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HERC HOLDINGS INC (HRI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered record equipment rental revenue ($0.839B, +12% YoY) and total revenues ($0.951B, +14% YoY), with adjusted EBITDA up 15% to $0.438B and margin steady at 46.1%; reported net loss of $46M (-$1.62 diluted EPS) was driven by a $194M loss on Cinelease assets held for sale .
  • Pricing remained positive (+2.1% YoY) while dollar utilization ticked down to 40.6%; management cited local-market softness from higher-for-longer rates and strong national mega project activity as mix drivers .
  • 2025 guidance (ex-Cinelease): equipment rental revenue growth +4–6%, adjusted EBITDA $1.575–$1.650B, net rental capex $0.4–$0.6B, gross capex $0.7–$0.9B; tax rate ~25%, with the company becoming a cash taxpayer for the first time .
  • Near-term catalysts: ongoing Cinelease sale process (expected 2025), dividend raised 5% to $2.80 annualized ($0.70/qtr), and announced definitive agreement to acquire H&E Equipment Services (synergies ~$300M EBITDA, scale uplift) — all likely to shape narrative and estimates trajectory .

What Went Well and What Went Wrong

  • What Went Well

    • Record Q4 and FY revenue with margin resilience: adjusted EBITDA rose to $438M with 46.1% margin despite mixed environment .
    • Strong national mega projects and specialty cross-sell supported double-digit rental revenue growth; management expects outsized share again in 2025 (“early to middle innings” across LNG, data centers, semis) .
    • Operating leverage in SG&A and disciplined cost actions preserved profitability; SG&A fell to 14.5% of rental revenue vs 15.5% YoY in Q4 .

  • What Went Wrong

    • Reported net loss (-$46M) on $194M Cinelease assets held-for-sale charge; tax provision impacted by non-deductible goodwill impairment .
    • Local-market growth decelerated (rate-sensitive), pressuring dollar utilization and incremental margins from new acquisitions/greenfields; lower proceeds on Q4 disposals also weighed .
    • Interest expense rose to $67M in Q4 (+$5M YoY) on higher average debt balances to fund acquisitions and fleet investment .

Financial Results

MetricQ1 2024Q2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$804 $848 $965 $951
Equipment Rental Revenue ($USD Millions)$719 $765 $866 $839
Diluted EPS ($USD)$2.29 $2.46 $4.28 $(1.62)
Adjusted EPS ($USD)$2.36 $2.60 $4.35 $3.58
Adjusted EBITDA ($USD Millions)$339 $360 $446 $438
Adjusted EBITDA Margin (%)42.2% 42.5% 46.2% 46.1%
REBITDA ($USD Millions)$313 $336 $428 $406
REBITDA Margin (%)43.1% 43.5% 48.9% 48.0%

Revenue components (mix and segment detail):

Revenue Components ($USD Millions)Q1 2024Q2 2024Q3 2024Q4 2024
Equipment Rental$719 $765 $866 $839
Sales of Rental Equipment$69 $65 $81 $96
Sales of New Equipment, Parts & Supplies$9 $10 $9 $9
Service and Other Revenue$7 $8 $9 $7
Total Revenues$804 $848 $965 $951

KPIs and operating metrics:

KPIQ1 2024Q2 2024Q3 2024Q4 2024
Dollar Utilization (%)39.7% 41.0% 42.2% 40.6%
Rental Pricing YoY (%)+5.1% +3.5% +2.3% +2.1%
Average Fleet OEC YoY (%)+10.1% +8% +12% +13%
Average Fleet Age (months)47 47 46 46
Net Debt ($USD Billions)$3.710$3.822$4.049$4.015

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Equipment Rental Revenue Growth (ex-Cinelease)FY 2024+7% to +10% (Apr) → +9.5% to +11% (Oct) N/A (FY24 delivered)Raised during FY24; delivered +11% FY
Adjusted EBITDA (ex-Cinelease)FY 2024$1.55B–$1.60B (affirmed in Apr & Jul) N/A (FY24 delivered $1.583B) Maintained; delivered near top-end
Net Rental Equipment CapexFY 2024$0.5B–$0.7B (Apr) → $0.65B–$0.7B (Oct, after gross $0.95B–$1.0B) FY 2025: $0.4B–$0.6B Lowered for FY25 vs FY24
Gross CapexFY 2024$0.75B–$1.0B (Apr) → $0.95B–$1.0B (Oct) FY 2025: $0.7B–$0.9B Lowered for FY25
Equipment Rental Revenue Growth (ex-Cinelease)FY 2025N/A+4% to +6% New FY25 guidance
Adjusted EBITDA (ex-Cinelease)FY 2025N/A$1.575B–$1.650B New FY25 guidance
Tax RateFY 2025~25% (FY24 assumption) ~25%; first-time cash taxpayer Maintained; new cash tax headwind
DividendOngoing$0.665 per share (paid Dec 27, 2024) $0.70 per share (5% increase; payable Mar 4, 2025), $2.80 annualized Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Mega projects & national accountsQ2: Mega ramp into peak season; acquisitions offset local slowdown . Q3: robust mega growth, outpaced industry .Expect outsized share in LNG/data centers/semis; normalized cadence in 2025 .Strengthening, more normalized cadence in 2025
Local-market softness & ratesQ2: deceleration in local growth; cost actions taken . Q3: rate-sensitive local starts remain challenging .Higher-for-longer continues to pressure local markets; Fed cuts needed for ramp .Still soft until rates ease
Pricing disclosureNot a focus previously.Ceasing specific rate reporting; directional “positive price” assumed .Policy change; competitive positioning
Specialty mix & cross-sellQ2/Q3: specialty drove stronger growth, trench acquisitions and cross-sell .2025 buy weighted a bit more to specialty; continued specialty opportunity .Increasing specialty contribution
Used equipment disposalsQ2: margin reduced on sales; shift to higher-return channels . Q3: higher proceeds YoY .Continue shift to retail/wholesale channels; proceeds normalized in Q4 .Normalizing, channel mix improving
Fleet efficiency & dollar utilizationQ2: internal transfers to growth regions; DOEs elevated .Aim to hold dollar utilization; fleet efficiency embedded in guide .Focused on optimization
Tax cash payerN/A.Becoming cash taxpayer in 2025; >$100M cash tax headwind .New headwind vs 2024

Management Commentary

  • “In 2024, despite a more challenging market than anticipated, we delivered another year of record results… leveraged tenured customer relationships… strategic capital-allocation priorities… diversified position across products, geographies and end markets.” — Larry Silber, CEO .
  • “For 2025, we’re seeing continued strength… mega projects in LNG, data centers, semiconductors, along with strength in health care, education and infrastructure… should more than offset persistent weakness in interest rate sensitive local markets.” — Larry Silber, CEO .
  • “Adjusted EBITDA increased 13.2% [ex-Cinelease]… margin benefited from favorable direct operating and SG&A expense management, but was impacted by slower local market, less efficient new acquisitions/greenfields, and lower proceeds on disposals.” — Mark Humphrey, CFO .
  • “We will be less directional from a pricing perspective going forward… expectation is positive price for 2025.” — Mark Humphrey, CFO .

Q&A Highlights

  • Estimates vs EBITDA bridge: EBITDA growth guided below rental revenue due to assumptions on used equipment disposals and total revenue mix; defending REBITDA margin across range .
  • Pricing disclosure change: Company will no longer report specific rate metrics; directional positive pricing embedded .
  • M&A pipeline: Robust and opportunistic; disciplined fit across culture/geography; continued market consolidation; specialty multiples higher .
  • Cash taxes: Expect to be a federal cash taxpayer in 2025 (new >$100M cash use), impacting free cash flow modeling .
  • Local markets and rates: Visibility remains limited; Fed rate cuts likely needed to reaccelerate local activity .
  • Industry capacity: Management does not view industry as over-fleeted; discipline observed in rates/disposals; 2025 fleet guide reflects digesting acquired fleet .

Estimates Context

  • We attempted to retrieve S&P Global consensus EPS, revenue, and EBITDA estimates; data were unavailable due to an SPGI daily request limit. As a result, we cannot quantify HRI’s Q4 beats/misses versus Wall Street consensus in this recap [functions.GetEstimates error].
  • Given adjusted EPS of $3.58 and adjusted EBITDA of $438M in Q4, combined with FY25 guidance implying slower rental revenue growth vs FY24, we expect analysts to refine models for lower capex, cash tax onset, and margin trajectory (directional view only) .

Key Takeaways for Investors

  • Q4 was operationally strong on an adjusted basis (revenue +14% YoY, adj. EBITDA +15%), but reported results were overshadowed by the $194M Cinelease impairment; core margin resilience remains intact .
  • 2025 guide implies moderation (rental +4–6%) with margin preservation, lower net fleet capex, and a shift toward specialty; expect FCF support but a new cash tax headwind .
  • Narrative levers: mega project pipeline and national accounts remain robust; local markets likely need rate cuts to reaccelerate; pricing disclosure change reduces external visibility on rate metrics but management signals positive price .
  • Ongoing Cinelease sale (expected 2025) and a 5% dividend increase provide support; the H&E acquisition (definitive agreement) adds scale, ~$300M EBITDA synergies and potential re-rating over time (subject to close) .
  • Watch dollar utilization and proceeds/mix on disposals; sequential margin drivers hinge on fleet optimization and maturation of 2024 acquisitions/greenfields .
  • Balance sheet/liquidity remain solid (net leverage 2.5x at YE, ~$1.9B liquidity), providing optionality for disciplined growth initiatives .