HRI - Earnings call transcript Q3 2021

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Operator

Good morning and welcome to the Herc Holdings Third 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]. is event today's note being recorded. Please now Elizabeth Higashi. would like to to over conference the turn I Please go ahead.

Elizabeth Higashi

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

this we based we and materially I'd involve forward-looking remind the actual These our risks are uncertainties. from differ to review caution will environment call. the on on like Harbor today, forward-looking Today's statements. remarks, begin statements our you Safe include Slide could would I you statements to see X. Before it statements as results on formal call our and therefore made that

refer XX-K XXXX. also to Factors of Form XX, for should You December on Risk Annual year-ended section our the the Report

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

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

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

Larry Silber

good Please Thank to Elizabeth, everyone. Slide and turn you, morning number X.

to the results in continue metrics. over shows quarter quarter many third three results financial execution the years. third Slide and Our new last outstanding X demonstrate of records reflect our operational

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

both As you prior-year and or by XXXX. our trajectory. grew solid was XX.X% prior-year market in by growing XXXX growth $XXX.X accelerated quarter, Equipment to in third can our to XXXX. in over see, compared the from performance and XX.X% in and increase driven over million our XX% rental specialty This revenue performance our pre-pandemic share continue increase business million the outpace EBITDA core an was Adjusted businesses, of XXXX. our performance XX.X% over clearly which of $XXX.X

leverage year-over-year million a per to achieve our in $XX.X quarter, appetite third record by operating This we net Day, on Investor as of time from recent Team goals And XXXX. diluted for XXXX. $X.XX the margin share quarter Herc. third growth We're points or per improved income adjusted EBITDA desire way at know success. presented year. an last our our and we have is to share on exciting you the compared reported $X.XX $XX.X focus million, XXX basis of the or with Our to in diluted XX.X% We greater

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

guidance. time guidance provided Day full-year of Given the range the we year, adjusted was indications for million, which million Investor EBITDA our the adjusted of the $XXX at affirming we to we're third rest raised the $XXX

environment volume, steady to XX% reflecting third and XXXX for demand has us. of improved equipment the rental an increased for supplies the to number be please Slide a and industry. utilization to optimal quarter, points year-over-year Tight year by basis mix, X. XXX turn We turned equipment rates. in Now out have dollar pivotal created

in Our is locations acquisitions announced both we Rental the out focus acquisition driving Since a $XXX Greenfield Rapid our for million acquisition price on top earlier this and XXXX, targets. MSAs total density our America December and Toronto North sixth select of purchase completed of in filling five our cumulative and urban Equipment month.

payable announced shareholders on We first our of of per XXth, to declaration November the $X.XX of share also October record of Xth. quarterly as dividend recently and

is expect forward. the providing momentum performance that growth clearly going and year-to-date strong we Our

years do turn achieved our is ensure Now optimal our and day. number equipment members promise industry, safely, we built every in commitment and team brighter Everything X. works plus please to rental future. Slide hard our efficiently history help on build performance customers to XX communities X,XXX and the over to customers of a With effectively our a

about introduced commitment our simple on business developing in at across truly Investor yet the generating strategy to approximately As number are provinces. is month. momentum Day The last capitalize locations truly we states turn fragmented industry. it opportunities we we equipment the gear and Canada XXX expanding shifting of in XX into and today, United takes We pipeline. our an market have model high our addressable Please experience and now to the Slide and five are operating X. States excited in We're M&A and

opportunity of Our team take is exceptional the before to us. advantage hungry

Now quarter our operations for our our Officer. in Aaron Operating the Chief and outlook here's details about Birnbaum, more

Aaron Birnbaum

Thank you, Larry.

reflect not appreciate unparalleled performance. the delivering XXXX and a XXXX, field third Herc for our we they really they're day up America. our our and of quarter tough of only are pre-pandemic members. They've with our Congratulations, one our We dedication teamwork done. results, exceed to job exceeding the performance Every every organization management North the challenge Rentals stepped their professionalism the each throughout of demonstrates their the to results exceptional contributions commitment off and team well of greatly challenged contributions serve in Coming our customers outstanding team year-to-date industry. and team. level and The

Now please turn to Slide X.

strong and XX% XXXX. XXXX a XXXX. higher rental showing to are our to XX% all exceptional solid $XXX end in in Equipment was than XXXX Our with of the million nearly performance third quarter markets rose results periods QX Business and comparable in revenue and compared the quarter was showed positive and activity compared momentum. compared

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

our base North ProSolutions upon America. Our investments and and deepened to The foundation segments solid power industry a and we for made revenue as in our years. verticals market urban generation throughout market diversify the the on we our our focus double-digit built strategy four climate of customer remediation provided successfully needs and strategic control to growth has last the contributed growth, widened over customers

solid showed operating pursuing in core demand acquisitions integration in business in normal our benefited are the we and other targeted Our the of quarter, we operations. acquisitions third The track made markets. actively the performance upturn we to-date on in regional is from

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

Our will improvement revenue remains next over support margin further Slide years turn leverage scale the robust. XX. to and few Please as our

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

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

dollar record quarter utilization third XXXX to XX% continued the We also each in and improve quarter. in achieved a

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

market purchases OEMs. We our and great from fleet largely ordered fleet while has in getting have delays have front certain for equipment Our new equipment, early department for the initial received orders. done job from we experienced a of we of a tight XXXX,

in You year. we XXXX announced that quarter, delivery additional $XXX this the may we that ordering an fleet in million were we expect recall in and second

industry inflation to material as fleet not the equipment cost year, in industry, increases have continue that will costs labor this costs rise but Our we impact been XXXX. shortages anticipate and

XXXX remain XXXX Fortunately, for we orders our most them September, in impact of so will inflationary our some at pricing, of had orders muted. XXXX by the

our the reduced year-over-year rental in fleet, by demand for we XXXX third $XX current quarter disposals million. operating Given

sales as average The a year. equipment percentage of and disposals this fleet age about turn rose XX% Slide to as year of XX. XX Even to proceeds last months OEC now age was XX from third Please our quarter XX% months. is the in

climate of expected national a with remediation we business mix of to customer the Specialty essential growth diverse the our drive addressable strategy. expanded to focus large expanded as sectors, to our specialty on entertainment. and and operating customers continue our business base sales Our markets continues be driver, is in control,

and growth in and Our end warehousing XXXX. industrial construction a and in support and strong manufacturing customers the segments general up our markets economy other gearing energy, in recovery verticals to are major of to showing focused on are and also and continue utilities look healthcare, momentum on We're high-growth beyond. XXXX

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

to-date expected to of right-hand this The Slide subject the announced values Since have agreement Greater to customary locations Equipment we September is on side on Turning with Rapid slide conditions our in Rental also now of the in We is XX. our at with the XXth. employees signing the Day cumulative quarter. fourth be acquisitions then to completed the Investor we of shared a XXX made closing purchase in area. the seven Toronto transaction

a additional locations we've isn't made help our targeted of results. our scale. more markets quite we'll urban the M&A XXXX from shortages mechanics drivers XX in So and The improve industry. reported turn operating capital. and with seeking double are But labor in in and Slide particularly than in contribution we so our coverage EBITDA pipeline Please MSAs aggressively for XX. the robust, There is amount top GTA, acquisitions has material start enhance and fair to density leverage been regarding far truck to the our media our our current to us XXXX

industry, competitive choice made we retention have and salaries said attract have to benefits and to we employer in be the to talent and strides As specific offer Herc. repeatedly, intend enhance to of team the

We also busy and team the members Herc our and new career opportunities on choice, intend Herc been of focusing training. be integrating to development, job we've and acquirer

we supporting by impacted are this of climate-related Ida. also With year, the spate Hurricane families Herc events the

Our members need. the assist their team and matches donations company contributions our to Herc members contribute in team

are resource of Veterans also Employee programs, that Women and support. and branches in foundation Safety huddle. start we career-related across the Resource groups, we exemplifying the everything with employee Our do and Group, day our active in belief, is offering every safety Action, opportunities, these networking

of striving days and is through days the the supplying maintenance days branch incidents, with no talk as major perfect. safety programs operations will one measurement, We're about branches. all It past and team all training. them us for third accidents, to a DOT on at in their days. in heard the of least safety various that activities and our quarter initiatives, efficiently our vehicle safety on means perfect commitment driving internal and communications motor you've perform our no achieved That means of particularly reportable with equipment and XX% and focuses continuous at-fault OSHA daily violations. help the servicing As also our focus no perfect always at safely, branch-by-branch XXX% of equipment In

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

the Now call on I'll Mark. pass to

Mark Irion

Thanks, good Aaron, and everyone. morning

delivered pleased with other industries environment constrained another a although a lot really of our rental performance strong in be is to excellent at industry demand have with quarter the It's the great like in and is supply it continue for QX. moment. We

great the with a that early in orders our steadily Our fleet quarter. new done job team so our throughout this getting arrived year, has fleet

into momentum Herc is XX members, EBITDA XXXX fleet summary XXXX. customers results was dollar QX the team $XXX.X and to the the Our primarily adjusted QX continued new a in record Compared of done and Slide strong with revenue million maintaining the utilization, rental team quarter jobs, demands EBITDA, revenue from third momentum with peak $XXX.X right job of to compared XX.X%. and This quarter revenues, to rental third volume many margin, income, in equipment the right due consistent led fleet XXXX quarter strong model. and shows key metrics the response, with increased and managing into XX.X% and including to Equipment in improved a pricing. XXXX, record our XXXX, in execution million and has with increased great operations a also managing integrating getting by record quarter customers XXXX. utilization. rental for net adjusted have

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

margin our XXX expansion. the XXXX anomalies our effect in in with QX of strong basis of quick line was XXXX. through we targeted not XXX XX% XX% EBITDA to results, likely an side There of basis cost flow and year. base expectations of margins the XX.X% temporarily points this to through return flow by our replicate to As margins XX.X% was should XXXX our temporary the remained and the in increase and are expect low quarters at range did expected, historic of the able sorts of from to will down QX Adjusted in to those over in of impacted XXXX EBITDA business from of all XX.X% and ability impact our points XXXX XXXX. maintain cost rolling slow be COVID to

commissions In and of side, in along rental expenses the provide employer re-rent, operating benefits. be the superior supply customers. delivery, we cost competitive our and and we compensation to to provide into the the we in to record payroll order On incurred have service some order coming business, to back with customer revenues industry, have choice also

adjusting been our of to to have growth. compensation and platform wage our for inflation We operating build strategically team's stay ahead

down basis our our graph years over we and to a our quarter how and challenges year. invest we the our will price managing impacted The we and by COVID on and will manage within rental and testimony range XXXX manageable run of business over the rates effects we our much base utilization next is the targeted in inflationary couple our a of continue managed improve X.X% this XXX rates. XX and year. rates points couple margins only are growth left of QX currently of XX% in in highlights can Slide people On quarter. flow investor basis double-digit all and returning returns. to beyond. average revenues. the in points the in All illustrates last last last success in less context We to out to latest the faced in. In of XX, COVID our XX% up we XXXX, reflects through highlight compared The trends to downturn is QX were quarters ability XXXX to on pricing in focus of The XXXX upper up well environment, despite rates

our maintain use. free specialty is with excellent record this professionalism times almost by we and quarter utilization. fleet the in is three our A ordering sales and we've we an acquisition Our capital growth combination industry from and Investor commit quarter continued ample pricing liquidity out we've operating industry The rate. new price cycle. momentum our record to back into and drive XX, our and leading of as On At time with in of executing are price at of supplemented the and efficiency was intend net of to positive million utilization, dollar supplies environment size near-term of demand the invest continue debt our right and purchasing months the fleet size before the QX last of growth The us continues on four momentum flow we Volume cash orders We and X.X% XXXX. acquisitions get industry-leading in of our to the to during on dollar utilization changes drove fleet The clear approximately over on environment momentum forward back Slide September most for fleet $XXX another early tools, the and our gotten $X.X fleet to positive sorts seems in a After our $XXX support team. recent return momentum environments we we to market This we going fleet in exciting. increased quarter our million savvy record of some operating XXXX our XX% goals up also businesses fund rates no activity. we as nine continue managed have of million momentum in XX, with under into the growth business ended clear, of our Rate, to on acquisitions of is to on and and goal excellent benefit which XX. track discipline managed territory integrated conjunction in $XXX.X our orders the has year-to-date, focus will into time funding in in impact We close powerful growth built the receiving in tight have to as laid billion saw all generated current our in future, XXXX. with and on maturities, continue those XXXX we September and Day efficiency. assets. record equipment to our rate steady years. change

into we in XX, accelerating the continue have our forecasts. times range ample forecasts to growth at plans, On three this range at XXXX. ARA two be year, our Slide industry target mid-single-digit our We is leverage the of share end of X.X the lower latest growth liquidity to and times. fund to

XX.X% XXXX are up by year-to-date are revenues year-to-date by and X.X%. over rental up on XXXX Our

scale future company boosts as So are of experience. our potential of have industry industry steady proposed equipment a taking Equipment base companies in early favorable with upcycle in more deliver we we worldwide have struggling This and rental benefits rental the clearly probably $X.X infrastructure OEMs Herc a is manufacture chain any before This customers broader very past are and new get faster shifts. momentum we scale with to to with billion much well from than environment broad is well-diversified favorable our mix rental the of than with next really seen is with even fleet are to inflation directly tight the supplies fleets construction. clearly connected non-residential the to construction own the spending. diversified not environment supply the to of a customer a commitments into appreciate and general is stages as everyone We're to Also, should in customers. large as bottlenecks. fleet demand our Rental consistently consistent certain XXXX, growing for of of It a a business service. extent. our increasing and remain cost facing is rates availability to majority and

will what this growing real fuel in and we rebound. investing is maintenance we benefit to plenty and to our continue support that that liquidity business a of ProSolutions to growth most share our business. able segment that intend market markets pent-up look for to should industrial balance in strategic also be turnarounds in plants to demand growth a and and by There's do. into Our grow share is XXXX we and lot and to have fleet and is demand There the sheet of gain and

XXXX of maintain EBITDA affirming Slide our XX, to three to through raised as in month, guidance only to and high of momentum you and at with fiscal to $XXX at XX% the left million Looking top-line and XXXX million results momentum our EBITDA. guidance range not side growth our the our focused of XXXX times in have top-line $XXX can range XX, we're XXXX. year profitable adjusted from through XXXX. a year goal current Investor margins margins Day to XXXX, seem $XXX double-digit continue to growth Slide in out of range this on We've We're for $XXX million but see expectations top-line our growth, On XXXX last we have by improve improved million. laid the our

excited from to leaders shift the over of CAGR XX%. hot of margins our the Rental Larry. adjusted for that advantage guidance Relations years, to XXXX. to I'll of have affirming as broader billion the review, of Day is industry website. the XX% excited you With section of from for had currently and adjusted for growth rental. For range momentum anticipate are very $X.XX a upcycle we to start. beginning in also $X.XX XX% we we the chance billion, On with fleet rental our Investor not We're goal and XX% call of expenditures next new to growth highlight of to a XXXX the to posted million who profitable industry; is XX% three secular Day. We're net also a XX% at revenue an those focused on to laid our the that, ownership can growth and by EBITDA to are in take our at video the our want to rate grow goals was have growth XXXX two a back EBITDA capital of fleet business, exciting CAGR to a the continues and on into rental couple We're performance Investor that of our we times to XX, at We're Slide million. an benefit improve net $X.XX about turn industry EBITDA we to XXX -- leader out we Investor upcycle a at grow industry look see a to and to

Larry Silber

Thanks Mark.

XX. turn please number Slide to Now

We focus mission. hold the values commitment vision, We goals also investors we growth their a point particularly making mission Before to given to we company we when are move we several this and we out is lines next the we developed which became please open the the over five-plus-years business are for our communities. right. every vision ago. today, in to questions. We in about And and we you are We But day our achieve Q&A, We values, to these take by operator, to manage values to know results. I wanted years. prove that our want want together. talk ourselves committed we We're our on investing public and responsibility. frequently do now I the about what

Operator

now We'll BOA. first question-and-answer you. Ross Thank the at go Instructions]. from Please begin question Gilardi comes [Operator Today's session. ahead.

Ross Gilardi

and with big obviously Just JLG deliveries had you're a about question what capital have on next to We've seen spending your out growth guys it has the least short-term now of that for your supplier. but capital there year. spending, be are I sounds managed big a mean getting well said from obviously year got projections you this the for all at and they're

that the my orders bigger level you've to and got your produce So but can necessary at buyer for your do year? take understanding to actually Thanks. deliver cost that what year you increases in suppliers prioritized ensure next the next suppliers confidence that the gives explain have fleet again you to

Larry Silber

the agreed the [ph] them receive obvious we Yes, chain has and the part announced Ross gear as XXXX and to delivered that work in industry. others JLG on as confirmation them and certainly will are slots but But our for orders to certainly our very with supply is order generally with there received to has for to according been certainly we impact everything from impact do with have that well we the we and great schedules production that potential to have that that where most your and for for us our great sure things major all make question time. news closely of strike Riwal not placed we intact have suppliers and

in well about we manner rates to And as any net fashion have for As relative as Aaron, comment low-single-digits receiving or suppliers. and year gear. relative to negotiated do our more? gear want the with net pressures don't for your in maybe very to far now foresee we've issues been next you in negotiating able on inflationary orderly question our us an to I rate, we're

Aaron Birnbaum

to you've and think well. year, and Larry, back that fleet for we planning you of all we XXXX started we our then I covered so we as think into we planned that look you this initially it early started started that did because look planning When early well. XXXX supplies receive I when very forward

fully receive the we expect I to extent, delays, So expect the to fleet do we planned we expect but I to for. maybe disruptions for, fleet an some planned receive

Ross Gilardi

Okay, great.

accounting the gross impact inflation? of So a that, Do that XXXX, to does next CapEx the your rental or equipment fleet? everybody squeezed your in out the life due so year into how margins depreciation cost you're type say bit the inflation inflation over get low-single-digit And accounting the get smoothed just baking of because works for you would is outlook on can right? the just, you remind in

Mark Irion

we smoothed year I looking broad gets mean, it Yes, for I yes, out. the and spend cost at Ross, accounting. so are next low-single-digit think increases

and eight in So years. is I mean, that fleet over comes depreciated seven,

So appreciation pay. no has out the with smoothed and real immediate increase

Ross Gilardi

I get what to back over and all guys. you hand Thank right. you. That's thought, I'll it okay. Right,

Operator

Thompson question Steven Group. next Our Ramsey ahead. Research today from comes Please go at

Steven Ramsey

what to into change could environment getting rate for Hi, if rates into on won't of and good is rate in get do the the you next do morning. XXXX? Maybe clearly this but discipline things strong like your favorable pretty you feel rates, wanted the environment think tight, or this this industry incrementally the you first year, tight get FY less supply pressures gets environment half that

Mark Irion

that flywheel favorable being a in and we a running don't environment XXXX environment, us Yes, of get in see we this And effect rate rate is no to Steven, you environment. build -- also. there that tends sort XXXX positive of -- for sort momentum a momentum see we rate, and disappearing, into so rate

Steven Ramsey

are the driving And great. back plus customers is coming off last entertainment that then Okay, seeing year in QX, strength? again the or group growth strength purely after the what areas bottom other that QX sector in other of XX% in

Larry Silber

as the of In be the activity categories would government some other well.

Mark Irion

at and that's local the portion entertainment that's there, Steven, not really Yes, all.

more swing back this that is and a that's back from So coming was market year, year. sort COVID of volatile stronger last

to the starting normal sort see customers mix we reflect of So versus in national local accounts.

Steven Ramsey

in SG&A back next to last Are running in And DOE at not, to of are elements then on operating normalize into being clarify what normalized. if few Excellent. it the year? months kind normalized Thanks. levels? one next coming And and both expenses place

Mark Irion

Yes, levels. now at we normalized are back

levels of running we're at revenue. mean, I of record sort So,

there's So of the in reductions are normal place the year. no are none levels real -- of [ph] and COVID operating -- SG&A cost since expense last

with back and we're continue levels sort of levels, operating through normal XXXX. into QX and those at we'll So

Operator

question Revich comes Goldman Sachs. from Jerry ahead. next with go Our today Please

Jerry Revich

Can make talk like $XXX might that over you closed you have us in million So to acquisitions? do now you with through have fleet step additional acquisitions additional the it the other business fleet? much as about branch grow room think that the can that locations, areas, you you your How look you what specialty plan? and on can we and about

Aaron Birnbaum

business was we would are MSA just the density Well, a it in them businesses. a gives Jerry of rest ones that about them that markets. exciting what is what's Only business, big lot we in the call far, trench the a them us urban so have some rental The general which we specialty was of one want California. done of that core of is

drive teams. specialty to on those working sales the our and that synergies through we right lots away So we of with that business have began opportunity

Jerry Revich

is get magnitude, rough can million comment you context? a million in And order of just $XXX an in to on fleet, fleet, extra us it of $XX

Aaron Birnbaum

then Well, that's acquisitions revenues specialty there's business our business through that running we took probably through I fleet them, you number specialty that on there's that, push those we that there from extrapolate assume no XX% and specialty that. could just grow side acquired to segment think if the the that through

Jerry Revich

your folks take to like you look we opportunity? quarter? as And fleet the full availability seasonally about interesting. essentially a third strongest Was folks get or have third higher? what's is out from comps, Very quarter utilization worked you would quarter standpoint, and utilization that How might there room XXXX up. to frame think the hard And you for

Aaron Birnbaum

there's is than still we I through to QX I year. would This a at this for us did would time Aaron, higher room run some that say say. what

Jerry Revich

of can above you charge and Mark, comments this And that on are account national type rates customers. environment, to rates lastly, well get you monthly on flywheel your expand I spot the

If of you the be? And through rate about so we were account agreements, to the for mark-to-market your can timing you monthly customers an just end, those can annual what's get higher appreciation how talk and the much national would cadence? quarter

Mark Irion

more spot days, the lot you've right. you yes, So cycle of those as every in momentum rates a XX in market There's mean, I if sort got it like.

year. in spread throughout we've rate have going So the momentum sort positive do sort they is that cycle we're it as national And growth in to to every We accounts they're in spot the what going, probably takes of relatively XX times the got the longer accounts, the three national of two evenly seeing at moment. get months. just

accounts focus up monthly a to got and they renewals national to within as we've cadence right So those come left renewal. getting for on we continue of

Operator

from Rob ahead. with go Research. Please question Wertheimer And comes today Melius our next

Rob Wertheimer

leverage is cost the evident largely Hey, or around now that cetera. good dynamics SG&A that how rate morning, just price I will reset? you've in remind that? it background you could just us expect versus the everyone. rental versus become much drop inflation, just some a more done Maybe the et Thank as you. Is years. Is of you it through wonder of next if couple talk

Mark Irion

of the cost it's more SG&A, spend in obviously fixed bigger It's a lot probably mostly two, portion P&L, a expenses. the than operating combination cost the operating there's it's leverage, the but of

fleet So more it existing just locations. putting from comes on most of really

is you add a there comes you that function step need cost as the add drivers along so that, mechanics with in straightaway. don't fleet, So to and

next to XX% Most branches and the really the existing over of locations. years You function there's our and do the step XX% on way part those flow but cost big a of that substantial, there's as as time. is sort sort work through accelerating sort just and those fleet increase strategy the a you fleet to just fleet couple can existing gets more that and of pretty of a that the through growth steady of handle your OpEx of

Rob Wertheimer

about then your maybe goes just you. IT Day, there. chatted feeling stop I Investor very technology can spend on about and IT as positioned IT. this of at Okay. helpful. we That not Larry, was on what's up a ask whether materially your where you base just the And or from question you're opportunity but And sort the I'll Thank well?

Larry Silber

plans. we Investor think our and when were I Look, at Day, presented

planning three the is out doing, of is we're into what over and sort into spending and we're Our that that years. baked baked looking everything IT next spend

function, kind baked So any think spend a you'll there's already not or step any I that's that don't incremental of see of kind in.

Rob Wertheimer

your just the scale? versus use then separation and And as you smaller opportunity competitors

Larry Silber

or The you roughly think market. the market four as is or of third have I know, players three Look, fragmented. a extremely top more the

of the So, spend spend, due of the where I in and there's as comes both a rental a in in and independent amount as other smaller gives to that overall industry fleet, a ability opportunity, that great IT in distinct structure, we companies. the kind few of the over separation business to the the us our fragmentation advantage peers well is, think capital in

that'll will a fragmentation that be that further fragmentation be continue will be will of there'll due to to there that. and happen, part consolidation So, --

Operator

Newman Instructions]. [Operator next Please ahead. at Ken question KeyBanc. Today’s comes from go

Ken Newman

we should coming how into in this, the quarter costs should missed I incurred a that quarters on maybe about if costs, labor you Sorry, you we that just can please aware be just and quantify but the of personnel impacts XXXX? in of think

Mark Irion

that that So I it comes sort to XXXX. basis of is returning mean, normal part from just on of

low inflationary shut commissions the some it's there of pressures to XXXX. on effectively normal was obviously sort were actions the business then and down. was sort and furlough And are year, still just and last entertainment into part of So, return touching going that of

as costs sort of context of that's X% been percentage sort we're spend, has the double-digit huge, increases costs looking and manageable ish revenues at in to payroll across that the of maybe in a XX% So of revenue growth.

mechanics So regular on being in basis of on we're with these there’s do are on of sort of market days, all staying find to hard adjustments lines. and sort a competitive made drivers our And, focused to that. the

that with go maintain still and margins as deal So can something we It's it's we margins and manageable. forward. improve

Ken Newman

a labor, Hollywood Right. bit seems or potential of that I am but strike I challenges this mean, or avert your it to curious route. forward? luckily headwinds end-markets that terms guess you impact labor taking kind that with different even guess I of you serve? keeping in awake just we earlier there view could anything of sticking which customers across potential But, going in an your a been are potentially opportunities are I Is have how were week, you entertainment night, able to the you business. or that a seeing at things

Larry Silber

abnormality type can certainly we in have to resources any I to reacted react about react year whether to And that, that, Deere averted it we we are look the COVID-XX plan try to we I understand be that. a strike an entertainment it, an to it. strike, could think the predict in what we we Yes, hear every day, that of John think applied if last as business, market and beyond you quickly, very don't for to or

sleep I it. that I over as big lose don't challenge. a wouldn't So view certainly

is, We the is working, a of But challenged don't that relief think think to going thought expect general in I indicative I that. with entertainment lot of the there'll we're resolution the industry because I be that let’s right. process. have quick that with type can a valve and And be tone deal keep people have

Ken Newman

in better you I'm you rental get two to Right. I sense on growth the and coming for saw fleets curious about in core quarter, quarters? the you the was revenue give a specialty those color think fleet in the growth revenues between how between if momentum just that some rental and trying of

Mark Irion

It was quarter. balanced pretty this

specialty as specialty been strong just back, was well with last year So, through course normalizes. and coming market coming of back, the

historically always balanced. focus faster; there terms forward. be core and pretty we the this relatively anticipate that business the those is part in balanced So of and sort growth, on two the quarter, now we Specialty as should contributions going of of a grown levers of smaller growth has then

Ken Newman

last you just then if don't me for Yes. And mind. one

on additional you're going Just terms you seeing equipment much in where are seeing supplier delivery any color fleet extension and the to back more across your how in the that the current you're slippages just on tightness, can provide of just slippage?

Aaron Birnbaum

their pivot QX OEMs met from call Day we about would the had the time know the is Ken. then deliveries deliver Investor smaller or the Aaron, hasn't would The and earnings of much struggled you is some another I goods, find What slippage changed bigger expectation little this from some our hard Yes, had is, say that. mostly same. and last we've of really to to we OEM, or at they're are ones, delivering I scheduled satisfy that really supplier bag, several our working for mentioned else was but put it's mixed capital a pinpoint, But our a hard somewhere to of particular it's fleet segment a like growing. kind us. fleet all to the that but bit ones late, although, times

Operator

BOA. ahead. is follow-up of go Gilardi Please Ross And a question our next from

Ross Gilardi

you're any? exposure for industrial on demand energy guys. you're kind Good pickup us morning. referenced, remind pent-up of seeing midstream there, had it's You tapping roughly we're how and Can Thanks, touch seeing upstream, divided that your you your exposure and is what and just if just maintenance downstream? what of by just and and there,

Aaron Birnbaum

the price upstream barrel part, gear hasn't pretty of the of accelerated the segment for into accelerated know of On the that as really I price has the rental fast oil. oil rapidly, demand as

customers we serve. stick we our up the We that like to Permian of basket And in play. with that area have

to more turnaround turnaround mention that continue in all happening, our On activity used and the to and downstream customers satisfy fourth the in downstream to continue fleet our way expect through we And segment did some activity That's all activity some pent-up of that new part, delayed. we our continue that that move starting was or next we into of we've segment as through improvement continue and year. that to quarter well. capital, the

Ross Gilardi

these energy downstream? sales And to percentage to percentage versus how of and want what percentage of rough it out of fleet your or you days just, Aaron, just is I give upstream know -- don't

Aaron Birnbaum

For or or X% upstream and downstream the about the X%. like is is us, X% X%

Operator

today comes Thank Steven Please you. And from ahead. go at question UBS. our next Fisher

Steven Fisher

Great. Thanks. morning. Good

is, you any turn mentioned and be around your it of rent? how to are how Curious are back find. challenges that seeing kind guys availability ability parts out of on hard You equipment that to get mechanics and there the might affecting

Aaron Birnbaum

This Aaron. the is similar as Yes, parts delays. delays we fleet have

our that daily, demands measure that a specifically we fleet Although, our OEMs on the And is a much how other think how our -- returned any parts got down, with from branches waiting I months. suppliers of news fulfilling rental, connecting measure fleet XX its model, we for degradation here parts. team secondary operating what and we need good have in the can the is we the the that our and way during focuses really last much had our we of and of operating modeled haven't

move capital we So to as along faster very are the towards were than the in we way are easy before we putting keeping pandemic. getting although it's our not similar fleet running running and human is our parts, and efficient the and we're it it business resources the

Operator

this would gentlemen, the I over to closing question-and-answer for any remarks. and like concludes back turn Elizabeth to conference the session. Higashi And, ladies

Elizabeth Higashi

me soon. a Thank all. you give you call any today. as forward if always, And questions, We anybody look to please seeing and you participating you. Thank appreciate all has to free we further feel

Operator

This Thank all today’s thank presentation. today's for you attending We conference call. concludes you, ma'am.

and may You have disconnect a lines your now wonderful day.

Herc (HRI) 21 Oct 212021 Q3 Earnings call transcript