HERC HOLDINGS INC. AND SUBSIDIARIES FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024

Press release·03/02/2025 12:56:11

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Herc Holdings Inc. (HRI) filed its annual report for the fiscal year ended December 31, 2024, with the Securities and Exchange Commission. The company reported total revenues of $2.43 billion, a 10% increase from the previous year. Net income was $143.4 million, a 15% increase from the previous year. The company’s gross profit margin was 24.1%, and its operating margin was 12.1%. As of December 31, 2024, the company had cash and cash equivalents of $1.23 billion and total debt of $2.45 billion. The company’s market value was $3.35 billion as of June 28, 2024. The report also includes information on the company’s executive compensation, corporate governance, and other matters.

Overview of HERC Holdings’ Business and Financial Performance in 2024

HERC Holdings is primarily engaged in the equipment rental business, with additional revenue streams from sales of rental equipment, new equipment, parts and supplies, as well as service and other revenue. The company’s profitability is dependent on the volume, mix and pricing of rental transactions, as well as the utilization of its equipment fleet.

In 2024, HERC Holdings delivered strong financial results, with equipment rental revenue increasing 11% to $3.2 billion. This was driven by a 9.3% increase in the volume of equipment on rent and 3.2% positive pricing. The company continued to execute on initiatives to increase margins and utilization across its operations.

HERC Holdings invested significantly in its rental equipment fleet in 2024, adding strategically to meet customer demand and position the business for future growth. The company also completed 9 acquisitions, adding 28 branches, and opened 23 new greenfield locations to expand its geographic footprint and serve both local and national customers.

Supporting the company’s financial flexibility, HERC Holdings issued $800 million of senior unsecured notes due 2029, allowing it to pay down a portion of its senior secured asset-based revolving credit facility. This increased the company’s available liquidity to over $1.8 billion at the end of 2024. HERC Holdings also amended and extended its accounts receivable securitization facility, increasing the aggregate commitments to $400 million.

Despite the strong operational performance, HERC Holdings’ net income declined 39% to $211 million in 2024. This was primarily due to a $194 million loss on assets held for sale related to the planned divestiture of the company’s Cinelease studio equipment rental business.

Revenue and Profit Trends

HERC Holdings’ total revenues increased 9% in 2024 to $3.568 billion, driven by the 11% growth in equipment rental revenue. Sales of rental equipment declined 10% to $311 million, as the company continued to sell equipment as part of its fleet rotation strategy. Sales of new equipment, parts and supplies, as well as service and other revenue, remained relatively flat year-over-year.

On the expense side, direct operating expenses increased 13% to $1.291 billion, outpacing the 11% growth in equipment rental revenue. This was primarily due to increases in personnel-related expenses, facilities costs, self-insurance reserves, maintenance, re-rent, and delivery expenses to support the company’s growth initiatives and expanded operations.

Depreciation of rental equipment rose 6% to $679 million, in line with the increase in the average fleet size. Non-rental depreciation and amortization also increased 13% to $127 million, mainly due to amortization of intangible assets related to acquisitions.

Selling, general and administrative (SG&A) expenses increased 7% to $480 million, but declined as a percentage of equipment rental revenue from 15.6% in 2023 to 15.1% in 2024, reflecting the company’s focus on improving operating leverage.

Interest expense, net increased 16% to $260 million, driven by higher average debt levels to fund acquisitions and rental equipment investments.

The company recorded a $194 million loss on assets held for sale related to the planned divestiture of its Cinelease business. This, combined with a higher effective tax rate of 27% in 2024 compared to 22% in 2023, contributed to a 39% decline in net income to $211 million.

Strengths, Weaknesses, and Outlook

HERC Holdings’ key strengths include its diversified customer base across various industries and project types, which has helped the company navigate the elevated interest rate environment. The company’s strategic investments in its rental equipment fleet, acquisitions, and greenfield expansions have positioned it for continued growth.

However, the company’s profitability was impacted by the planned divestiture of Cinelease, as well as higher direct operating expenses and interest costs. The effective tax rate also increased, putting pressure on the bottom line.

Looking ahead, HERC Holdings’ management remains optimistic about the operating environment for equipment rental companies, citing continued strength in economic activity. The company’s focus on improving margins and utilization, along with its financial flexibility and liquidity, should support its ability to navigate any potential market challenges.

The planned sale of Cinelease, if completed as expected in 2025, will allow HERC Holdings to focus on its core equipment rental business and potentially redeploy capital to further strengthen its position in the market. The company’s ongoing investments in its rental fleet, acquisitions, and greenfield expansions are expected to drive future growth and enhance its competitive positioning.

Overall, HERC Holdings’ 2024 financial performance demonstrates the resilience of its business model and the company’s ability to execute on its strategic priorities, despite the impact of the Cinelease divestiture. With a strong liquidity position and a favorable industry outlook, HERC Holdings appears well-positioned to continue delivering value for its shareholders.