber

thanks Thanks for the Rob book. and

Rob Wertheimer

guys you of kind but a quarter? revenue we of what bit I You’re And have be the it. Hope the where enjoy clean do there upside. had look revenues little the two might a questions at industry like forecast one in are if welcome. first Your you was wondered I really.

mix if So, it that I if on curious but I'm didn't entertainment bit below you or operationally a were the matters the that quarter? know Not or whole Do lose you the operational the anything was share disruption else? just little in on case? time,

Mark Irion

We have don't a really revenues. industry into good look

mix trends we than in general. sort into fill bit little were industry weighted industry. and industry a the look we volume entertainment through weighted, line anticipates a had with of think more generally And stuff I the our probably Our and heavily in what saw

Rob Wertheimer

maybe So, mix.

may the next look you the And you actions And on enough. been the been in the with at question may what is guys took given permanent. accelerated nice you're times doing this margins. long-term a fair of past quarter of have call Okay, some have or you've a more couple mentioned have

stick could us more give you is of So, is what a us the going just and just did And are XXXX Thanks. was accelerated XXXX? with narrative actions -- that into do -- that you kind you to think think what around like permanent? you

Mark Irion

in terms quarter Well, operations – those sort were the happened good of and in that action the at and that will QX worked a going of into example QX, in hours of an furloughs cutbacks and branch dramatic the impact.

spends, In proportion. were expenses these cutting terms of external as a delivery outside them maintaining concentrating of some on and we back

going we in down as that into steps the reducing additional and QX. – as will of come back go took So a percentage shutdown, they were couple down of revenues drop QX with dramatic big an COVID our as they the into volume our

as half maybe costs volume some the comes just of back costs run as we're remain of those forward But So going will savings how with we our those operations. efficient return. more

Larry Silber

during of force in more our then versus own Rob, And repair will labor we repair that re-rent intention be as activity, continued reducing probably the well utilizing Yeah. and it will our our quarter use our as to on and to our remain addition exclusively use to was fleet. the a focus probably some of adjusted that external where own internal re-rent minimizing keep

Rob Wertheimer

I'll Thank Larry. it again. Thanks, you. Okay. try

Larry Silber

Okay. to your book. Thanks. looking forward reading I'm

Operator

next ahead. comes Group. the of go from Thank you. line from The question Thompson Please Research Ramsey Steven

Steven Ramsey

morning, everyone. Good

Larry Silber

Steve. morning, Good

Steven Ramsey

specialty I on first. focus guess to

demand decided how maybe then projects into mitigate due What volume? virus. You pricing helped drove of the to that of some demand you in takes QX? specialty and and drawdown it market drove that QX? the What how kind maybe, And

Aaron Birnbaum

Aaron. I can The type answer this of is part – projects that clearly. pretty

quarter needs So on deployed one. temporary it part power of rent all sector, a some specialty was that I'll the take even healthcare the continued the to equipment climate for it drove question to was of across Mark that remains government think and the part initial the volume for let through it how control, of – the your of responding The today. wave was of lot that other – I North stay the and America there

Mark Irion

Yeah.

to really whether definitely to increase a and in price the customer And on whether It had granular. respond mean getting I there's too going an spot and it's the out So mix pricing that size it it's really contractual of the then question volume. depends to pricing. or without

and on benefit growth continue So that in I as think we the big focus a part volume QX. and us increase to something big strategic takeaway of us a the just should is in positive QX business and to that

Steven Ramsey

Can customer majority you customers. talk care a or driving of driven accounts on Great. is basis end that on you temporary And by these were new about driven Was what that? to guys health it then in? types or addition other totally markets talked the new

Aaron Birnbaum

focused allows goes of or to the years. and that stay revenue, been generating pretty also with And business we've on the obviously grow is on the that kind Well, five healthy. replenish can accounts jobs four strategy new accounts, us but we any so in for attrition finishing

the big industrial accounts, local say So I versus type I'd in of big it's as across like board. would accounts, what the regional But accounts new as call mostly far it's segments really accounts.

Steven Ramsey

if impact to again Great. revenue there get guess expect there's was back and would entertainment revenue the to do I And business. the don't any But the know, – the of segment? there or QX you quantify zero. the second entertainment sectors? then to rental maybe, mix to special of half to dig sales side I way on almost majority come pretty is are half year's quickly And other into that of last in

Aaron Birnbaum

during strengthening. to we gap quarter probably a went not the in that as is ago. every segments would where end get second the rapidly back be going to of but another entertainment year long that And pretty of was hard COVID stair-stepping to go, only and of The imagine, up. due it's were to it's shutdown Yes. predict closer closing year I we'll business as one the week It's the North it there's the as where we America kind on to zero

Steven Ramsey

Great. Thanks for the color.

Larry Silber

Thanks, Steve.

Operator

Weber Markets. Thank you. Seth The RBC next from question Please from Capital comes go ahead.

Brendan Shea

is just on walking Hi. to were away from Good your lower, was priced, a because Thanks. where for on? deals, was going morning. Related This guess, they you maybe wondering no of it of simply were is utilization, Brendan deals case aggressively more I Seth. that or that maybe everything was that because I were

Larry Silber

utilization. cities of volume our so case a was it of market the down, our say, areas, no North shutdown got America that would I deals, affected Yes, shut the in when particularly because across metropolitan and did large

our a type service provide. strategy our don't to focused pretty well aggressive that away we result much chase I very activity. of pricing of really the and think we So any to that type customers of that want We was solutions as we of miscellaneous attract on. a on walked We didn't it lot of and maintained the deals have

Brendan Shea

Okay.

but it seen side pricing like, pretty on acting confirm, just rates sounds rationally their point? to many So the really lowering at you still market I irrationally or in players the guess this haven't right, acting

Larry Silber

market is acting be is tend majors, players. always in local the smaller deals here There's I I'd competitive that rationally. amongst mostly generally either behaving say Look, everybody call the think to I'll the marketplace. rationally by and there or what But

Brendan Shea

Thanks. Great. Okay.

Operator

from Please Revich Jerry of from go line question next comes The Thank Goldman you. the ahead. Sachs.

Jerry Revich

getting at your specialty for to over I'm fleet talk wondering shift if CapEx balance about look And we follow-up. the specialty meaningful Thanks you What on outlined. of could target look have specialty on XX% you the mix a mix you taking part updated like up the the continued are and you you the that any if right what should of going finding of mix your year? Do now that business you're I'm as thoughts fleet? based grow to wondering you forward? the Yes. anticipate as as

Larry Silber

to quarter. would participate specialty the things over around here the course gear power environment the I somewhere environment be clean that at equipment filter to generation, opportunity in HVAC, evaluate Jerry. Look, between stated level target that say, the of fleet. then the We'll last air of our We're was and support, the that. said Yes. we that had after medical go XX% invest and wanted it in we've we to of an and we'd and continue Thanks sort going XX% our to

So It customer to allows specialty that's to solution that where to a for if we're our to it prepared the and businesses. focus our XX% look us. to the us great And above approaching continue will take range, we product base. enables It's demand provide see be invest than important in business be. a the us rather more to just XX%

Jerry Revich

if you good comment a directly? reinstating wondering look then can Okay. projects visibility you is visibility today to on Thanks. talk the presumably guidance, about compared considering I'm as that you at just you're a have And much business year-ago, whole, how pretty if you can but on

Aaron Birnbaum

starting. were of you back that landscape the jobs or look we're rebound that prior the And at from index, seeing American a Primarily items June temporarily to follow regions, get – postponed then clear are North that to now month. that shut some work, from – we KPI jobs ABI the when it's did the it's our like down starting our that in

– The be it's seems bouncing is to like activity pipeline remains the question. long-term back. So

Jerry Revich

you your about would non-res in how XXXX, flexibility you environment? the resources Okay. resources scenario can allocate XX%, private in allocate And fleet base would XXXX, as down on XX% case into comment you if in that how that is think on you note,

Mark Irion

I where on market other Well, fleet anyone weakness construction mean necessary in and the in end strength in depending the isn't there's markets behalf.

in way any invest And through cut opposed continue CapEx continue customers level specialty environment just expenditure their as we end in we've got year. that to wherever into get of fleet. big demand The would This will saw next works year that to so the So went to we of a didn't that industrial going those into its base the volume targeting is. we really it's to the the markets. lines,

Jerry Revich

Appreciate the conversation. Thanks.

Larry Silber

Jerry. Thanks,

Elizabeth Higashi

Thank you, Jerry. And hour. I end come our of to the think we've

thank look you have as e-mail further for call. you So joining to or all on today's soon. hesitate us We you questions, forward all me call any always, a to lot. Thanks, me. give Thanks with obviously, And Stanford. please do not if talking a

Operator

Thank now gentlemen, You're conference welcome. has the you presentation. for attending Ladies and concluded. today's

You may disconnect. now

Herc (HRI) 23 Jul 202020 Q2 Earnings call transcript