On February 13, 2024, Herc Holdings Inc (NYSE:HRI) revealed its financial performance for the fourth quarter and full year of 2023, reporting mixed results. While the company achieved record total revenues for both periods, net income for the fourth quarter experienced a decline.
Herc Holdings, a leading equipment rental firm in North America, showcased its position as the third-largest equipment rental company in the region with a 4% market share. Its fleet size, valued at $6.2 billion, caters to various sectors, including construction, environmental, industrial, and entertainment. With a history spanning over 50 years, Herc Holdings has expanded its offerings to include specialty items and long-term rentals, particularly for industrial customers.
In the fourth quarter, Herc Holdings saw a 6% increase in total revenues, reaching $831 million. This growth was primarily driven by a 5.8% year-over-year increase in rental pricing and a 9.4% increase in volume. However, the company experienced a 7% decline in net income for the quarter, amounting to $91 million or $3.20 per diluted share. This decrease can be attributed to a decline in the studio entertainment business and higher interest expenses. Adjusted EBITDA for the quarter grew by 6% to $382 million, maintaining a margin of 46.0%.
For the full year, Herc Holdings reported a significant increase in total revenues, rising by 20% to $3,282 million. Net income also saw a growth of 5% to $347 million or $12.09 per diluted share. The adjusted EBITDA for the year increased by 18% to $1,452 million, although the adjusted EBITDA margin slightly decreased to 44.2% from 44.8% in the prior year. This overall performance demonstrates the company’s ability to manage inflationary pressures and maintain cost discipline while investing in growth.
Herc Holdings’ achievements in terms of revenue growth and adjusted EBITDA highlight its competitive position in the Business Services industry. Rental pricing strategies and expansion through mergers and acquisitions (M&A) and greenfield openings have contributed significantly to its revenue growth. Throughout 2023, the company successfully added 42 new locations through these initiatives.
Furthermore, Herc Holdings has exhibited disciplined capital management by implementing a share repurchase program. In 2023, approximately 1.1 million shares were bought back, reinforcing the company’s commitment to returning value to its shareholders. Additionally, Herc Holdings increased its quarterly dividend by 5% to $0.665 per share.
Looking ahead to 2024, the company projects organic rental-revenue growth of 7-10% and a year-over-year increase in adjusted EBITDA of 6-9%. It is important to note that these forecasts exclude Herc Holdings’ Cinelease studio entertainment business, which is currently being held for sale. The projected outlook reflects the company’s confidence in its strategic priorities and its ability to capitalize on the anticipated higher construction spending.
In conclusion, Herc Holdings Inc’s financial results for the fourth quarter of 2023 demonstrate its resilience in a challenging environment. With its strong revenue performance, strategic growth initiatives, and commitment to cost management, Herc Holdings is ready to continue creating value for its stakeholders.
