Herc hits records but lowers CapEx
24 October 2023
Herc Rentals has reported record total revenues of $908 million for its 2023 third quarter that ended Sept. 30, representing an increase of 18% year-over-year. Equipment rental revenue was $765 million and total revenues were $908 million in the third quarter of 2023, compared to $706 million and $745 million, respectively, for the same period last year.
“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,” said Larry Silber, president and chief executive officer. “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.”
As of Sept. 30, Herc’s total fleet value was approximately worth $6.2 billion at original equipment cost (OEC,) and in the third quarter, the company’s fleet at OEC increased 19% compared to the same period last year. Average fleet age, according to the company, was 45 months, which is down compared to Q2’s age of 49 months.
“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,” added Silber.
Despite the results and returns, Herc has lowered its net rental CapEx guidance by -8.33% to $1.0 to $1.1 billion from its original guidance of $1.0 to $1.2 billion. The decrease is due in large part to the entertainment industry’s shift from studio leasing and renting to direct ownership, said Herc, which supplies lighting and grip equipment rentals through its Cinelease Studio Entertainment business.
Herc acquired Cinelease in 2012. Today, lighting and grip equipment represents ~5% of Herc OEC. Studio entertainment, meanwile, represented 1% of rental revenue in 2023 Q3 compared to 5% for the same period last year.
“Today, we also are announcing that we will begin exploring strategic alternatives for Cinelease, our studio management and lighting and grip equipment rental business. 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,” said Silber.
The company also announced it made two acquisitions in Q3, adding four greenfield locations. Year to date, Herc Rentals has invested $332 million on a total of eight acquisitions, adding a total of 14 locations. Most recently, Herc purchased Rental Equipment Center in Colorado.
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