Herc Holdings Q2 2020 Earnings Report
Key Takeaways
Herc Holdings reported a decrease in equipment rental revenue and total revenues for Q2 2020 compared to the previous year, primarily due to the impact of COVID-19. However, the company improved its adjusted EBITDA margin through cost control initiatives.
Equipment rental revenue declined by 19.6% to $327.6 million due to lower volume.
Total revenues decreased to $368.0 million, driven by lower equipment rental and sales revenue.
Adjusted EBITDA margin improved by 380 basis points to 40.6% due to cost control measures.
The company issues 2020 adjusted EBITDA guidance of $625 million to $650 million
Herc Holdings
Herc Holdings
Herc Holdings Revenue by Segment
Forward Guidance
Herc Holdings anticipates a decline in the volume of fleet on rent and equipment rental revenue in the second half of 2020, but maintains its adjusted EBITDA guidance.
Positive Outlook
- Construction and business activity began to improve in early June and continues to trend slowly upward.
- The company has managed its costs and taken steps to substantially reduce its capital expenditures to conserve capital.
- Herc Holdings generated free cash flow of approximately $179 million in the first half of 2020.
- As of June 30, 2020, the company had ample liquidity of $1.2 billion.
- The company leadership team's experience contributed to better than anticipated second quarter operating results
Challenges Ahead
- Future business conditions related to COVID-19 are uncertain.
- The company estimates the volume of fleet on rent in the second half is likely to decline approximately 8% to 13% year-over-year.
- The company estimates equipment rental revenue in the second half will be down about 10% to 15% year-over-year.
- Lower base going into the balance of the year
- The typical seasonal ramp is starting from a lower base going into the balance of the year.
Revenue & Expenses
Visualization of income flow from segment revenue to net income