Herc Holdings Inc. announced financial results for the quarter ended March 31, 2017, reporting equipment rental revenues were $320.6 million and total revenues were $389.4 million in the first quarter of 2017, up from $307.8 million and $365.6 million, respectively, for the same period last year.
The Company reported a net loss of $39.2 million, or $1.39 per diluted share, in the first quarter of 2017, compared to a net loss of $1.5 million, or $0.05 per diluted share, for the same period last year.
Equipment rental revenues increased 4.2% and pricing improved 1.1% in the first quarter of 2017 compared to the prior year period. Rental revenues in key markets, excluding currency, increased 8.5% and pricing improved 1.7%, compared to the first quarter 2016. The first quarter net loss reflected an increase of $31.3 million in interest expense related to debt issued in June 2016, stand-alone public company and other costs, and continued weakness in upstream oil and gas markets.
"Our revenues and pricing were strong in the first quarter despite the industry's normal seasonality and continuing headwinds in upstream oil and gas," said Larry Silber, president and chief executive officer. "Rental revenue growth in key markets was particularly robust, and we remain confident in our strategy. The continuing progress we are making in expanding our customer base and increasing revenue in key markets was offset by the impact of stand-alone public company costs, certain business transformation and other costs, and investments in our sales organization and branch operations.
"Our strategy is on track as we continue to shift our fleet mix to include a greater variety of higher dollar utilization fleet. In addition, net fleet capital expenditures reflect our disciplined approach to capital management through well-managed fleet rotation. We expect to deliver improved EBITDA margins over time as our expansion in high-growth, urban markets offers opportunities to outperform overall equipment rental industry growth rates."
First Quarter Highlights
- Equipment rental revenues in the first quarter of 2017 were $320.6 million compared to $307.8 million in the prior year quarter, an increase of 4.2%. Revenue growth in key markets more than offset lower revenues in upstream oil and gas markets. – Equipment rental revenues in key markets increased 8.5%, excluding foreign currency, and accounted for 85% of the total. Key markets are defined as markets we currently serve outside of upstream oil and gas markets.
- Sales of revenue earning equipment also increased substantially over the prior year. The improved results reflect the return to normalized channels, led by less reliance on auction sales.
- Pricing in key markets increased 1.7% and overall pricing increased 1.1% in the first quarter compared to the same period in 2016.
- Adjusted EBITDA in the first quarter was $97.8 million in 2017 compared to $107.8 million in the first quarter of 2016. The change was primarily attributable to additional stand-alone public company costs, professional fees related to the Company's year-end 2016 filing, business transformation costs, and lower contributions from upstream oil and gas markets. These impacts offset improvement in the results of sales of revenue earning equipment and improvements in key markets.
- Average fleet unavailable for rent (“FUR”) was 13.0% in the month of March 2017 compared to 12.4% in March 2016, primarily reflecting the timing of seasonal equipment coming off rent in Canada due to an early spring this year.
- Dollar utilization of 32.0% in the first quarter was nearly flat compared to the prior year, reflecting continuing headwinds in upstream oil and gas markets.
- Direct operating expenses were $169.1 million in the first quarter of 2017 compared to $158.7 million in the prior year. Approximately half of the increase was due to higher personnel-related expenses while the remainder was due to increases in fleet and facility expenses, including the opening of three new locations during the first quarter.
- Selling, general and administrative expense (SG&A) increased to $81.2 million compared to $62.5 million in the prior year. The increase is primarily due to higher information technology expenses, professional fees and other stand-alone public company costs, as well as additional sales personnel to drive growth.
- Interest expense in the first quarter was $37.8 million, an increase of $31.3 million compared to the prior year period, primarily reflecting the increase in the company's debt on a stand-alone basis and a $5.8 million charge related to the redemption of $123.5 million of senior notes during the first quarter.