HRI - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the Herc Holdings Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Elizabeth Higashi, Vice President of Investor Relations. ahead. go Please

Elizabeth Higashi

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

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

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

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

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

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

Larry Silber

and good Elizabeth you, morning Thank everyone.

Our outstanding operational to demonstrate continued execution. quarter results

from rate supply a steady Our demand. strong benefited rental tight equipment results environment, which industry-leading in and delivered management favorable operating

Given invest by the raised million year decided to million the fleet expenditure million. to guidance additional to the current have operating environment, $XXX our $XXX fleet we XXXX end capital before $XXX also net of and an

Our drive year-to-date momentum is year expected record a of to performance.

Given indications time raised second this the rest for year EBITDA the million million. the guidance $XXX to of to full the year, $XXX year adjusted for we've

please rental years turn works a July our Now, company efficiently achieve every industry, slide as performance equipment ensure safely, on fifth With to a our and in effectively X,XXX-plus celebrated X. the our member recently optimal XX day. customers over of X. public number to team We anniversary history hard

attend our website. of promise either do spoke future. the XX, vision our build details and and produced or we a communities, are York your brighter posted but calendars XX-year commitment be event in and on In anniversary New in-person in is more person Everything the date, please mission recently an which our to fall, September out sending Investor on Meeting video, our employees values corporate We'll help closer we hosting built is to Our City. in mark customers our to virtually. on

three six next executed you successfully this our be branches with network our integrated our year. locations event. five stages years, that sharing first We acquisitions greenfield have at via we that we'll the journey opened in Now, of and

the We're are excited across five operating about Canadian States As XXX momentum states provinces. of generating the Canada now pipeline. we and in United are our we XX in developing today, and M&A and locations

quarter brief results. of overview number financial second Now, to slide please a turn X for our

impact XXXX a XXXX, comparison XXXX. here with not in unusual due the to but COVID-XX, only share performance of the Given we

over growth, in increase market million from compared XXXX business, and our performance trajectory $XXX.X year, increase our XXXX. business XXXX. the $XXX of years. Equipment or last XXXX. core which ProSolutions growing by are XX.X% million XX.X% now share This the and performance investments in X.X% to Adjusted see you grew As in prior solid an second by revenue business, our our performance in of was the year returned our outpacing prior EBITDA a XX% quarter, pre-pandemic over two in the can was rental Entertainment clearly driven over and to over

margin second EBITDA in $X the share reported Our focus or We second on diluted the year. with XX.X% of share million $X.XX income year-over-year leverage $X.XX per to net improved of XXXX. quarter operating quarter XXX million compared diluted points last or in adjusted basis $XX.X per

can you in more off XXXX. indeed time This look team strong to records are the forward our breaking start from Herc exciting an As and a see year to is we results progresses. for we as

the XXXX published Now find recently XXXX aligns initiative for we We please turn to X. slide website, for additional first established using of to Relations Investor on Located major report hope interest. base XXXX as reporting a time. three our number our standards transparency corporate the global you goals the citizen which We year.

with look greenhouse First, X.XX We ESG our lower. program discussing intend on annually intensity second, target by emissions -- XX% nontoxic XX%; you. waste forward to finally, TRIR XX%; to to our and of our progress safety by to reducing improve report gas reducing continuing a with and or our annually landfill our

of Now Chief Aaron operations Aaron? our for Officer. in quarter is Birnbaum more about Operating the here the our details

Aaron Birnbaum

Larry. Thank you,

done our a of reflect team a of every appreciate and members each quarter team Congratulations commitment team of one job like you We results team. our all personally and Rentals XXXX. to coming would really second and The I Our deserves contributions entire off of the congratulations greatly thank professionalism Herc a thank huge tough well exceptional Herc. the you. and for

to X. slide Now please turn

a our we as North for positive growth verticals upon we markets market successfully results our America. The customer performance but foundation strong XXXX. our our solid to deepened our and QX showing momentum. solid built to and showed investments market of to XXXX, diversify strategy made quarter segments base are urban Our was provide of Business compared industry exceptional and all throughout second the widened also compared strategic activity and end

business approximately as of Our year-over-year ProSolutions XXXX by share. second the continue quarter market we expand XX% increased our to in

tailwind on years. business we control entertainment generation climate needs our and ProSolutions remediation demand focus customers second content benefit the over to the revenue power continued and in from of annual four the growth Our has our made XXXX. for double-digit quarter, the contributed last the in to investments the of Entertainment In

zero quarter. Our second last entertainment in year's was practically business

meaningfully activity So production the year's to return contributed results. to this

operating contribute summer this and live from as particularly to rental to and strategy entertainment music continue and continues will activity events fall Our recover. leverage to activity sporting

benefited and we an quarter regional pipeline. business core normal Our track of are showed in our M&A demand from acquisitions in performance the The operating solid upturn developing operations. on integration and of the second we is our

model in operating offsetting drive the in continued Herc quarter. margin and Our to fleet improvement year-over-year personnel-related efficiencies performance operational costs increases in

scale Our improvement during remains year, revenue support leverage margin growth our the as robust. will further and

Now please turn to slide XX.

focuses services As a essential commitment provider safety. most on health and of our important

operating our our well-being employees, enhance in customers communities. to team and training the investing continue safe for a by of environment will and We

foundation the help new ability a will implemented management have we contribute work Management which to safely. this We way us to & new approach Health system System our year improve also The Safety helps methodology processes. also a our working of streamlines audits. system programs a and provides providing correct issues reviews any solid easy-to-understand and It our safely and and to external safety by safety

Perfect motor focuses achieved our no As as on OSHA of and a one internal at-fault no initiatives you've the us talk of quarter about accidents the major operations safety days XX% vehicle branch-by-branch past perfect. heard days is DOT in Days. incidents, In programs branch second our with violations. no various safety That on measurement, reportable

with help always of means our are communications efficiently safely, perform the equipment training. maintenance striving our at for commitment focus in means all servicing branches. daily safety driving days, to a continuous and applying equipment that will activities their and and We also and XXX% them and particularly It perfect through team

a are they're safely days rental days when Our seven best week. done

Now, Slide please to turn XX.

quarter, is OEC fleet of left-hand at the slide, the the billion, total on OEC end second side $X.XX QX X.X% than as composition fleet the this about of Our of end XXXX. of at was higher

specialty continue ProSolutions for fleet, now our as which fleet about total of in our includes accounts and XX% the to XXXX. QX ProContractor and of invest We of end

$XX see you in in XXXX. fleet OEC the period. were QX million an OEC increase quarter, year's $XX to comparable in of expenditures the second sold the can million, chart, second our right-hand XXXX million were in $XXX Fleet On compared quarter last from disposals

market the a front tight Our getting job OEMs. fleet new a to department great looks for of be what done supply equipment from construction has in

costs in our XX and our at to Equipment the XXXX to age as higher disposal. levels wholesale We second of supplies as not used We have returned channels material average added proceeds net in equipment, pricing percentage year. equipment well $XXX experienced benefited for higher OEC disposals have any increases of a CapEx as fleet sales of The retail was pre-pandemic and months of approximately contribution quarter. million from total of a percentage XX%. from the and this tight

please Now, Slide XX. to turn

base the essential our QX. operating sales customers strategy. drive business growth continues business customer continues in to diverse Our in large driver and expanded national be to specialty of Specialty with sectors mix our our

look manufacturing care, and utilities growth support are general Our in strong industrial upcoming where to customers up and warehousing other construction quarter, and verticals we gearing and demand. and seasonal major experienced health and the energy,

in segments and our momentum to recovery strong are We showing on XXXX. generate the of high-growth are a focused the economy markets also end

a We expect operate to lean continue additional efficiencies structure expansion. to and cost fleet drive margin

to the pass I'll Now Mark. call on

Mark Irion

everyone. Thanks, and morning, Aaron, good

another better and We and a QX be positive circumstances. QX. momentum performance took business rate continue off delivered QX. pleased is than hand in throughout our almost and from The with quarter seasonality excellent the of all QX We is that really QX in such volume to built and

time momentum half sets the year record guidance positive the for XXXX of we out a year. us raised second into for and have of back the up QX this So

customer margins executing equipment America fleet customers throughout provide to utilization and continue North to our our expand and We and small both premium our projects. on to large for strategy we're our and excellent service

and cycle XXXX in are QX the in our continue a a Slide quarters cycle, XXXX. track to last in through the quarter fact the depth XXXX, from are and beating with XXXX in progress are of equipment record The XXXX of the of success adapt of increased QX all comparisons. our and shutdown. XXXX, in environments. to to previous The that economic revenue of business comparisons refer in utilizing the by rental with next peak execute growth Equipment increased momentum weak the X.X%. second rental a XXXX leverage to and of real to we impacted and accelerate shutdowns, to to couple only of we capital comps to record have due QX quarter quarter comps the $XXX a COVID second compared the sorts the XXXX, results, to XX.X% the measurement accelerate was but I'll our of As them million COVID and occasionally resilience ability summary profitability. speaks available in in XXXX primarily economic our second have year to shows being XX pricing. quarter of of XXXX decent revenue our $XXX.X obviously the we step operating away XXXX. model of real base continued of QX improved comparison in the a our XXXX all with from volume operating million Compared

net deliver per to $XX peak XXXX XXXX basis in XXXX. income million in XXXX. XXXX, XX.X% in of or net the Adjusted were share and EBITDA from XX% second points for increased or our income a diluted by per share, of quarter in to also XX.X% XX.X% by record to in XXXX. and the million comparison second profitability EBITDA $X.XX XX.X% adjusted XXX continue QX diluted from margins improving cycle was compared previous at We of up in $XX.X comparison adjusted quarter XXXX with with in quarter in Adjusted solid $X.XX second

to but rolling effect As ability we cost base over QX impact slow and low maintain of our flow-through by XX%, upper last and the XX.X% points our XX.X% basis XXX left was strong range points The for expansion. the and highlight pricing our from of by graph previously the average the the COVID-impacted illustrates XXXX. rates likely discussed, to basis our of side expectations at trends Flow-through return business XXXX, to remained XXX historic XXXX quarter, points with from XX% down we have to in to slide and up compared XX, year. margins was REBITDA in would margin with quarter. quarters XXXX, line by pricing XXXX. of XX it XXXX up On down a latest should basis XX% our in of utilization the targeted on year-over-year reflecting

deliver and as We team. professionalism current The we on continue rate our we demand, to leading our supplies and have discipline tight environment We to our market believe tools and of continues equipment our lift. market be rate decent benefit the excellent pricing of sales focus team momentum execution our for happy continue XXXX. with are and supported to building the and have steady from rate

the utilization Dollar XXXX in a into the of points XXXX. back and quarter, performance momentum results, deliver improvement solid we record got have We post-spin XXX pricing basis a from see XX.X% second can from environment. our can in a our was favorable pre-pandemic you

that from and our see year-over-year and momentum positive a fleet efficiency this dollar in down comparison chart and size record we can in in Fleet forward XXXX. and in QX going to have returns. QX, fleet utilization terms real remains momentum the of You sets year and utilization changes up

Compared X.X%. and have up up begin the Rental was XX.X% XX.X%. in We by see were grew quarter. to growth rates volume and revenue fleet should rolling purchases XXXX XXXX in by rental third our to

the mix, lot quarter. So from shutdowns. mix. a risk mix improved as also the in has assets customer XX.X% from we this in mix contribution three-quarters came have of mix improved of came bulk part Entertainment The had which fleet of of rental business, of big which from fleet from the a the depths change Approximately COVID

of in we've was of from to the quarters roll and were Adjusted as re-rent contributors. contribution during as obviously the to improved with QX EBITDA to related year-over-year. million and turn improvement. increases EBITDA increase compared to ancillary addition, primary QX of compared will the are expenses, an by for the XXXX. million with In second COVID-impacted equipment got The furloughs and X.X% second sale rental This Adjusted costs from of an controls was of contributed keen of cost in revenues. delivery, quarter XX.X% the basis $XXX.X improved rest on on an XXXX growth DOE outsized points increase XXX of personnel-related in the freight compared mix reduce increase margin leverage cost controls. for we XX. from revenue second focus a maintenance slide skewed a growth XX.X%, and $XX.X revenue comparisons record the million, million quarter and quarter $XX.X volume XXXX, the in to the operating to higher the such Please place $XXX.X XX% COVID overtime A XXXX. shutdowns, profits and increased over

revenues the a of business the rental of in at Our run back a to percentage volume XXXX currently should couple of of in the and quarters transacting what the half at ran are level DOE XXXX. we we more similar normal for are next

place increased run management higher expenses those big XXXX, including and to of years. COVID, an bad during sales by XXXX, to We strides half comps on primarily margins highlights and to despite in to margin compared offset bonus are think about XXXX incentives in holding margin improved these out the expenses, and and commissions Similarly XXXX percentages over expense, in to stock rest few SG&A the of profile, chart costs change our better last terms This impressive debt made collections. DOE, cost $XX.X lower XXXX slide from On generated travel will in revenues we controls comparisons year. quarter the a last back cash rental of CapEx how skewed effect by level of with million Second $XXX XX, first net of rental the incentives, SG&A half. related million the due with in free by flow are of million base unusual XXXX. to way to COVID for $XXX

million for the fleet year. to million $XXX are $XXX of guiding net to CapEx We full

third incur the with XXXX, second X.X the the times, results reflective we QX. Strong fourth of in from ago. much in compared quarter that pay for X.X is quarters, times fleet contributed will decreased to which reduction net in we the So the expenditures of year also received to and leverage, cash as a of June not fully operations when XX,

We and are of our availability million reduction into show XX XXXX, liquidity the now range new below debt to billion XXXX, we three With two billion of ABL no of industry XX, on maturities On XXXX. cash as ample for and $XXX into was about $XX.X times. as XXXX comprised cash credit the over December from near-term support our of forecasts. liquidity million. growth we and ample targeted invest net our of $X.X the primarily June have times in slide leverage of had $X.X to fleet capital June total a equivalents future business XX of We future, facility to latest and cycle. XX, Total

macro the ARA XXXX does in a been change forecast at forecasting North the return has XXXX by XXXX. market there to Looking still year-to-date. lot not not levels market X.X% of to and American until grow is only to rental forecasts

rental by XXXX XX.X%, year-to-date up year-to-date our by on on XXXX up Now are and are actual revenues X%.

of mix base fleets a XXXX, in general. a have with past either in with are two. we gaining the Our growth of customers. experience. is company is as the And it's companies of are scale Rental likely and to than the rates combination industry consistently a share with have think a And rental Herc imply off. or forecasts of seen customer This rental we be I scale well-diversified well-diversified broad faster consistent grown

up a before cycle, early bottlenecks. equipment, new to favorable everyone tight, customers and clearly chain certain deliver extent. potential favorable to our really is availability demand manufacture stages supply We in with should suppliers due construction environment inflation benefit as as OEMs fleet get remain and are appreciate into commitments to for facing struggling from we steady of boost spending. next cost with is even rates, worldwide are any future very of to any service. fleet $X.X the This Equipment infrastructure the to our billion environment increasing also a rental own our It a to

is construction. business not of non-residential majority the addition, our directly to connected In

in we to Our also segment, of ProSolutions in benefit. in years rebound our this growth of Entertainment investments that to industrial and most in a remainder rebound growth be in markets and the production, pent-up later turnarounds, we able the plants have demand for gain into to balance XXXX fuel will and continue grow business this supporting our do. fleet share content and support business. with intend our to is dividends investing the market to be event look is lot that in that a share and for paying sheet real couple year. our growth business strategic of we is what There looks least should likely our And demand, at and end There for is engine of XXXX a maintenance live the to to liquidity and of XXXX. by plenty to and next

a EBITDA now are of we strong to to QX, million Turning execute are of strategy QX demand and With range updated exceed adjusted record year expectations. $XXX for strongest on taking XXXX, to year own to into fiscal a guidance $XXX guidance, team the in slide for million. up momentum XX, seasonally out our and Herc forecasting our quarter heading continues the our our to

equipment. fleet to and to market been tight an for additional continues department purchasing new able has incredibly in Our excel source

to we're million. guidance our million equipment As taking $XXX a rental net to result, CapEx up $XXX

about to are With an excited advantage years. as call pleased what that, back we the quarter be the for reported I'll into looks have exciting We the hot take of start the we over cycle. with performance we performance anticipate of to and Larry. next industry turn couple a up are the new And

Larry Silber

Mark. Thanks,

last XX. gap our number we've slide with everyone how turn to slide please far five the years over shows closing the This in peers. industry Now come

focused months quarter improvement XX results EBITDA June to our through increased EBITDA margin in customers, will Diversity second latest markets for XXXX QX. longer of XX, is updated term. adjusted Operating free is liquidity Our to improve greenfields of revenues by leverage urban And scale margin show has adjusted with income XXXX. expectations end guidance. implied expected our net period and the plans drive and markets long-term increased in on and meeting to cash in M&A for our ending XX. And provides was our regions We be market upcoming geographic you XX.X% initiatives the solid high-growth strong adjusted over record XX.X% new the plan We're opportunities. long-term. EBITDA investor and a as to margins foundation future a discuss likely review year growth capital for our XXXX in flow allocation for plan on September at those with opportunities.

So the again, your operator, please lines. And mark please now calendars. open

Operator

first question from go Instructions] [Operator of you. Please our America. And Gilardi Ross Bank with today will ahead. Thank come

Ross Gilardi

morning. Good

Larry Silber

Ross. morning, Good are you? How

Ross Gilardi

Doing you. Thank good.

your the has allocation. company So on last been alluded on steal the just any September you the Herc's just down. thoughts certainly, about five to kind to talked thunder mean in around, -- I getting approach for years fleet from about debt OEC, sustaining your you changes turning capital but XX, of the not of

now leverage your You're below target.

And we if are what with should presented itself made forward? the to just -- on one market thoughts what in larger So the sense? M&A company a appetite and line going for transaction, more expect your an and grow fleet

Larry Silber

I'll Yeah. as of as answer can that thunder from question, I without again, much Ross. stealing September. Great

and look the and in technology. in investments are in investments and considering training investments business, where continue continue we'll to and today. in are M&A than on been pipeline our in with it's greater capital exists been sheet but with certainly that we've will for to our do with performance better seven then in allocation. discussions balance a things other Board discuss what acquisition We around or than buybacks which dividend meet investments we people, in beginning do developing we Board what past, might our as a priority the late now that months our or we relative our greenfield, either to are liquidity in December. our be six about a our focus and fleet, first strong with we'll And track certainly relative we And or then our Obviously, we'll fairly

Ross Gilardi

on it. And you down side broken by Thank numbers, versus you. Got was that X.X% alluded rate say the can can which granularity how more then, on specialty any quantify your business? was you provide your can it -- gen rent if to? you And heavily

Mark Irion

I much think board. across Ross, it was the pretty

from of We sequential it's rates. the business. That contract the bit in coming strong more layers than a stock volatile be rate. the market the little So spot obviously to momentum and tends had all

getting to results spot build momentum on working and really So good through in channel. that sort the up contract rates of

Ross Gilardi

Okay.

the environment from the the normal rest Mark, were the the year year-on-year foreseeable remain lastly, perspective year? end the -- sounded confident rate wouldn't assume certainly you rate on would that seasonality pretty for Why you to exit be by futures. the of to if what expect -- a pretty you you Just of for favorable

Mark Irion

It should continue build. to

So, a environment. favorable it's

As running levels. steady and utilization equipment at demand. I supply mentioned tight high We're

got in going of environment stay year. rate first to a to half place the we'll that in So we've build everything focused look continue is continue and to the on favorable for the momentum and

Ross Gilardi

Thanks very much.

Mark Irion

Ross. Thanks

Operator

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

Mark Irion

morning Jerry. Good

Jerry Revich

long-term talk morning philosophy this management next versus have differ be you is I'm ran way mean folks pricing about spot the you're making environment thinking just good I'm everyone. to the rate ago moment and your your difference short-term what's you're the bit business the between the if And Hi on could to between previously? how versus Yes. alluded that a wondering approach you of wondering a customers and Thanks. point just going seen. at give I strongest this longer-term your that over team couple Can a opportunities. as about work? how quarters how context that predecessors of us Mark you to you decision the relative might

Mark Irion

or I Yes. the Jerry. a same there, it's think response I mean similar

annually. to rate contracts They volatile and year get start this and less environment a market year So it them up turned last lift. spot more local think decreases the bit us getting come I than protected around time provided takes us mean in protection from I with little year. And this last

of in market as as So, pricing as environment the and place We've managing just that take and sort got tools get that face executing we're aggressively segment on we also and on working the focused advantage and tight that spot to the the supply contracts business equipment can. of in sort we're getting really our also. need lift of we out this of we

Jerry Revich

and into evolve course of the sequential in sequentially over July? you terms And did pricing of the cadence of can quarter pricing talk to How that? the

Mark Irion

sequentially the quarter. up throughout was It

we'd going and into QX see expect that's we'd what QX. that's expect So and to through what

Jerry Revich

And XXXX. consensus targets estimates that at own those and just below terms XX% looking expand well can estimates you leverage. on we're spoke in margin of of numbers for operating of Because all to about our Mark incremental XX% that the drivers you the level

level So that that us? build existing investments on of you just can terms of for what's leverage level operating you our of driving any could comfort in way build

Mark Irion

COVID and that comps. I exceeded expected operating last effect we've a been in bit of terms the of you've more pretty in growth dollars just is given think of actual got base XXXX for gear leverage run revenues of the the growth we as consistent But it flow just years. revenue consistently flow mean, off into the and couple of XXXX I and we've weird as of range very the more the the we rental and volume that, through. becomes the sort through easier to rental

back XXXX rental becomes dealing weren't in was of easier a XXXX. level of in and kind bit it XXXX So, that XXXX, the same we anticipate when with than little growth into revenue we

Jerry Revich

of growth comfortable So of range to if like. in that even versus driven it CapEx still 'XX allocation by you with expectations high it within the price? greater comfortable flexes being well You're volume like range sounds and of you're sounds end that have

Mark Irion

but No. XX% we'll It's not higher Yes. to XX% EBITDA. in through, XXXX flow you almost But rates growth CapEx Obviously be key lot here the to the neutral a utilization right? in been mean fleet I get XX% improvement. from not that's and than XXXX is reflected in improvement. able and terms XX% utilization growth time and in to of really run that, fleet with driver

Jerry Revich

Appreciate the Thanks. session.

Mark Irion

Jerry. Sure. Thanks

Operator

will go question come next Please ahead. our And Group. Steven from Thompson Research Ramsey with

Mark Irion

Steve. morning, Good

Steven Ramsey

some everyone. I focused around Good have questions morning CapEx.

the about that take How given are you're this, could? prefer even to guide would this, net shortage, and up equipment higher you channel your raise to do significantly. than to And equipment challenges if seen you it you manufacturing able CapEx in talked checks. And the makers? able You

Aaron Birnbaum

the typically The new got CapEx into to now. And strong of we'll out got experience, we in Hi, the now fleet year. year we we this right more maybe revenue We the call. plan of -- our suspecting But every equipment of net up our got two liked pretty up alluded this delays. in we first, confident towards enough. than equipment to feel second Steven, chain went it in single business business. day our equipment our the to in as as some show a we trends. continue late. little pretty our that and is rest some normal see later, have good a capital bit cadence And does be supply quarter, up months Aaron. in this with was showing got sits for year, would got we we right And a And there We year earlier, might end last as and

Larry Silber

vendors our And opportunities an manufacturing job, us. department with communicating with And Yeah. add closely for and on in key done fleet our additional kudos of excellent work year working really for enabled that's our has very our in this the department what's excellent slots. to fleet decision for so vendors, availability our capital to generating

Steven Ramsey

to lasting versus demand guys beyond that Does ongoing Okay. times this you positive fleet this time year? the investing raise And in delayed normal. XXXX both, this CapEx lead outlook calendar thinking signal and and about, opportunity then, shortage on a behind the the

Aaron Birnbaum

supply confidence And ability our capture marketplace. Yeah. the more XXXX, in on in dynamics share demand into to signal business. the It does the going and our

Steven Ramsey

Great, thank you.

Aaron Birnbaum

Steven. Thanks,

Larry Silber

you. Thank

Operator

And question our Please will come go ahead. Dobre next Mig Baird. with from

Mig Dobre

Thanks.

Aaron Birnbaum

How are Hi. morning. Good you?

Mig Dobre

morning, everyone. Good Yeah.

it's on a your had coming the halfway were a year. quarter, raising CapEx through peers aggressive last I I what we think earlier in well relative year. the increase. in And of little they were it's more this some know to CapEx point, So, material discussion doing this as

your how markets Is kind exactly simply is than are what of maybe the understand, to mean So that perspective, through that manage market to cycles? in the dynamic how my about thinking maybe I something it to you're business you've of trying terms in make original your from this were? seen changed in through guess you different, planning decision prior So CapEx. the progressed or it I we seeing the has Is carefully trying year. than I'm understand you're that want right? end year strategy increase more differently sure evolved the to what to I assumptions lead pricing to

Aaron Birnbaum

is you. Thank Mig. Aaron This again,

markets performing I picking even of next and industrial think well turnaround. of notes haven't bag a which the all of a with participate that mixed the year end been back of still half picked steady all yet. of scheduled this very see it's has different off up They do the we a mentioned and But our kind year really lot last year's up bit above. half they're quite of kind really in levels. call do in different first segments. of of them like We segment on in a We a of lot the and

also equipment the you tight is just -- have then it So marketplace. a

we that customers relationships So sales we're want more maturing. our further-and-further strategy developing And fleet we've our entire more to our make sure available is as customers and got the customers. and touching our for with

we're net So what with real doing the confident fleet about we're CapEx.

Larry Silber

Yeah.

of Mig demand market market those organization a develops. take activity as gains. And in hands I of as well it to hot share both feeding we're as think it's advantage on combination our

Mig Dobre

Yeah.

what peers that maybe CapEx some So I your there with little was the not of a than I that, loss. you're more mean, to you've have share some sense given that's careful trying at. get would been been getting

year? you've that managed thinking to still you're this and You're share gain do going so to

Mark Irion

growth growing Yeah. ensure clear next market excess couple No It's rate. at pretty that of mean over that out of we're our in look well the play I the will weeks.

Mig Dobre

I see. thinking relative based I'm rate the And on about the XXXX. wondering then updated OEC here, on outlook to you're how say exit

in updated your XXXX to CapEx XXXX plan? on rate based relative exit So

Larry Silber

we certainly going have back and XXXX. over the of we're we'll fleet generally look higher the fleet year and exiting our grow think than to XXXX did half XXXX of level a I

year. will grow the fleet back of half So the in

Mig Dobre

Okay. for be wondering And year to are that setup guidance but lastly not you're here decent for -- or here, in you providing the is XXXX Where me, better. a I'm obviously recognizing we're And Thank CapEx? any in terms as on seeing are you you. of pricing conversations What Are with what's now? are for suppliers available production vis-à-vis XXXX slots the there limitations securing side? XXXX? XXXX you to

Aaron Birnbaum

this A OEMs, good actually until of of XX% We've already a are call XXXX. at plan a lot XX%, sold secured OEMs Yeah. it those. again for we But of secured year. buys our portion, Aaron, Mig least have lot next is out

in some know year. as all second improvement element, for So the looking what the you in scheduled price And are all all to that's not year. the mentioned nearly -- OEMs pretty as increases. next they're looking just year far marketplace, this going I from on the quarter that increases come some price them much what are of for price But pricing about next material we in

have our with the of all But at moment. we slots. negotiating them secured So we're

Mig Dobre

Thank you. call. Thanks for the

Operator

go ahead. from And Please will Redburn. Tyler our question next come Neil with

Larry Silber

Good Neil. morning

Neil Tyler

or terms to that from as left -- able allocation really. away introductory Yeah, tight to the it's the still I your be the fairly still for optimistic see conditions well any Is -- good you that likely suppose what morning. CapEx One secure? in buying in there difficult that again, you comments. and but executed translate do market making The it deals, me and pipeline into to you're more pipeline referred capital around and of what's to M&A towards through coming

Larry Silber

because actually the M&A the Yeah. difficult want to the year. think are smaller activity probably players in ability as may well supply fleet make may of some to have a tight do geographic of go has regional players, some advance, secure Look encourage helped coming not and those off out we or I not -- COVID investments and they

someone to few to consider think strategy going out up and So it's Herc fact in carry I encouraged plans done is their players forward. with teaming a it's business probably invest in business like and what their their

Neil Tyler

Excellent. Thank you.

So of in mean expect half year versus and numbers M&A I is move we step a XXXX obviously of by but -- lumpy reasonably half terms the first sort versus this those half for through to up as nature of into XXXX, cadence the next? and second back

Larry Silber

And, our time and obviously, That's stepping to and M&A deal it optimistic in generally about some take is Yeah. you expectation. said come certainly we unpredictable But a are consummate as does lumps. up.

Neil Tyler

Thanks Excellent. Larry.

Operator

ahead. from Capital with come KeyBanc question Markets. Please go Newman our And will Ken next

Ken Newman

Hey, everyone. good morning

Larry Silber

Good morning. How are Ken? you

Ken Newman

well. Doing Thanks.

can half. look us of dollar of back you Just at utilization sense the the into progression curious give if you how any

on I into planning your more an for expectation as CapEx imagine mix still quarter. a I amount mentioned plans the fleet third decent take from you're And normalized to think well. you of

all of second third from So quarter here? to increase you I that said mean expect but -- with seasonal would magnitude a similar quarter

Mark Irion

sequential into you'll the the strongest I quarter. QX it think see tight mean improvement. rolling I is sort with Yes, utilization. normal We're of

everything The you've in a dollar quarter. good set for is improvements in. seen utilization So, third are up baked

we've first quarters mean no -- doesn't had on we're going just in that that through. the move and not there's to because of outstanding couple So, performance continue momentum

normal the So, seasonality should apply.

Ken Newman

is want XX% improved if since in the guidance good you do but low into don't you've on XX% pretty utilization out kind rate expect the progresses the Right. into kind of run a way give of yet, XXXX going -- think the the has XXXX standalone fleet like obviously, years? linearly rate utilization the type industry company. a could to and I And you fleet utilization How you dollar become a market I know look you think? mean forward of

Mark Irion

utilization chasing been we've company, standalone a our still been mid-XXs dollar and in we've that's Since goal.

Ken Newman

margins Similarly equipment just that Right. think and of? about takes back mentioned the cadence back into mean gross for of half the think to XX% XX% one we incremental the margin of in should puts XXXX. you Any of us here be rental And aware as margin year? about the I more target gross kind into expansion segment the half And then we I for me. think just margins, help

Mark Irion

for I think XXXX guide is I So, XXXX. mean for flow-through that not

half effects base So, was of XXXX back XXXX. by the of still hampered

what year that we margin XXXX but EBITDA for growth for margin end and at previous of of the should XXXX looking we've just years the that's full seen we're see in over less going the year increase So, nonetheless. But over given to XXXX, base EBITDA effect. be than an

Ken Newman

it. Thanks. Got

Mark Irion

you. Thank

Operator

Our follow-up America. from a next Instructions] ahead. Gilardi with Bank question go [Operator Ross is Please of

Ross Gilardi

want could driver a for take your of in sorts just get -- to and squeezing of Like much regulation in. be that. business? parts whole perspective stricter that potential your codes collapse that guys happened particular and building the much back Florida in I on Thanks us of for and terrible more your on what's this any just building the

Mark Irion

Yes, the mean I live appreciate I Ross condominium question. in Florida, in South so I

mean building went codes have in with Florida was building in a post-XXXX at in I improved. increase XXXXs. significant up There -- least I think South that the Andrew.

think last been the they of in got think exposed steady building years. Florida couple there has And I after Northern some to storms improvement I So, a codes even Florida. in across increased

safety structural and and over since there's to that So, a in years commitment up. the improvement codes went building integrity been XX building steady

see -- improved the But from are construction older how significantly they engineered you're you're of I years. going think recent buildings in to I certifications. terms has those those with think So, to involved XX-year that refocus the see continued going a a in we're on

Larry Silber

residential since improvements building of hurricanes structures through. I early requirements whether winds properly to codes housing became certainly make any type has and the and a kind protection the XXXXs as of it's Gulf the whole way to commercial And to hour sort facility as area, the the structure build and condominium in improvements came would and dramatic the through certainly through there XXXXs of hurricane or -- been more Yes. its high-rise XXX-mile region, it withstand a or prevalent and say relates

So...

Ross Gilardi

in driving -- these and fires that what that fashion. it's elements a more happening, terrible are drought thing? things just and actually your you've California that that you what business got like specialty out business rental are in type of relief sustainable these seems of Like disaster and for about this forest but is on And focused guys are

Aaron Birnbaum

moved lived in Yes. before I Ross, this Aaron. is California. I to Florida, And

those of to those cadence there And always we're whenever happen respond. wildfires increased. the has definitely So

Our we is always there respond. industry but to respond, actually

of Some it's contractual business.

spot emergency Some of of an part business. it's the just of And that annual needs equipment. to seems be

that's have -- over maybe demand as are go think of the future lot case way up to to -- create they might it out underground. equipment in rental that power with along when their goes And that some infrastructure the I those if as it. forest change look you is a lines will over of the big the

the coast a lot really we're well our network. on West with up of Coast -- So situated we're the in locations down and

forest we're able to those fires respond pretty regularly. to So

Larry Silber

along the PG&E fact lines that California XX going be over spending to $XX yesterday the power billion coast. they're In announced next bury years to

Ross Gilardi

Yes.

equipment You and out. trenching to lot carry digging that need of a stuff of other task a and lot

But So Appreciate it it's thanks very much. really guys. interesting.

Larry Silber

Yes.

Aaron Birnbaum

you. Thank

Larry Silber

Ross. Thanks,

Operator

with our ISI. question David come ahead. will Raso next And from Evercore Please go

David Raso

again for for percent maybe versus next needs? you I you that next were Can Thank clarify normally you earlier year Hi. year you've and secured? squeezing equipment where that of that of think time the you me stated percentage needs compare in. year's your what this equipment

Aaron Birnbaum

normal it's about say it about year. XX% a with I'd and normal

David Raso

about normal. That's

Okay.

Aaron Birnbaum

Yes.

David Raso

of see the that channel mix sense channels? equipment the versus of the use going on auction give other through given you used of then equipment strength selling, thinking can going the used and need us that in just a how channels you're to market the And lack forward about strength maybe you

Aaron Birnbaum

-- through sell XX we've able more months. to the XX months retail over Strategically and that we past been channel really want do wholesale to the

retail the changed we We'll But use spend our we to if the time. So to -- auction have want our is continue to fundamentals on most of wholesale of marketplace want dramatically. we where channels. those focus really if

David Raso

can can at How lower help that quantify of what much in lower-margin retail you least -- the marketplace? shift seeing you But selling the channels? you're a little bit see historically versus a

Larry Silber

we're retail our of months through wholesale the you channels months Well, would probably today XX XX% we're channels probably wholesale through in to XX if close activity and auction XX% through XX% through back our retail and to excess I go and auction. more of or and say XX% less.

David Raso

Okay. for Very time. much so helpful. the Thank you

Larry Silber

Thanks.

Operator

I'd our And question-and-answer conclude closing remarks. back Elizabeth the turn like session. to this will over to for conference any

Elizabeth Higashi

hesitate seeing you shortly. don't Thank person of questions any you you, Cole and Thanks reach soon. very investor Bye-bye. please a if you look in to further always to forward meeting all sending obviously, out thank and lot. be you our to out as us But details for we joining all today. We'll have

Operator

conference The you attending today's concluded. for now presentation. has Thank

now disconnect may your lines at time. You this

Herc (HRI) 22 Jul 212021 Q2 Earnings call transcript