Herc Q1 Earnings Beat As Higher Rental Rates Offset Inflationary Pressures

Herc Holdings Inc HRI reported first quarter 2023 revenue growth of 30% Y/Y to $740 million, beating the consensus of $732.8 million.
Equipment rental revenue increased 24% Y/Y to $654 million, reflecting favorable pricing of 7.0% Y/Y and higher volumes of 23.2% Y/Y.
Selling, general and administrative expenses rose 19% Y/Y to $106 million due to higher selling expenses, including higher commissions and other variable compensation and payroll and benefits.
Adjusted EBITDA rose to $308 million, with margins decreasing 10 basis points Y/Y to 41.6%. While sales of used equipment more than doubled Y/Y, studio entertainment revenue declined compared to the year-ago quarter.
Cash and equivalents totaled $40 million as of March 31, 2023.
Adjusted EPS of $2.35 beat the analyst consensus of $2.14.
Net Rental equipment capital expenditure stood at $283 million versus $258 million a year ago.
As of Q1-end, total fleet was around $5.9 billion at original equipment cost (OEC), with average fleet at OEC increasing 29% Y/Y.
HRI repurchased shares worth $52 million in Q1 2023, with around $229 million remaining under the share repurchase program at the end of the quarter.
Outlook: HRI reiterated its guidance for 2023 adjusted EBITDA at $1.45 billion - $1.55 billion and net rental equipment capital expenditures of $1.0 billion - $1.2 billion.
"Higher rental rates are more than offsetting inflation, while demand across regions and in our end markets is seasonally strong, benefiting from the multi-year fiscal stimulus, re-shoring and mega projects, as well as long-term industrial maintenance contracts for on-site fleet management." said Larry Silber, President and CEO.
Price Action: HRI shares traded lower by 3.34% at $107.22 on the last check Thursday.

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