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Herc Holdings Inc (HRI) Q4 2024 Earnings Call Highlights: Record Growth Amid Market Challenges

In This Article:

  • Equipment Rental Revenue: Increased 11.5% year over year for the fourth quarter.

  • Net Income: Full year net income of $7.40 per diluted share, impacted by Cinelease asset valuation adjustments.

  • Adjusted EPS: $12.88 per share, up about 5% over last year.

  • Adjusted EBITDA: Increased 14.7% to a record $438 million for the fourth quarter.

  • Adjusted EBITDA Margin: Nearly 49% for the fourth quarter.

  • Rental Revenue Growth: 12.2% increase in the fourth quarter.

  • ROIC: Declined 120 basis points to 10.1% at the end of 2024.

  • Fleet CapEx: Total fleet is now a record $7 billion as of December 31, 2024.

  • Free Cash Flow: $314 million in 2024.

  • Dividend: Increased 5% to $2.80 per share annually.

  • 2025 Guidance: Rental revenue growth of 4% to 6%; Adjusted EBITDA between $1.575 billion and $1.65 billion.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Herc Holdings Inc (NYSE:HRI) achieved record-level results across key financial metrics and growth strategies in 2024.

  • The company opened 23 Greenfield branches and added 28 locations through nine acquisitions, enhancing market share and revenue efficiencies.

  • Specialty fleet CapEx was increased to capture share of wallet opportunities and support mega projects.

  • Herc Holdings Inc (NYSE:HRI) reported an 11% increase in equipment rental revenue, outpacing fleet growth for greater asset efficiency.

  • The company maintained a strong balance sheet with a leverage ratio well within its charter range, supporting future growth opportunities.

Negative Points

  • Net income was impacted by an adjustment to the fair market value of the Cinelease business due to a slower recovery in the studio entertainment industry.

  • The local market slowdown and inefficiencies from new acquisitions and greenfields affected fleet efficiency and dollar utilization.

  • Higher interest expenses related to increased borrowings for acquisitions and rental equipment investments impacted net income.

  • The company anticipates being a federal cash taxpayer in 2025, which will affect free cash flow.

  • Persistent weakness in interest rate-sensitive local markets is expected to continue, posing challenges to growth.

Q & A Highlights

Q: Can you explain the discrepancy between the rental revenue outlook and the EBITDA outlook? A: Mark Humphrey, CFO, explained that the rental revenue is projected to grow 4% to 6%, but total revenue growth is slower due to expectations around used equipment sales. The EBITDA margin is being defended across the board, with expectations for used equipment sales impacting the adjusted EBITDA growth perspective.