Herc Holdings Pivots to Execution After H&E Integration
Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% return on invested capital) and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping it realize economies of scale and scope that are the building blocks of cost advantage. These are the fundamental traits that allow the firm to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).
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