HRI - Earnings call transcript Q1 2022

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Operator

Good morning, everyone, and welcome to the Herc Holdings' First Quarter 2022 Conference Call. All participants will be in a listen-only mode. [Operators Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Elizabeth Higashi, Vice President of Investor Relations and Sustainability. ahead. go Please

Elizabeth Higashi

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

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

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

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

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

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

Larry Silber

we report increase I'm EBITDA achieved the performance first field number income, utilization, everyone. Volume total and and Thank quarter rates turn Outstanding to dollar sales, steady new increased the contributed revenue morning, by operations, in to net of XX.X%. over margin. you, XXX Elizabeth, the positive in year. teams Please utilization pleased EBITDA, revenue, slide points demand XXXX that adjusted four, our basis and to good rental records was revenues, to enhanced operating and prior Dollar a support in and environment. by rental XX% adjusted

companies opened addition, In locations smaller in with the new and five of we completed locations, the greenfield acquisition three three quarter.

rental Cloverdale we the Rapids, acquisition the appreciation five, morning. last of quarter the our over first rest slide the strength that discuss our year, to guidance detail Ohio, latest team of to quarter closed teams first in Company, Michigan, number integrating Irion we've of closing the We are our and to a the Equipment pleased the I'd and with customers start of new in of Pittsburgh, to raised of years. which full-service and to Year. immigration executing Cleveland, the employees acquisitions Detroit quarter systems and serving will Please and areas welcome family, metropolitan acquisition on and and EBITDA delivering general thank New their and our record XXX for for earlier into and our and this Herc employees, the we on extend operations new I'd and week, the employees core all Pennsylvania. like Herc that, Mark the team. turn the our construction equipment in also company outlook operations shows work Based performance industrial Grand with like the for this adjusted XXXX for again, a five later entire results as

growing million our million $XXX.X per or outstanding demonstrate XX% to over last million sales $XXX.X by revenue of a business year. Adjusted decision diluted first diluted to driven supply to meet or to We was million. quarter, of an income rental equipment the share $XXX.X to in increase in with million compared Our in equipment, core from continue from year first $XX.X light lower share or prior of to requirements of grew our businesses. customers quarter XX% continue performance in of an to issues This our prior year. compared results $X.XX execution. new the first solid original operational we EBITDA and $X.XX XX% increase to increase net rental supply the equipment share market our related in specialty tight made despite manufacturers. grew revenue million of was Total XX% chain quarter, reported per $XX.X Equipment $XXX.X

and and Our professionalism of focus to for on improved another our and team. enhanced adjusted points in operating first quarter XXXX, margin leverage our scale reflects quarter This the first tenacity Herc, basis EBITDA year-over-year the XX.X% is an time XXX team of exciting record.

XX team and rental and work achieve number customers about at the Please years team Association. of so our goals do This to The future. Our industry, broad commitment in efficiently, now we our additional the slide four by an Rental several we Day, market operated brighter grow. location. of the day. equipment North of years. United based Investor XX% growing even last $XX committed last quarter, excellent to safely, X,XXX how more locations on customer according our greenfield Cloverdale history a be in optimal we'd billion, over and end growth far to built We customers this customers on At effectively provinces. hard estimated industries American the XXX to we've do array we achieve to size in success. for locations and across turn quarter, acquisition, service States greater one states and and is with every expanding a the presented Canada, we With Everything built the addressable ensure know help solutions foundations our and fall, providing growth added were performance rental six. members our XX XXXX and to five the Canadian opened to over to our is is to American The build communities and promise week,

to organic continue by our opportunities select market We addressing industry the to expect supplemented momentum continue we overall in through the acquisitions. by the outperform growth to and as growth,

number turn please seven. Now, slide to

Investor from see maximizing ESG, core Day, our introduced that can business, and at are major expanding technology, you As of capital. on our growing integrating our focused slide allocation pillars strategic specialty, elevating this we our

Birnbaum, will Aaron? Officer, our on We progress update now are Operating executing operations. our these in strategic initiatives, you Aaron Chief and

Aaron Birnbaum

Thank the you, a year. good great morning, Larry, What and everyone. start to

operating strong The first leverage. reflect increasing quarter the results environment scale and and enhanced our operating

has to an is executing done Our the come. our excellent in the is strategy typically more what lightest quarter team job Clearly, there year. of

slide Now, please number to turn nine.

we in seized results with Equipment QX to opportunity fleet, year's comparable quarter the $XXX.X average the reflect in accelerating by with up million, the rental fleet period. Our XXXX. OEC up investment compared rose revenue over XX% last XX%

our to in operations. Our all core of regional continues benefit solid operating from performance business

and climate market remediation, The we targeted additional to XXXX year-over-year share continue as markets acquisitions continued also growth locations of generation, control, business in our of to to continue the of quarter and first equipment. power and in ProSolutions expand to pump track, in we growth the XX announced, the focus organic rental through double-digit contribute acquisitions. date, we on on have integration is Our

this our continue net year. will fleet are fleet We we capitalize expenditures in on $X.XX billion $XXX capital and investing to expansion, million to

number slide to turn XX. please Now,

Our fleet expenditures in at first XXXX. OEC totaled of quarter $XXX million the

of year fleet $XX at we Given in environment, current equipment reduced management of fleet quarter in the strategic with same was year's rental disposed nearly year. this last to time, We our OEC compared year. At than disposals less disposals quarter, level expect the this first for last million in point of which be demand the OEC the and about million first we $XX as equipment-constrained substantially quarter. in first last the

of on the than March at is $X.X at XX% OEC composition of fleet slide. XXXX, Total of about higher the OEC left-hand year. fleet end last side now fleet XX, billion this QX at Our is

We QX of reflects of to total of accounted record in utilization ProContractor, QX, invest Dollar lowest points XXXX. This includes specialty typically is continue in and about fleet as QX utilization well since of basis our XXXX, year which to end the a XX% the XXX XX.X%. ProSolutions our the first the to improved quarter fleet and quarter of seasonality. for compared due the dollar rest year for

XXXX, and fourth an call, do impact and the year. modest, our our anticipate orders level costs of and orders had mid in impact used in As quarter our we to XX% sale sales year. of compared average age The channel as rose an the mix increase Please in now a in our XX. XX% is to same of contributed a months, in our said the will we inflationary year, with last proceeds costs last in most the age which slide this OEC, was shortages, fleet in turn labor percentage quarter, be should at and continue year XX pricing industry number so months equipment Stronger to XXXX disposals that equipment in quarter, to early the fleet XXXX to industry, the XX single-digit as rise we time. first was about inflation, As next improvement ago of equipment it

expanded national customers business operating base essential a to specialty sales sectors and drive mix, customer our continue strategy growth diverse provide large in Our our and of opportunities. additional business

of in constrained the warehousing pump, fleet We expanding offer growth remains manufacturing, in specialty as climate in customers we well remediation, premium to other major line array vertical issues. and drivers growth. to greenfield drive and core supply to and market expected addressable commercial utilities are of markets Addition continue acquisitions expanding healthcare, continue and fast-growing focus energy, be as locations to to construction. of on due targeted and top markets a the We'll fleet the industrial broader entertainment, are control, opening through chain urban while and as to can

industry years diversification last verticals stable Our new drive and over several growth. to healthy strategy the targeted

growing by you industry see verticals growth regions. are produced, across and As we strong can multiple the all across we successfully

of our growth to revenue quarter XX% revenue, major local continue the New Please on recent added in focus XX% XX. customer from Perfect the This new fourth core of number represented up first In quarter do, striving be quarter, and continues the the Safety opportunity. and Days slide acquisitions. rental local additional XXXX, to XXXX. throughout rental through at growth line reflects for turn of we impact XXX% everything a of in is with first organization. total the customers to of we

at achieved incidents, violations. DOT measurement, In safety no XX% Our Days, the days OSHA focuses major of days reportable quarter, our branch that all no accidents, operations a no at-fault program with and first vehicle least branch-by-branch Perfect on is internal on of perfect. as motor

we fleet. come reduction Scope integrate into we further emissions that operations, ESG of from most recognize X X greenhouse fuel-efficient our and As Scope will the in gas

We to innovative interested and can alternative solutions investment More how the forklifts, of electric powered or and and energy their safety, we support and to our are our fleet, customers them. their expand traffic goals including [Ph] [light footprint, carbon more towers] vehicles, in to aerial are select welders. for continue we assist equipment, in reduce looking

who safety build XXX Before our to local communities how collect future, our members, clothing needy. customers performance, of our with I and food I'd promoted operations, Pro communities. At the with describes our pass out to our in call statement, to and commitment the also most we excellence we purpose a purpose equip Atlanta, activities to our in individuals point to Mark, our like team meeting, recent Expo and on statement, for also honored community and sales, brighter

to our that Group excellence in support And our is Day, corporate-wide do we all recently Our America. I communities tomorrow team are encouraging supporting they Resource point we projects become for that invest thank like Herc chapters operational as out to the Humanity through North also projects in to as launched members Women planet. women-built their Employee local enhance serve. Action also initiative in should since Habitat Earth a to the devotion well team to in I'd involved local theme, for

pass to on I'll Now, the Mark. call

Mark Irion

Thanks, as operating momentum continue environment key strength Aaron, in quarter clearly continue achieved and and equipment create rest team the is we high metrics focus morning, the strong challenges manufacturers key quarter a profitable as delivered Strong improving and long-term gear companies. first year on of Herc performance growth, value. key for fast, rental also level to metrics. in provide record the of for demand and good first end most and ongoing our investing performing in of and of the a markets chain all supply high in that our leading we well everyone. we The the bodes The at

early, the steadily, growth mentioned, Aaron As revenue fleet so drive we year. we our arriving fleet to expect is ordered and new growth throughout

beyond. and summary of Our into throughout in the to record continue momentum time done to great and pricing shows has execution our from job revenue quarter with a compared XXXX, volume very fleet and utilization, XXXX. $XXX.X momentum. $XXX.X results customers, This will led operations Slide while first impressive and and XX% excellent team consistent performance continued new team to XX that has integrating rental a Herc the Equipment due million million increased delivering with XXXX, dollar strong primarily members, model. by

clearly are our results. gear executing We running our we the when at high at look in and Day, are growth strategy QX successfully you outlined Investor

organic both the in pleased Breaking XX% acquisition the grow growth. strategies growth We X/X ability are we hard for a about our of pushing down rental and that fact growth business. first are came to validates our and with on enjoying the success. organic core This our from quarter, revenue lot

our market talents, to outpacing and another rental bring to organic and a nice believe continue markets. us of X/X the Acquisitions lever expand key contributed the and XX% overall from about boost we share. growth, in provides quickly allows rental market penetrate Our is growth growth which to on key growth revenue, we

Herc welcome family. working M&A members We our our have the customers for hard have and a into pipeline integration solid team new and to team

is fast only Our but and revenue impressive, profitable. not growth

We XXXX record compared comparison share net first XXXX the an All income XX.X% are investors share quarter or diluted all, net value. income we're of in our margins quarter, XX% the $XX.X in mode, results in $XX.X growing QX long-term first $X.XX the with in quarter; to excellent growth Adjusted increased for XXX of excellent profitably. to in of for EBITDA creating million from Adjusted Adjusted or a delivering XX% basis in first per per and XXXX. points XXXX. were quarter million improving EBITDA increased XXXX. adjusted to diluted also XX.X% sustainable fast, in and $X.XX

be increases the quarter start year, the As typical for were from forward year. the at in XXXX, weakest flow-through is level to the the QX growth we margins seasonally to lowest during it cost is and business for carrying and

got we, in items job along late With rest of to more little the bit lines added some Not a cost inflation big with the the some current cost world, the a quarter, in line than expected. deal.

we'll per inflation external We which both year-over-year, have and move model and The internal up XX% was that fuel, delivery impacts on. costs. an of resistant gallon example, adjust, cost our for

surcharges by for model fees. recover fuel a to proportion us a significant way of adjusts We these have that and inflation cost increases of and allows delivery

lot didn't delivery However, Adjustments keep and expected, XX%, didn't have fuel fees. late were leave been made cost in moved costs QX, over February a fuel than to up quite these which charges recovery reaction of mechanisms faster up. costs and our time. March

see balance XXXX. mitigation We the of cost expect better through to

at inflation-resistant around XX% dig XX% flow-through lucky guidance. pace have half cost quarter back historically the increases We flow-through the but grown this platform path this we of into updated model, are and high baked to at in to for more in to investment And volume-related this through utilization, clear is REBITDA puts on have X,XXX on quarter, XX% existing fleet we quarter, a details experiences. about in this be growth locations a maintenance part the about the a over the solid members and be held and and and at and our to and added as fast inflation. year, XX% XXXX, half new is margins point see we building we team get growth, fast challenging have We're to expected. year. current low our would the Operating growing a last have We're in leverage for into as All and strategy, for also for expected by incurring than in acquisitions. will pressure future growing quarters our quarter. team maintenance at a

demand is All is and improve returns. the our our of and the compared can left the as up The years, success consistently growth. margins couple rates points market our graph our of environment continue the by pricing adjusted and to drive highlight the rate, reflects to professionalism of quarter. business discipline revenues. over also XX%-plus sales steady for of manageable quarter Herc our On rental EBITDA latest upper tight last clear our current ability excellent investor invest in price of from XXX to average The XX, and in within And and slide and context we focus on with continues our illustrates team. equipment managing this our in and year. we our rate people, tools last performance, growth we pricing and momentum supply support benefit utilization our of in trends to basis The on and

In and to gotten the price have we price. intend on momentum addition, to seems back, the continue industry industry leading

Our rate The in executing we remainder operating price and quarter sequentially expect sorts for environment each on is increase all and rates is to clear. clear, of record year-over-year track our momentum XXXX. and of the of

XXXX, the fleet contributed closed and ordering with Our at with which integrated of savvy also conjunction is in by OEC about delivery fleet quarter the steady a in activity. billion has purchasing combination size supplemented to $X.X early of fleet acquisition

it quarter mitigate growth. environment. growth our points going momentum in cash drive Dollar same $XXX expenditures a ample QX of flow our have ability in impressive on before through future than QX in liquidity we in we our year-over-year. can business up inflation to OEC goals growth more cycle. and very and Net value positive our the long-term year. by would are as XXX much into return a and current of we which XX% assets. that the cash in excellent utilization a growth fleet and from shows as is negative to no it see and up flow is compared we impact last operations average million in powerful positive near-term commit to dollar reported into forward, exceeded in we get by basis the our environment, dollar typical reflects a and XX, We we we In into on, XX% the of fleet rent year first growth our soon capital costs free for new represents driver and can This improve, maturities, to acquisitions. XX%, fund utilization quarter, invest and Improved as QX fleet of capital on continues growth the rate a we fleet a slide which to operating XX% driver and as has taking hits as rent lot that on a on are out in with XXXX yard. the On the volume of last fleet quarter was current winter, average comparison fleet fleet to Our execution putting solid hands at took

to range three growth of lower target plans, liquidity our fund end is ample of times. our two the leverage to and our at X.X have times at We

implies base momentum in much eclipsing at a the industry have than in paid large, This clearly experience customers. payout of $X.XXX, general, consistent growth XX, faster XX% of dividend a billion also of general, companies are show and of is taking grown revenue We $XX share. is forecasts. $X.XX with March rental the share. end the the company well-diversified market mix forecasting and Herc rental the XX% in industry an more to industry consistently growth customer which is We fleets, scale XXXX, our industry with broad per ARA a growth On of rate, annual scale well-diversified slide rental rental with quarterly where a broader increase and we an industry rental past is latest out rate. than of of a and at have

deliver availability, any very stages in equipment our of cycle the to own This challenged tight, up from to billion We and our we construction for is is favorable and as are fleet the increasing Also, our facing potential the is connected directly worldwide environment Equipment future supplies customers into infrastructure proposed supply early It a rates a even to should the to new bottlenecks. benefits as due everyone before inflation breadth fleet of OEMs steady boost really are of environment business are of our next cost favorable to to $X.X to a not spending. fleet majority chain manufacture get with construction. demand rental service. commitment appreciate our offerings remain certain extent. the our and nonresidential

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

translates That an adjusted EBITDA XX% and $X.XX of range growing the of are the around in high XXXX. adjusted over EBITDA in of business, in we the line billion a to billion of bottom low guidance with and to have XX% we and raising excellent strong for to EBITDA the On We've confidence the first currently back results full quarter with XXXX. end to EBITDA end $X.XXX adjusted momentum raised top for our increase our the year.

capital raised $X.XX of net fleet expenditures also end We our bottom guidance billion. to to the million $XXX

back as delivering strategy. execute our growing an With continue confidence to of the that, high-growth upcycle call excellent look stages are excited performance exciting early we I'll the to on in be turn are industry to the We Larry. and and

Larry Silber

Thanks, Mark.

our and values. our please as the communities from we to number our we we XXX% safety Now, frequently mission, pyramid, we And take about is for ourselves together, But We continue we We turn results, talk day, do. see could slide center also XX. responsibility, our serve vision, to we're we in of you and everything Days. achieve are while striving communities. committed customers investing improve what's this do every Perfect right, and in at to

please So open lines you. for questions. the now, operator, Thank let's

Operator

Ladies and gentlemen, at this time, we'll from Please begin the comes Sachs. question-and-answer your today session. go ahead [Operator Instructions] Jerry with And our question. first question Goldman from Revich

Larry Silber

Jerry. Good morning,

Jerry Revich

everyone. guys, Hey, good morning,

Aaron Birnbaum

Good morning.

Jerry Revich

And good hi, you just if Liz, the you over on number cadence in of course the point that about the the I'm morning. looks Larry, cadence, Aaron, maybe if sequentially Mark? picked And Mark, Based if quarter, a price don't can Is you of it like the you've talk don't up about mind? quarter. right, wondering the year-over-year could you pricing mind. talk

Mark Irion

into to easier cadence mean at Yes, the QX. it's just and the I probably look through year

in year-over-year. execute pretty steady We improvements in steady going the so on through pricing have the continuing should to we pretty look throughout improvements year, So, pricing that year. forward to

were years. favorable very there, pressures disciplined to of So, good reacting a price, environment in pricing seen as around cost XX for as environment sort the industry and that I've

Jerry Revich

level you made hit year-over-year that just is in Mark, the can a rate high moment on range, from ago, pushed 'XX? a pricing that comment piggyback that standpoint those that prior pricing exit X%-X%. of in an has increases industry single-digit the heading point, just into potential Based on feasible cycles, last this is year, And there the to

Mark Irion

Yes, X% in coming last of dip, to negative sort that XXs. cycle the of X% on possible. was back the no, did off -- number lower the and much so that's previous range That the out of a come

reasonably So, and the we year-over-year bit push little momentum comp what got as there different But continue we'll pricing can. we've there's it in high to is here. a than as

Jerry Revich

is getting as operating lastly, Okay, and over a utilization I'm logistics in there fleet this fleet absorption you're here cadence the you done of you super. this benefits improve availability. standpoint, of heading have you're into work into plan? the 'XX, And wondering, based the peak year a year, folks fleet to lot for do more absorption from of time or course room the full heading on think season

Mark Irion

there's So, room improve. the time utilization shoulders, on to

as of You QX. we sort XXXX, even room had into there's again, get room growth based and into on It's absorption. QX shoulders you there's sort utilization record the it's year demand, QX for And then a of see that improvement strength in going in into this last QX, where utilization middle on in peak better and of year. volume the movement, and just and seasonality for in year,

Jerry Revich

Okay. appreciate I the discussion. Thanks.

Larry Silber

Thanks, Jerry.

Mark Irion

Jerry. Thanks,

Operator

our question. question go Fargo. from from comes And Please Seth Wells your Weber next ahead with

Seth Weber

cautious bit. incremental maybe a I Hey, make thanks the to want that a Mark, target I sure guess just year to for guys, ago? it function really getting question. REBITDA you're you I your drop-through the of taking that's environment, rate operating -- months for your doesn't given I on the rate like about little in just how reflect change rates, good you're on year where morning, just three relative the and the for more that outlook any make just want any to high. it sure sounds and not thinking you so were for in is expense pulled

Mark Irion

momentum rate, expectations mean balance and clearer I we -- I for -- the year. on I sort of No, of, rate couldn't think the be

this grow we growing. to quarter quarter-over-quarter So, it I've it we said already each year. twice continue And expect to it expect today,

good The is in XX environment rate momentum it's as rate. rate on And is years. we been the So, solid. as executing will continue

than can growth, and are of that sort there's driver, we flow-through our cost increases the so break initially of pressure I pressure. but impacting 'XX, Costs of at think, And on expected got sort than of that the We've the get sort XXXX like bullish are and anticipated. lot cost still to maintenance, long-range we target lines of the of if XX% looking volume in above as rate, down, them cost we're that's sort XX% sort down of wages flow-through sort of range you there less XX% a anyone So, less for as range. as is and are mostly we inflation but fuel, -- in there. and talking

Seth Weber

the balanced Right, just way thinking you is understood, fourth or year? -- or the okay, second or thanks. be there third towards second quarters be front-end quarter should think just supply it any And on lowest the and going to help are or the about we the quarter do I is of the any more cadence, CapEx, still then more spending about assume is XQ, spending keep -- the it'll quarter is loaded the then XQ, constraint same and

Larry Silber

Yes, basically out our let's fashion majority they with our We're as "Look, of distinct XXXX, taking of sort in XXXX. good QX XXXX, we And as they ready orders it take pace it continued them, this QX. We're will sort in it QX. we'll a available, that if didn't fleet as slow not it with And right. expectation the put prepared to commitment it, soon is like normally we Obviously, bigger our that take like our bulk last we growth have have question. for We our QX of in of to in QX the a we'll similar through year." XXXX soon and as sooner. get But vendors -- continue year, down as ready. it's in saying,

Seth Weber

the indication what that that to first they're relative to getting you the any able OEMs in from better, quarter? Okay. Have production that -- improve deliveries this gotten you is got

Aaron Birnbaum

Seth, is this Aaron.

said get, most the product often, XX delivering to vendor already the suppliers are that we late. although, we've part, it's days For our before as expected

expected finding others, but opportunities. was and Some fill kind what we're trouble able that than gap of out have nimble being other delivering more to OEMs

to continue of have we bit So, coming quarter through be and quarter, in quite a this a QX. fleet first should bigger than QX

Seth Weber

Okay, it. guys, appreciate thank I you.

Larry Silber

Seth. Thanks,

Operator

Please ahead comes Our question. from Bank of next your question Ross from with Gilardi America. go

Ross Gilardi

morning, Good guys. Thanks.

Larry Silber

Morning, Ross.

Aaron Birnbaum

Ross. Hey,

Ross Gilardi

much units? of initial up that do the due cutting cost the And disposals went million or Just then the on you mean, you are $XX I by guide, number back I the gross about at of to relative versus inflation net how just that mechanics in mean midpoint. to million your is expectations? think is CapEx $XX

Mark Irion

So, just a little hedge it's for expectations of out the or due of guess, really -- delivery. the mostly sort taking, of I bit it's

So, into expectations. the mean to amount they haven't from the our size our cost it's year in equipment -- expectation. minimal of we And fleet been of the really and the top, line with line. from went the planning changes coming to rental the fleet. gross any are sell I of maximize Sales the just

impact gross the over So, expectations. from from hedge most out our inflation no coming taking with just of of real lift the line

Ross Gilardi

infrastructure guess, up in our scheme million, earlier of do of fiscal Okay, scale end at got things. about big But, I number, in arrive $XX just CapEx a it And strategy -- or can to And to stimulus it's year? you you expect -- but more then, do talk to small advance a bit on it. U.S. the advance a it's event, expect equipment [Ph] little influence frontloading grand of in about this that it you enough XXXX the next year? of] any that starting infrastructure additional more number, [in the 'XX is

Larry Silber

and'XX. is the early, staging us orders think several been flowing years, making had last visibility committing, by we've say, front line, of we to securing I about down, those the for has Yes, so so our sure at and 'XX we're plenty as to locking the flowing, more and 'XX, sure in and it's that that give OEMs slots, production making the that ordering it for that of equipment continuing pattern equipment

Ross Gilardi

Larry. to latest Right forecast? think just equipment, Thanks. I wanted is increase from -- is then CapEx if on you it either wanted think And rent acquisition on around is but expectations? depreciation the from much increased by year-end your is by And thanks, And of rate now, I relative guidance of more much should OEC full-year? squeeze the in, of be on from where then number it's the and your run so, billion, for a that how you, fleet Okay, guide $X.X could we to where 'XX? on based verify initial how to EBITDA couple or just fleet

Mark Irion

volume in so M&A. up it of of went rent with you other range go just of whole equal and on we bottom a just a there's you, them And the the to the a also, and bigger midpoint, additional end, at of questions. if down over lifting messiness it's organic one year parts. of break the the sort of time? want in confidence then and midpoint So, Then into than you terms guess, contraction expectations if terms bunch bit of growth of with, in say, to sort sort of I organic range hit me to and Do equal M&A. guide, the growth whether the list what sort outlook, there's

Ross Gilardi

OEC And exit of what's the we on Mark, around it on depreciation rate end on $X.X forecast? based Is the your where on fleet latest billion be for year? the full-year? CapEx the at Yes, should

Mark Irion

that. at is of No, Yes. of the Okay. to depreciation. of end good, about Yes, the about sort the XX% good OEC in terms of average for OEC a right that's rate XX% and marker sort sorry on of year,

Ross Gilardi

you. thank Perfect,

Mark Irion

Thanks, Ross.

Operator

Wertheimer next with ahead comes Please Rob Melius. from Our question. go question from your

Larry Silber

Rob. Morning,

Rob Wertheimer

Well, thanks. everybody. morning, Good Hey.

So, guess lot inflation your for with with acquisitions, have growth guys incorporating and all investing business, et you the I some repairs, a Mark, the thanks mean, whole cetera, for on even obviously, the I comments. in fleet. going cost

cost. clean above it stripping kind -- if pure the below your or the stripping Are don't mentioned cost I a out to of, current inflation is You can, say just structure the on fuel pricing, you other your know out costs? just basis, able

Mark Irion

if context probably revenue at No. biggest in the the is the it look right, growth. sort you of mean, driver, of Well, XX% I rental volume

fuel And -- fuel it's guess So, in costs. in volume volume of the XX-XX unit and and talking but probably is to terms I driver. directly, biggest

So, the XX% wages in maintenance volume inflation not and XX% It's impact and costs. line it's fuel like significant is at significant expenses. but fuel, unit It's and items. of the most as the

Rob Wertheimer

and Maybe but Maybe inflation the percent pure rate wage that inflation cleanly, all the it I X-ish running right now? answers. other didn't rental ask Okay. is than maybe less

Mark Irion

No.

are running mostly mid-single wages expenses So, are maintenance volume. and overall digits,

So, sort big are of of the sort drivers -- you they that DOE. of

line biggest mostly delivery XX% got So, volume. sort expenses the the digit, next costs, item XX% volume, unit and wages, of there, are that's in and fuels is mid-single maintenance

Rob Wertheimer

the you when surcharge Okay, perfect. or minor all I then stop comment any price pricing increases. there. as guess have separate? of looks Two a And from do more, industry, kind you -- that Thank rental whether I'll fuel you. it's whatever, through one on rate if does just is regionals the come one; or is it And like following the industry in what

Mark Irion

across be not P&L, don't There's surcharges They rental yes, through at in the fuel across rate. pricing lift is if So, discipline of pricing. it the revenues through come board look factored rate looks focused a in the retail into our growth. an but there's overall do terms in come like the size, seems And board. country, on the across everybody to you

Rob Wertheimer

Perfect. Thank you.

Mark Irion

Sure.

Operator

And from Steven Please our Research. your next question. comes with from Thompson question Ramsey go ahead

Steven Ramsey

or delivery sure, Hey, to is in that QX QX end dig is CapEx, raising low QX? that just times good better morning. I on make and being delivery of the better Wanted to wanted in

Larry Silber

mentioned we 'XX. few than since as and been But delays, we've end like back ago, expectations, to in some QX what XX into That said, see that or continue just better were Well, now, maybe even the a experiencing little a we Aaron XX-day QX, deliveries delays. expected. minutes within 'XX, bit of

delivery a getting in the normal flow, the past, and bit. we are volume expected just We're even the more becoming quarter. a it's days little over So that we're of carrying being extended the though

So, higher QX. improve. and through the And QX that, in And better. we year, expect see, deliveries should on a target, of is it we volume as roll the will we maybe little deliveries obviously,

Steven Ramsey

the OEC, you XX% of equipment in range end And of expect is currently. range, FY break helpful. Okay, then that to of into XX% kind beyond? specialty that is Do within low 'XX? Or optimal target to nearing the that fleet,

Aaron Birnbaum

next months, the optimal break over we'll that median into think the I part XX range. to XX of

in We continue heavily very well. to perform it, and invest

Steven Ramsey

thing of Or helping and obviously, how and some your last season? pressured, changing utilization? are therefore then contractors long a And their into helpful. with is playing in this out materials staying challenges getting busy Okay, is labor Is that site, potentially projects on there for into the job done. dynamic me, visibility fleet the lack

Aaron Birnbaum

I out those big their mean tell. labor find jobs it's to able to to projects They're there. hard get started. There's

rigs going for it and some maybe them hard I to be get that to of the again. up, think back there's labor fires gas, it's kind oil to if sectors, going get

projects online. problem really to online, But business. it. vertical be they So haven't that business that if is we And It's coming are noticed coming of -- active. a they're might that there try expand

Steven Ramsey

you. Thank Helpful.

Operator

And Ken our from your with next question. Newman ahead KeyBanc. question comes from Please go

Ken Newman

for guys. taking morning, good Thanks Hey, question. the

Larry Silber

Hey, Ken.

Ken Newman

I to put a curious first to you in and to you leverage expect the quarter that costs. barring could on it year spike the SG&A I'm finer SG&A the leverage another the the wanted prior the rest return Just second levels, point quarter, if fuel into improve but year, of understand versus think

Mark Irion

not there's of SG&A. fuel So, in lot a

I as percentage of QX, quarter same the year, it see think just rates as in SG&A of a you'll and there. rental with is rental year, off as going where the through really leverage it driver the through cadence is that's So, percentage mean, quarters revenues get will highest -- in I not as a the you revenues will see you same increase a the the more the -- well, any of cadence going reduce of that.

conservative In of SG&A though. our terms really with of that's expectation That's We're being not sort an down we're Most flow-through, taking in on our flow-through. expectation. of driver. DOE

through simply, going to we get the So, XXXX. that year SG&A in more I answer leverage on will think

Ken Newman

the the utilization? positively, you've help kind about Can rate volumes Understood. pretty quarter of the going reasonable And it But first about you then quarter every I year-over-year expect improving spoken utilization year. is watermark It environment, that year. for think follow-up, like up remaining sounds -- of be think the how the is rest the the through dollar obviously, for thinking us you three to to for about quarters? just low you're my about dollar

Mark Irion

seven inflation I that your Yes, impacts if for going you about one fleet. years. We're it fleet holding no, mean Yes. year in, think of cost

the cost recover rate. to -- years any seven the increase got really we've with fleet So, of of

on not model. that's kind thing focus challenge, terms of having So a that's inflation-resistant and an key the in real really of to

back to that. the that's of sort this approach fleet, at good quarter's the I the in cost years got it, very doing shot So, think inflation we've way and to get seven and a

Ken Newman

Thanks. Understood.

Mark Irion

You got it.

Operator

from comes Baird. question next our Dobre Mig And from

Mig Dobre

Good you. everyone. Thank morning,

rental I year interpret think we're sure on clarification a to that progresses? are will we improving you rate When start continue comment, rates that? how rental year-over-year sequentially to meaning clear, about I'd that growth make Is the quick are you accelerate in just talking with just the Mark. that sequentially, were your earlier as to

Mark Irion

Yes.

increasing we forward sequential from growth I -- X.X% trend in going QX from implies XXXX. year-over-year got the through that each we've quarter increases. that to increasing looking are rate think And

Mig Dobre

exit into question, rental is it the Okay, I more commented as be fair progresses? the trends year the you comps or rate I'm see. then of that sort what And confidence north effects sustained you on, that 'XX again, X%? to curious comfort rates gives the that on base difficult maybe the to these of could as to can then earlier given an on be assume somewhere And

Mark Irion

at on ability quarter just X%. to haven't any history, rates, right. We've we sort look had you commentary raise got with of an each of when effect type rate our in base year-over-year X.X%, So, this it's environment. a in each what historically. doing we've forward we're going up in we're to more that's up so if quarter done heading towards then at environment And favorable it We're looking than saying

we'd improvement. X% to it certainly I there of reasonably desire sort at one the have far continue yes, of So end a into put rather as sort and -- by X% pushing just quarter, it out we than as There's higher go X.X% of think steady up something a we're not and can. in or a all looking year, we'll run that or really the

sort just accounts national modest we way manage work in a in of with environment Some competitive this to from a our where and relationship need coming of customers. is our manage this the and

modestly do not the the we our steadily of recover and year. we'll cost look but the And course we're and rates, advantage to looking take to gouge to business. through that in need So sort of

Mig Dobre

our clarification. to started at very and XX% fair, the clear that sounds change. pretty pretty slow, question But flow-through your on full-year you a thanks as we for And EBITDA, No, expectations. obviously, on were then

be type you cadence So how up I'm range the this Or of kind to XX-plus should of of the about second of Do fully curious a thinking quarter? back-half-loaded flow-through. as situation? we in more to is catch that this

Mark Irion

we've made, Yes, loaded, we've -- of a mean, it of portion with right. got is fixed see QX. that I you're higher that as in I build through. think leverage. is It's recurring just leveraging portion But we back-half A costs we a it just there's lumps this QX so in in that don't revenues investment

get the your XX% the obviously, make XX% have which XX% to will you year, up as flow-through. into in back-half sprint than in to and QX. improve leverage and XX% higher the it for So on revenue get be But, for the XX% get to quarters, more are to -- higher that to QX you QX,

Mig Dobre

Okay. and of But given thinking it's just considerable saying? cost, you're happening QX. than QX a that's what That's sequentially, be more everything improvement shouldn't we -- with

Mark Irion

the quarter year. That's Yes. steadily through -- each improvement

Mig Dobre

the through in terms cadence terms capital if deploying at looking the of and CapEx of intermediate low-end in also on at is term pretty longer months timeframe, Analyst obviously have a few infrastructure. to of by if question, you environment Day, I'm provided it, have gone clarity and my guess we how are Thank either you. or at sort at over serves might targets lastly, billion kind I CapEx have this shifted and then this, the thinking it's on And this more all? our high-end, has you billion you XXXX-XXXX the through memory $X $X.X of term are all here the changed curious demand the good, period, in

Mark Irion

So, that organic guidance was guidance, right. pretty much

those a stacks the increases so acquisitions M&A and as that So, that little take more capital, bit number. that M&A -- up, branches those

getting with more XXXX. expectations, but probably We our are in into line bullish XXXX

year. are in we that that the to extent looking the and will we confident last we put be capital and markets to think that the I out in cycle confident above So, end guidance spend over

Mig Dobre

thank Very helpful, you, guys.

Larry Silber

Thanks, Mig.

Operator

go John comes Northcoast. Healy ahead from your with next Please Our question from question.

John Healy

Thanks.

potentially questions of for about the rest me, a for into here, is XX% quarter a on it rate things; it know the this contribution is how that what acquisition quick this then the question, contribution number we I good there? the and acquisitions kind that the year, in side clarification better that you two the the about number of hoping that those year. to think Just proximity just the Is in of plus that's from or you is price, X% understand differently? X% from a do then, the based was could lying know, is guidance, just is different there was the And said of growth guide the QX. optimism revenue for for get or

Mark Irion

So, you Northcoast… undercover, Don from Wiley,

John Healy

I'm undercover. Yes,

Elizabeth Higashi

John. All right,

Mark Irion

You a pseudonym. are on

Elizabeth Higashi

We are wondering, John.

Mark Irion

it full So, guidance, expected, the John, the almost running is think XXX that I QX into for think, so of if you acquisition as year, -- last we into did right. the impact

expected and not And We has your larger rate. the did that closed the question? -- part the which other just acquisition of So, of listed they're on what -- the was most guidance, part to rise. the impact then, that's the Cloverdale yesterday, we

John Healy

Pricing.

Elizabeth Higashi

Rate?

Mark Irion

pricing guidance. grow we more so quarter X.X% Pricing, yes, so rate have into our do in got X.X% We're every saying to we we this QX. that are going year, than affected

John Healy

fleets, pipeline wanting we on interpret things, of should same you talking would optimism M&A there, side. side the level that guys get to M&A the on just how obviously characterize then, And and Okay. enthusiasm of the you are about more

the you year, kind things properties of rest the of of take closing So, horizon like more some maybe it? sort for of going are the is level and to the are there time out quarter you on or

Mark Irion

and John, robust in do top product want markets smaller in of are larger and we pipeline fairly No, focus that XX both and strategically have located to in what lines MSAs. we our a acquisitions, on

path continue a robust same and early along QX and we the that funnel, it's So, we in hope to demonstrated QX.

John Healy

to Great, look Thanks, forward guys. it.

Mark Irion

Thanks, John.

Elizabeth Higashi

for I think question. we more have one time

Operator

Fisher your from with go ahead final question comes Please question. our And Steven today UBS. from

Steven Fisher

questions. the taking for thanks Great,

Ross in don't because you to say, of no or suppliers for your you already that purchases, fleet is just further this surcharge agreements in requests know, expect "Hey, last the or have curious, you that your mentioned think there this to earlier year, no year any after major you I sort increases pricing to are that thanks, we inflation are able that from year?" agreements our is just the change

Larry Silber

did And said, had you any around some less of as a and based has. we for that, on very vast have suppliers minimal those consideration requests suppliers some know, costs. have happen, But you some or if I the one years earlier, be that. seven of than suppliers that less know, the not Well, say, would surcharges diminish we few, would incremental Mark see part XX% have most handful been to We've from to, I and anything majority, recover we avoid requested surcharge, of would like than handful our for mentioned costs. able

have and factor, minimal. small very been been those that have requested a it's So,

Mark Irion

The forward. made the the line comment cost, I We fleet expected. in with was going in with QX the that inflation do we the was that line received pricing, cost inflation in we expect what was

over on there will going quarter additional So, we've inflation the what first be been into that 'XX in fleet cost 'XX. of paying

Steven Fisher

cost in, think Okay, March being actually the actually pricing that's through to than catch ability is fuel helpful. sort on or of for ahead up, going dollar you step up March, February dollar up on costs margin increases, end less forward, where sort and to And you that get offset I of mentioned the are you that in fuel going dollar a QX, a dollar that? pricing for and then, say, generate can just of what just

Mark Irion

are you -- customers don't the with charge fuel QX. or so on we we the the comeback about if burn, unusual charge, So, like, charge marginal fuel in don't recovered that's in

the -- a QX, in the charge late increase in base. get went from impact surcharge don't fuel of that will we the unit So, and our dollar of terms will into of really through, for the don't dollar we no, we flow which in we burn benefit every that but really after quarter, get going cost

Steven Fisher

Thank you very much.

Larry Silber

you. Thank

Operator

Elizabeth we the gentlemen, the end I turn call ladies would time remarks. of conference for today's any at back reached And session. Higashi to have and this over like question-and-answer closing to

Elizabeth Higashi

Jamie, and us you joining you, thank on for the Thank everyone call today.

questions all please forward me to have give you we As soon. seeing if further a call. you any to don't Thank look always, you. And hesitate

Operator

gentlemen, and We conference conclude Ladies this thank today's for you call. with will that, do us morning. we joining

disconnect now lines. may You your

Herc (HRI) 21 Apr 222022 Q1 Earnings call transcript