hri-20240331

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33139

HERC HOLDINGS INC.

(Exact name of registrant as specified in its charter)


Delaware						20-3530539
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

27500 Riverview Center Blvd.

Bonita Springs, Florida 34134

(239) 301-1000

(Address, including Zip Code, and telephone number,

including area code, of registrant's principal executive offices)

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, par value $0.01 per share

HRI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Smaller reporting company

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 19, 2024, there were 28,368,574 shares of the registrant's common stock, $0.01 par value, outstanding.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

TABLE OF CONTENTS



		Page
Cautionary Note Regarding Forward-Looking Statements		1
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023	4
	Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2024 and 2023	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	6
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	26
ITEM 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	27
ITEM 1A.	Risk Factors	27
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 5.	Other Information	27
ITEM 6.	Exhibits	28
SIGNATURE		29

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the period ended March 31, 2024 (this "Report") includes "forward-looking statements," as that term is defined by the federal securities laws. Forward-looking statements include statements concerning our business plans and strategy, projected profitability, performance or cash flows, future capital expenditures, our growth strategy, including our ability to grow organically and through M&A, anticipated financing needs, business trends, our capital allocation strategy, liquidity and capital management, exploring strategic alternatives for Cinelease, including the timing of the review process, the outcome of the process and the costs and benefits of the process, and other information that is not historical information. Forward looking statements are generally identified by the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," "looks," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions. All forward-looking statements are based upon our current expectations and various assumptions and apply only as of the date of this Report. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will be achieved.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including those set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 under Item 1A "Risk Factors," in Part II, Item 1A of this Report, and in our other filings with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM l. FINANCIAL STATEMENTS

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)


	March 31, 2024		December 31, 2023
ASSETS	(Unaudited)
Cash and cash equivalents	$	63	$	71
Receivables, net of allowances of $17 and $20, respectively	560		563
Other current assets	67		77
Assets held for sale	27		21
Total current assets	717		732
Rental equipment, net	3,831		3,831
Property and equipment, net	486		465
Right-of-use lease assets	721		665
Intangible assets, net	496		467
Goodwill	537		483
Other long-term assets	10		10
Assets held for sale	409		408
Total assets	$	7,207	$	7,061
LIABILITIES AND EQUITY
Current maturities of long-term debt and financing obligations	$	19	$	19
Current maturities of operating lease liabilities	37		37
Accounts payable	201		212
Accrued liabilities	194		221
Liabilities held for sale	23		19
Total current liabilities	474		508
Long-term debt, net	3,753		3,673
Financing obligations, net	103		104
Operating lease liabilities	705		646
Deferred tax liabilities	750		743
Other long term liabilities	48		46
Liabilities held for sale	66		68
Total liabilities	5,899		5,788
Commitments and contingencies (Note 12)
Equity:
Preferred stock, $0.01 par value, 13.3 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value, 133.3 shares authorized, 33.2 and 33.1 shares issued and 28.3 and 28.2 shares outstanding	—		—
Additional paid-in capital	1,815		1,820
Retained earnings	544		498
Accumulated other comprehensive loss	(124)		(118)
Treasury stock, at cost, 4.9 shares and 4.9 shares	(927)		(927)
Total equity	1,308		1,273
Total liabilities and equity	$	7,207	$	7,061

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In millions, except per share data)


	Three Months Ended March 31,
	2024		2023
Revenues:
Equipment rental	$	719	$	654
Sales of rental equipment	69		71
Sales of new equipment, parts and supplies	9		8
Service and other revenue	7		7
Total revenues	804		740
Expenses:
Direct operating	307		281
Depreciation of rental equipment	160		152
Cost of sales of rental equipment	46		46
Cost of sales of new equipment, parts and supplies	6		5
Selling, general and administrative	115		106
Non-rental depreciation and amortization	29		26

Interest expense, net	61		48
Other expense (income), net	(1)		1
Total expenses	723		665
Income before income taxes	81		75
Income tax provision	(16)		(8)
Net income	$	65	$	67
Weighted average shares outstanding:
Basic	28.3		29.0
Diluted	28.4		29.4
Earnings per share:
Basic	$	2.30	$	2.31
Diluted	$	2.29	$	2.28

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(In millions)


	Three Months Ended March 31,
	2024		2023
Net income	$	65	$	67
Other comprehensive income (loss):
Foreign currency translation adjustments	(6)		1
Pension and postretirement benefit liability adjustments:
Amortization of net losses included in net periodic pension cost	—		1

Total other comprehensive income (loss)	(6)		2
Total comprehensive income	$	59	$	69

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Unaudited

(In millions)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 31, 2023	28.2	$	—	$	1,820	$	498	$	(118)	$	(927)	$	1,273
Net income	—	—		—		65		—		—		65
Other comprehensive loss	—	—		—		—		(6)		—		(6)
Stock-based compensation charges	—	—		5		—		—		—		5
Dividends declared, $0.665 per share	—	—		—		(19)		—		—		(19)
Net settlement on vesting of equity awards	0.1	—		(12)		—		—		—		(12)
Employee stock purchase plan	—	—		1		—		—		—		1
Exercise of stock options	—	—		1		—		—		—		1

Balance at March 31, 2024	28.3	$	—	$	1,815	$	544	$	(124)	$	(927)	$	1,308


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 31, 2022	28.9	$	—	$	1,820	$	224	$	(129)	$	(807)	$	1,108
Net income	—	—		—		67		—		—		67
Other comprehensive income	—	—		—		—		2		—		2
Stock-based compensation charges	—	—		4		—		—		—		4
Dividends declared, $0.6325 per share	—	—		—		(19)		—		—		(19)
Net settlement on vesting of equity awards	0.3	—		(25)		—		—		—		(25)
Employee stock purchase plan	—	—		1		—		—		—		1
Exercise of stock options	—	—		1		—		—		—		1
Repurchase of common stock	(0.4)	—		—		—		—		(52)		(52)
Balance at March 31, 2023	28.8	$	—	$	1,801	$	272	$	(127)	$	(859)	$	1,087

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In millions)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	65	$	67
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of rental equipment	160		152
Depreciation of property and equipment	19		17
Amortization of intangible assets	10		9
Amortization of deferred debt and financing obligations costs	1		1
Stock-based compensation charges	5		4

Provision for receivables allowances	12		13
Deferred taxes	9		3
Gain on sale of rental equipment	(23)		(25)
Other	3		2
Changes in assets and liabilities:
Receivables	(7)		13
Other assets	(6)		(2)
Accounts payable	(2)		8
Accrued liabilities and other long-term liabilities	(6)		(27)
Net cash provided by operating activities	240		235
Cash flows from investing activities:
Rental equipment expenditures	(181)		(332)
Proceeds from disposal of rental equipment	61		49
Non-rental capital expenditures	(30)		(33)
Proceeds from disposal of property and equipment	2		3
Acquisitions, net of cash acquired	(148)		(138)


Net cash used in investing activities	(296)		(451)

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Unaudited

(In millions)


	Three Months Ended March 31,
	2024		2023
Cash flows from financing activities:
Proceeds from revolving lines of credit and securitization	385		640
Repayments on revolving lines of credit and securitization	(302)		(347)
Principal payments under finance lease and financing obligations	(5)		(4)

Dividends paid	(20)		(20)
Net settlement on vesting of equity awards	(12)		(25)
Proceeds from employee stock purchase plan	1		1
Proceeds from exercise of stock options	1		1
Repurchase of common stock	—		(44)
Net cash provided by financing activities	48		202
Effect of foreign exchange rate changes on cash and cash equivalents	—		—
Net change in cash and cash equivalents during the period	(8)		(14)
Cash and cash equivalents at beginning of period	71		54
Cash and cash equivalents at end of period	$	63	$	40

Supplemental disclosure of cash flow information:
Cash paid for interest	$	78	$	63
Cash paid for income taxes, net	$	3	$	1
Supplemental disclosure of non-cash investing activity:
Purchases of rental equipment in accounts payable	$	—	$	18
Non-rental capital expenditures in accounts payable	$	5	$	3
Disposal of rental equipment in accounts receivable	$	5	$	15
Supplemental disclosure of non-cash investing and financing activity:
Equipment acquired through finance lease	$	3	$	3

The accompanying notes are an integral part of these financial statements.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Organization and Description of Business

Herc Holdings Inc. ("we," "us," "our," "Herc Holdings," or "the Company") is one of the leading equipment rental suppliers with 412 locations in North America as of March 31, 2024. The Company conducts substantially all of its operations through subsidiaries, including Herc Rentals Inc. ("Herc"). With over 58 years of experience, the Company is a full-line equipment rental supplier offering a broad portfolio of equipment for rent. In addition to its principal business of equipment rental, the Company sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies; provides repair, maintenance, equipment management services and safety training to certain of its customers; offers equipment re-rental services and provides on-site support to its customers; and provides ancillary services such as equipment transport, rental protection, cleaning, refueling and labor.

The Company's fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction, lighting, trench shoring, and studio and production equipment. The Company's equipment rental business is supported by ProSolutions®, its industry-specific solutions-based services, which includes power generation, climate control, remediation and restoration, and pumps, and its ProContractor professional grade tools.

Note 2—Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The Company prepares its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). In the opinion of management, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, however, these condensed consolidated financial statements do not include all of the disclosures required for complete annual financial statements and, accordingly, certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with Securities and Exchange Commission ("SEC") rules and regulations. The Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, the condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 13, 2024.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ materially from those estimates.

Significant estimates inherent in the preparation of the condensed consolidated financial statements include receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, valuation of acquired intangible assets, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies and accounting for income taxes, among others.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Herc Holdings and its wholly owned subsidiaries. In the event that the Company is a primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity are included in the Company's condensed consolidated financial statements. The Company accounts for investments in joint ventures using the equity method when it has significant influence but not control and is not the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Recently Issued Accounting Pronouncements and Disclosure Rules

Not Yet Adopted

Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

Climate-Related Disclosure Rules

In March 2024, the SEC issued final climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. The disclosure requirements will begin phasing in for annual periods beginning in calendar year 2025. Currently, it is uncertain whether the SEC's new climate-related disclosure rules will withstand pending and future legal challenges. In April 2024, the SEC issued an order staying implementation of the new disclosure regulations pending the resolution of certain challenges. The Company is currently in the process of analyzing the impact of the rules on its related disclosures.

Note 3—Revenue Recognition

The Company is principally engaged in the business of renting equipment. Ancillary to the Company’s principal equipment rental business, the Company also sells used rental equipment, new equipment and parts and supplies and offers certain services to support its customers. The Company operates in North America with revenue from the United States representing approximately 92.7% of total revenue for the three months ended March 31, 2024 compared to 91.9% for the same period in 2023.

The Company’s rental transactions are accounted for under Accounting Standards Codification ("ASC") Topic 842, Leases ("Topic 842"). The Company’s sale of rental and new equipment, parts and supplies along with certain services provided to customers are accounted for under ASC Topic 606, Revenue from Contracts with Customers ("Topic 606"). The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

The following summarizes the applicable accounting guidance for the Company’s revenues for the three months ended March 31, 2024 and 2023 (in millions):


	Three Months Ended March 31,
	2024						2023
	Topic 842		Topic 606		Total		Topic 842		Topic 606		Total
Revenues:
Equipment rental	$	648	$	—	$	648	$	590	$	—	$	590
Other rental revenue:
Delivery and pick-up	—		45		45		—		41		41
Other	26		—		26		23		—		23
Total other rental revenues	26		45		71		23		41		64
Total equipment rental	674		45		719		613		41		654
Sales of rental equipment	—		69		69		—		71		71
Sales of new equipment, parts and supplies	—		9		9		—		8		8
Service and other revenues	—		7		7		—		7		7
Total revenues	$	674	$	130	$	804	$	613	$	127	$	740

Topic 842 revenues

Equipment Rental Revenue

The Company offers a broad portfolio of equipment for rent on daily, weekly or monthly basis, with substantially all rental agreements cancellable upon the return of the equipment. Virtually all customer contracts can be canceled by the customer with no penalty by returning the equipment within one day; therefore, the Company does not allocate the transaction price between the different contract elements.

Equipment rental revenue includes revenue generated from renting equipment to customers and is recognized on a straight-line basis over the length of the rental contract. As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the equipment was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, the Company will have customers return equipment and be contractually required to pay more than the cumulative amount of revenue recognized to date under the straight-line methodology. Also included in equipment rental revenue is re-rent revenue in which the Company will rent specific pieces of equipment from vendors and then re-rent that equipment to its customers. Provisions for discounts, rebates to customers and other adjustments are provided for in the period the related revenue is recorded.

Other

Other equipment rental revenue is primarily comprised of fees for the Company’s rental protection program and environmental charges. Fees paid for the rental protection program allow customers to limit the risk of financial loss in the event the Company’s equipment is damaged or lost. Fees for the rental protection program and environmental recovery fees are recognized on a straight-line basis over the length of the rental contract.

Topic 606 revenues

Delivery and pick-up

Delivery and pick-up revenue associated with renting equipment is recognized when the services are performed.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Sales of Rental Equipment, New Equipment, Parts and Supplies

The Company sells its used rental equipment, new equipment, parts and supplies. Revenues recorded for each category are as follows (in millions):


	Three Months Ended March 31,
	2024		2023
Sales of rental equipment	$	69	$	71
Sales of new equipment	3		1
Sales of parts and supplies	6		7
Total	$	78	$	79

The Company recognizes revenue from the sale of rental equipment, new equipment, parts and supplies when control of the asset transfers to the customer, which is typically when the asset is picked up by or delivered to the customer and when significant risks and rewards of ownership have passed to the customer. Sales and other tax amounts collected from customers and remitted to government authorities are accounted for on a net basis and, therefore, excluded from revenue.

The Company routinely sells its used rental equipment in order to manage repair and maintenance costs, as well as the composition, age and size of its fleet. The Company disposes of used equipment through a variety of channels including retail sales to customers and other third parties, sales to wholesalers, brokered sales and auctions.

The Company also sells new equipment, parts and supplies. The types of new equipment that the Company sells vary by location and include a variety of ProContractor tools and supplies, small equipment (such as work lighting, generators, pumps, compaction equipment and power trowels), safety supplies and expendables.

Under Topic 606, the accounts receivable balance, prior to allowances for doubtful accounts, for the sale of rental equipment, new equipment, parts and supplies, was approximately $16 million and $11 million as of March 31, 2024 and December 31, 2023, respectively.

Service and other revenues

Service and other revenues primarily include revenue earned from equipment management and similar services for rental customers which includes providing customer support functions such as dedicated in-plant operations, plant management services, equipment and safety training, and repair and maintenance services particularly to industrial customers who request such services.

The Company recognizes revenue for service and other revenues as the services are provided. Service and other revenues are typically invoiced together with a customer’s rental amounts and, therefore, it is not practical for the Company to separate the accounts receivable amount related to services and other revenues that are accounted for under Topic 606; however, such amount is not considered material.

Receivables and contract assets and liabilities

Most of the Company's equipment rental revenue is accounted for under Topic 842. The customers that are responsible for the remaining equipment rental revenue that is accounted for under Topic 606 are generally the same customers that rent the Company's equipment. Concentration of credit risk with respect to the Company's accounts receivable is limited because a large number of geographically diverse customers makes up its customer base. The Company manages credit risk associated with its accounts receivable at the customer level through credit approvals, credit limits and other monitoring procedures. The Company maintains allowances for doubtful accounts that reflect the Company's estimate of the amount of receivables that the Company will be unable to collect based on its historical write-off experience.

The Company does not have material contract assets or contract liabilities associated with customer contracts. The Company's contracts with customers do not generally result in material amounts billed to customers in excess of recognizable revenue. The Company did not recognize material revenue during the three months ended March 31, 2024 and 2023 that was included in the contract liability balance as of the beginning of each period.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Performance obligations

Most of the Company's revenue recognized under Topic 606 is recognized at a point-in-time, rather than over time. Accordingly, in any particular period, the Company does not generally recognize a significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous periods, and the amount of such revenue recognized during the three months ended March 31, 2024 and 2023 was not material. We also do not expect to recognize material revenue in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2024.

Contract estimates and judgments

The Company's revenues accounted for under Topic 606 generally do not require significant estimates or judgments, primarily for the following reasons:

•The transaction price is generally fixed and stated on the Company's contracts;

•As noted above, the Company's contracts generally do not include multiple performance obligations, and accordingly do not generally require estimates of the standalone selling price for each performance obligation;

•The Company's revenues do not include material amounts of variable consideration; and

•Most of the Company's revenue is recognized as of a point-in-time and the timing of the satisfaction of the applicable performance obligations is readily determinable. As noted above, the revenue recognized under Topic 606 is generally recognized at the time of delivery to, or pick-up by, the customer.

The Company monitors and reviews its estimated standalone selling prices on a regular basis.

Note 4—Rental Equipment

Rental equipment consists of the following (in millions):


	March 31, 2024		December 31, 2023
Rental equipment	$	5,851	$	5,785
Less: Accumulated depreciation	(2,020)		(1,954)
Rental equipment, net	$	3,831	$	3,831

Note 5—Goodwill and Intangible Assets

Goodwill

The following summarizes the Company's goodwill (in millions):


	March 31, 2024		December 31, 2023
Balance at the beginning of the period:
Goodwill	$	1,154	$	1,088
Accumulated impairment losses	(671)		(669)
	483		419

Goodwill classified as held for sale	—		(65)
Additions	55		128
Currency translation	(1)		1

Balance at the end of the period:
Goodwill	1,206		1,154
Accumulated impairment losses	(669)		(671)
	$	537	$	483

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Intangible Assets

Intangible assets, net, consisted of the following major classes (in millions):


	March 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Customer-related and non-compete agreements	$	284	$	(77)	$	207
Internally developed software(a)	68		(49)		19
Total	352		(126)		226
Indefinite-lived intangible assets:
Trade name	270		—		270
Total intangible assets, net	$	622	$	(126)	$	496

(a) Includes capitalized costs of $7 million yet to be placed into service.


	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Customer-related and non-compete agreements	$	248	$	(69)	$	179
Internally developed software(a)	64		(47)		17
Total	312		(116)		196
Indefinite-lived intangible assets:
Trade name	271		—		271
Total intangible assets, net	$	583	$	(116)	$	467

(a) Includes capitalized costs of $3 million yet to be placed into service.

Amortization of intangible assets was $10 million and $9 million for the three months ended March 31, 2024 and 2023, respectively.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

Note 6—Assets Held for Sale

As of March 31, 2024, the Company's assets held for sale consisted of the Cinelease studio entertainment and lighting and grip equipment rental business ("Cinelease"). The film and studio entertainment industry has shifted to a studio centric model where owning or managing a large footprint of studios is becoming more important to be a competitive equipment rental provider, requiring significant investment in fully managed studios. This business model is a departure from the Company's stated growth strategy. Cinelease has been actively marketed for sale and management expects a transaction to be completed within 12 months of the date it was determined to be held for sale.

The following table summarizes the assets and liabilities held for sale (in millions):


	March 31, 2024		December 31, 2023
Assets held for sale:
Cash and cash equivalents	$	1	$	1
Receivables, net of allowances	14		8
Other current assets	12		12
Total current assets held for sale	$	27	$	21

Rental equipment, net	$	184	$	183
Property and equipment, net	35		34
Right-of-use lease assets	74		75
Intangible assets, net	4		4
Goodwill	65		65
Other long-term assets	47		47
Total long-term assets held for sale	$	409	$	408

Liabilities held for sale:
Current maturities of operating lease liabilities	$	8	$	8
Accounts payable	6		6
Accrued liabilities	9		5
Total current liabilities held for sale	$	23	$	19

Operating lease liabilities	$	66	$	68
Total long-term liabilities held for sale	$	66	$	68

Note 7—Leases

The Company leases real estate, office equipment and service vehicles. The Company's leases have remaining lease terms of up to 20 years, some of which include options to extend the leases for up to 20 years. The Company determines the lease term used to record each lease by including the initial lease term and, in the case where there are options to extend, will include the option to extend if it has determined that it is reasonably certain that the Company would exercise those options.

The Company also leases certain equipment that it rents to its customers where the payments vary based upon the amount of time the equipment is on rent. There are no fixed payments on these leases and, therefore, no lease liability or ROU assets have been recorded. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

Table of Contents

HERC HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unaudited

The components of lease expense consist of the following (in millions):


		Three Months Ended March 31,
	Classification	2024		2023
Operating lease cost(a)	Direct operating	$	36	$	33
Finance lease cost:
Amortization of ROU assets	Depreciation and amortization	6		6
Interest on lease liabilities	Interest expense, net	1		—
Sublease income	Equipment rental revenue	(18)		(16)
Net lease cost		$	25	$

SEC Form 10-Q filed by Herc Holdings Inc.