Herc Holdings Reports Record Revenue and EBITDA in Q3 2023

Positive Third Quarter Results Drive Herc Holdings to Explore Cinelease Alternatives

Herc Holdings announced its impressive third quarter results in the 2023 earnings call. The company experienced record-breaking performance, attributed to increased rental rates and volume growth. Total revenue reached an all-time high of $3.072 billion, with adjusted EBITDA also setting a record. Herc Holdings plans to consider alternatives for its studio entertainment business, Cinelease.

Herc Rentals Expands Network and Overcomes Supply Chain Challenges

Herc Rentals added eight new locations and made significant acquisitions in Southern California and Houston.
Despite supply chain challenges, the company remains confident in its fleet planning for 2024.
Herc Holdings adjusted its fleet investments and disposals to meet demand, resulting in $124 million worth of used fleet sales.

Rapid Revenue Growth and Stellar Financial Performance

Herc Holdings experienced robust revenue growth from both local and national accounts in Q3 2023.
The company expects to sell approximately $800 million of fleet by the end of the year.
Herc Holdings achieved a record adjusted EBITDA margin of 49.3% and a 12% growth in net income in the quarter.
The company revised its adjusted EBITDA forecast range for 2023 to $1.45 billion to $1.5 billion, indicating growth of 18% to 22%.
Herc Holdings anticipates the next three periods to be the strongest in the industry’s history, with $306 billion worth of nonresidential infrastructure projects planned for 2023.

Optimism for Future Growth and Capital Allocation Strategy

Herc Holdings continues to capitalize on a burgeoning large project pipeline, expecting to secure a significant share of the market’s growth. The company operates with a significant debt burden but has been aggressively buying back shares. Despite performance impacts due to labor strikes at Cinelease, particularly in the Studio Entertainment sector, Herc Holdings expects minimal impact on Q4 results.

In Q3, 58% of rental revenue came from local accounts, while 36% was associated with non-residential construction. Herc Holdings has revised its adjusted EBITDA forecast range for 2023, projecting continued growth. The company will outline new guideposts for future growth during its Investor Day on November 2nd.

Herc Holdings expects to benefit from a robust pipeline of nonresidential infrastructure projects in 2023, supported by federal funds. Despite a slight anticipated decrease in dollar utilization in Q4 2023 due to the impact of studio entertainment and the absence of significant weather events, demand remains strong across both local and national accounts. The company is also considering divesting its Cinelease business, expecting strong demand for it.

The company’s capital allocation strategy for the coming year is still under review, with more details to be provided at their Investor Day on November 2. Herc Holdings projects industry growth of around 10.5% in 2023 and mid-single digits in 2024, aiming to outperform the market. As per InvestingPro Data, the company has a market cap of $2.920 billion and a P/E ratio of 8.41, indicating it’s trading at a low earnings multiple.

This article offers valuable insights into Herc Holdings’ record-breaking Q3 2023 results, its plans to explore alternatives for Cinelease, and its optimism for future growth.