Herc Holdings Inc.

Good morning, and welcome to the HERC Holdings Second Quarter 2022 Earnings Conference. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Elizabeth Higashi. Please go ahead.

Thank you, MJ, and thank you all for joining us this morning. Welcome to our second quarter 2022 earnings conference call. Earlier today, our press release presentation slides intended to be filed with the SEC and are all posted on the newly redesigned IR website at ir.hertgrantals.com. This morning, I'm joined by Larry Silver, President and Chief Executive Officer, Erin Birnbaum, Senior Vice President and Chief Operating Officer, and Mark Erion, Senior Vice President and Chief Financial Officer. We'll review our second quarter results with comments on operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks will be followed by an open Q&A. Before we begin our formal remarks, I'd like to remind you to review our Safe Harbor Statement on slide three. Today's call will include forward-looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from the forward-looking statements made on this call. You should also refer to the risk factors section of our annual report on the Form 10-K for the year ended December 31, 2021. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures for the closest GAAP equivalent can be found in the conference call materials. Finally, a replay of this call can be accessed via dial-in or through a webcast on our website. Replay instructions were included in our earnings release this morning. We have not given permission for any other recording of this call, and we do not approve or sanction any transcribing of the call. I now turn the call over to Larry.

Thank you, Elizabeth, and good morning, everyone. Please turn to slide number four. I'm pleased to report that we achieved strong results in the second quarter, reflecting a positive operating environment and robust command. We continue to achieve new records in the second quarter of 2022 in total revenue, rental revenue, net income, dollar utilization, adjusted EBITDA, and adjusted EBITDA margin. Volume and rates contributed to the 35% increase in rental revenue in the second quarter over the prior year. Dollar utilization increased 40 basis points to 42.5%, and adjusted EBITDA increased We completed the acquisition of six additional companies with a total of nine locations in the second quarter, including the previously announced acquisition of Cloverdale Equipment Company in April. Year-to-date, we've spent $317 million in net cash expenditures on our acquisition strategy. On July 5th, we announced the amendment and extension of our senior secured asset-based revolving credit facility. doubling the capacity to $3.5 billion and extending the maturity to 2027. The additional capacity is expected to provide the company with ample liquidity for several years to come. We announced today that we plan to repurchase our common shares under the 2014 Stock Repurchase Program subject to market conditions. The program was established in March of 2014 and has a remaining authorization of $395.9 million. We believe that given our operating performance and long-term growth prospects, that the year-to-date downturn in our stock price implies a discounted valuation of our real worth. We intend to take advantage of this price imbalance and continue to enhance our returns to shareholders longer term, keeping in mind that we intend to maintain debt levels within a targeted range of two times to three times net leverage. And finally, based on the second quarter results and our outlook for the rest of the year, we are updating our 2022 guidance range for adjusted EBITDA to $1.195 billion to $1.245 billion, which implies a 34% to 39% increase over our 2021 results. We are also maintaining guidance of our net fleet capital spending to $900 million to $1.12 billion. And now let's move on to our financial highlights. Please turn to slide number five, which shows the second quarter results over the last five years. Our second quarter results shown here on a five-year basis demonstrate the acceleration of our growth as part of our shift into high-gear strategy. Equipment rental revenue was $605.4 million in the second quarter, an increase of 35%, or $157.4 million compared to the prior year. This increase was driven by solid performance in our core business and growing market share from our specialty businesses. Total revenue grew 30% to $640.4 million, impacted by lower sales of used rental equipment, a decision we made to continue to meet customer requirements in light of a tight supply of new equipment related to supply chain issues from original equipment manufacturers. We reported an increase of 53% in net income to $72.2 million, or $2.38 per diluted share in the second quarter, compared with $47.1 million, or $1.55 per diluted share last year. Adjusted EBITDA grew 37% over prior year to $284.2 million. Our enhanced scale and focus on operating leverage improved year-over-year adjusted EBITDA margin 210 basis points to 44.4% in the second quarter of 2022. This is an exciting time for Team HERC, and we are extremely pleased with the performance and tenacity of our team. We are committed to providing excellent customer service and expanding our rental solutions to a broad array of customers and industries to achieve even greater success. Now, please turn to slide number six. With 57 years of history in the equipment rental industry, our 6,100 team members work hard to ensure our customers achieve optimal performance safely, efficiently, and effectively every day. Everything we do is built on our promise and commitment to help our customers and communities build a brighter future. As of the end of the second quarter, we operated 333 locations across the United States and Canada in 42 states and five Canadian provinces. As we add additional locations and employees to Herc Rentals, we are committed to ensuring that we focus on safety training and other programs to assist the new team members in their integration into our Herc culture. The addressable North American market size is now estimated to be $60 billion and growing by about 15% in 2022, according to the American Rental Association. Every day, new mega infrastructure and other industrial commercial projects are announced throughout North America. We intend to get our fair share of this new activity. We expect to continue our momentum by addressing the opportunities in the market and outperforming the overall industry as we grow through organic growth supplemented by select acquisitions. Before I pass the call over to Aaron Birnbaum, our Chief Operating Officer, I want to thank the entire PERF team for their outstanding contribution and their focus on delivering outstanding customer service. I'd also like to welcome all of the employees of our latest acquisitions to the Herc family. We hope you are as proud to be a part of Herc Rentals as we are to have you join us. And now Aaron will update you on our operational programs.