Herc Rentals posted $908 million in total revenues for the third quarter of 2023, compared to $745 million for the third quarter of 2022, a 21.9-percent year-over-year increase. Equipment rental revenue was $765 million compared to $706 million last year, an 8.3-percent rise. Sales of used rental equipment increased nearly 600 percent, from $21 million in last year’s third to $124 million this year, resulting from the return to more normal fleet rotation as deliveries have become more predictable in some categories of equipment. Sales of new equipment increased 10 percent, from $10 million to $11 million.
In the third quarter, Herc reported net income of $113 million, or $3.96 per diluted share, an increase of 18 percent compared to $101 million, or $3.36 per diluted share.
Dollar utilization was 42.1 percent compared to 45.3 percent in the prior-year period. A slowdown in the studio entertainment business as a result of labor disruptions contributed to 2 percent of the change, as has continued supply chain challenges in some categories of equipment that have disrupted the normal cadence of deliveries.
Herc had a positive rental rate growth of 6.9 percent during the quarter.
“We continued to leverage our core strengths in market coverage, fleet management, pricing discipline and a best-in-class team to deliver double-digit revenue and adjusted EBITDA growth in the third quarter,” said Larry Silber, president and CEO. “Over the course of the quarter, we also successfully rebalanced our fleet after a wave of back-ordered supply was delivered in the first half of the year. And, with the health of the supply chain improving, we were able to accelerate used-fleet sales after two years to refresh our offering and make way for the new equipment.
“Continued investments in our premium fleet offering, strategic acquisitions and advanced technologies, along with robust demand across key end markets and a focus on cost discipline are driving the momentum in our business and will support sustainable, profitable growth over the long term."
Silber announced possible changes in the studio equipment rental business.
"Today, we also are announcing that we will begin exploring strategic alternatives for Cinelease, our studio management and lighting and grip equipment rental business,” Silber said. “This decision was made due to the changing dynamics for lighting and grip rental providers in the film and studio entertainment industry, which has shifted to requiring significant capital investment in studios. For Herc to allocate capital for growth in this new real estate-focused business model would be a divergence from our stated strategy."
Adjusted EBITDA increased 19 percent to $410 million compared to $345 million in the year-ago period, and adjusted EBITDA margin was 45.2 percent compared to 46.3 percent in the prior-year period. Margin performance was impacted by a decline in Herc’s studio entertainment revenue year over year, as well as a significant increase in sales of used equipment.
Fleet gets younger
As of September 30, 2023, the company's total fleet was approximately $6.2 billion at OEC. Average fleet at OEC in the third quarter increased 19 percent compared to the prior-year period and increased 24 percent year-to-date. Average fleet age was 45 months as of September 30, 2023, compared to 49 months in the comparable prior-year period as improved delivery cycles enabled Herc to lower its fleet age.
Herc completed eight acquisitions with a total of 14 locations and opened 13 new greenfield locations through the end of the third quarter of 2023.
For the first nine months of 2023, Herc posted total revenues of $2,450 million compared to $1,953 million, a 25.4-percent increase. Equipment rental revenue for the first nine months totaled $2,121 million, compared to $1,838 million, a 15.4-percent uptick. Also, for the nine-month period, sales of rental equipment increased nearly 400 percent, jumping from $68 million to $278 million year over year.
Herc Rentals, No 3 on the RER 100, is headquartered in Bonita Springs, Fla.