Herc Holdings Inc.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Herk Holdings, Inc. Second Quarter 2023 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Leslie Hunziker, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to HERC Rental's second quarter 2023 earnings conference call and webcast. Earlier today, our press release, presentation slides, and 10Q were filed with the SEC, and all are posted on the events page of our IR website at ir.hercrentals.com. Today we're reviewing our second quarter 2023 results with comments on our 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. Now let's move on to our safe harbor and gap reconciliation 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 factor section of our annual report on Form 10-K for the year ended December 31, 2022, and our quarterly report on Form 10-Q for the period end June 30, 2023. 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 are the closest GAAP equivalent can be found in the conference call materials. A replay of this call can be accessed via dial-in or through the webcast on our website. Replay instructions were included in our earnings release this morning. We have not given permission for any recording of this call and do not approve or sanction any transcribing of the call. This morning, I'm joined by Larry Silber, President and Chief Executive Officer, Aaron Birnbaum, Senior Vice President and Chief Operating Officer, and Mark Humphrey, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Larry.

Thank you, Leslie, and good morning, everyone. Please turn to slide number four. We had a strong first half for 2023. Total revenue and adjusted EBITDA were second quarter records, driven by a 7.8% increase in rental rate and above-market volume growth. Additionally, we ramped up fleet dispositions in the quarter to adjust to higher OEM shipments and to take advantage of the still-strong used equipment market. Continued disruptions in the studio entertainment and markets related to labor strikes in the film and TV industry, as well as the sale of three times more fleet year over year, weighed on EBITDA margin in the quarter. Excluding studio entertainment, margin and flow through significantly improved year over year. You can also see on this slide that our capital allocation strategy focused on profitable growth investments supported an increase of 40 basis points in ROIC in the second quarter compared with last year. On slide number five, it's clear that we continue to significantly outperform the equipment rental industry. ARA estimates the industry grew 8% in the second quarter compared with our rental revenue growth of 16%. Revenue from non-residential, industrial, and infrastructure work remains strong, and the largest rental companies with fleet capacity and the best branch network coverage are winning an outsized portion of the construction starts. Our year-over-year increase in revenue is two times greater than the industry, despite continuing challenges of the studio entertainment business. With the Actors Guild recently joining the screenwriters on strike, we now are prudently planning for studio shutdowns to continue through the third quarter and possibly through year end. Aaron will give you more color into the adjustments we're making to our fleet plan as a result, and Mark will give you insight into the financial impact. Total revenues got an incremental boost in the quarter as we opportunistically increased our rate of fleet sales, allowing us to begin addressing the pent-up rotations from the last two years while leveraging the ongoing strength of the used equipment market. We are in a great position for continued growth through the balance of the year. Team HERC is advancing the key initiatives of our strategic plan. We continue to execute well while remaining flexible to be able to quickly pivot and capitalize on areas of growth. Now, if you turn to slide number six, in addition to leveraging our scale as a market leader, The successful execution of our growth strategies also contributed to our outsized performance relative to the overall industry. We are increasing revenue in our core categories through fleet investments, as well as acquisitions and new greenfield facilities that support branch network optimization. Revenue from our high margin pro solution specialty business grew double digits again in the second quarter, incrementally benefiting from new products new locations, and cross-selling synergies. And our innovative customer-facing digital capability called ProControl NextGen continues as a catalyst to new project wins, especially at the national account level. As always, we're committed to responsible operating practices built on a strong cultural foundation, a safety-first protocol, and a pledge to continue to work hard to do more for our employees, customers, and suppliers. In the second quarter, we released our comprehensive environmental and social responsibility report. Our corporate citizenship report describes our approach to integrating sustainability and social responsibility into our decision-making and operations. I encourage you to check it out on the investor relations page of our website. Also, during the quarter, we were recognized as one of America's climate leaders by USA Today. and we received an upgrade to our MSCI rating. We are now recognized as a company leading its industry in managing the most significant ESG risks and opportunities. Finally, between fleet investments, strategic M&A, dividend growth, and opportunistic share repurchases, we strategically allocated capital to drive long-term growth and higher returns. With that, I'll turn it over to Aaron to share the high-level operational drivers in the second quarter, and then Mark is going to walk you through the second quarter financial metrics and some of our assumptions for the back half of the year.