Herc Holdings Inc. · NYSE:HRI

Herc — Q2 2020 Earnings Presentation

37 slides from Herc's earnings presentation, Jul 23, 2020

  1. Slide 1: Q2 & First Half 2020 Earnings Conference Call

    Larry Silber President & Chief Executive Officer Aaron Birnbaum Senior Vice President & Chief Operating Officer Mark Irion Senior Vice President & Chief Financial Officer Elizabeth Higashi, CFA Vice President, Investor Relations HERC HOLDINGS INC. Q2 & FIRST HALF 2020 EARNINGS CONFERENCE CALL July 2

  2. Slide 2: Safe Harbor Statements and Non-GAAP Financial Measures

    Safe Harbor Statements and Non-GAAP Financial Measures Forward-Looking Statements Information Regarding Non-GAAP Financial Measures This presentation includes forward-looking statements as that term is In addition to results calculated according to accounting principles defined by the federal securi

  3. Slide 3: HRI Strengths - Now More than Ever

    HRI Strengths - Now More than Ever Top tier - 3rd largest equipment rental company Experienced Scale and capital resources Management Investment in specialty business paying off Diverse mix of customers and industries Disciplined Long-tenured relationships Capital Strong culture of customer service

  4. Slide 4: Health and Safety

    Health and Safety We are committed to the safety of our team, their families, our customers and communities Monitoring and Adjusting Frequent Organizational Focus on Perfect Days to the Local Conditions Communications • Closely monitoring local • Timely COVID-19 bulletins • Maintaining focus on "The

  5. Slide 5: Q2 2020 Takeaways

    Q2 2020 Takeaways Sequential improvement in volume and rental revenue from mid-April through June Maintained rates in the quarter Strong cost controls contributed to YoY improvement in margin Disciplined capital spending and working capital contributed to improvement in free cash flow NYSE: HRI 5 ©2

  6. Slide 6: Second Quarter 2020 Highlights

    Second Quarter 2020 Highlights Equipment Net Income Rental Revenue Q2 Q2 $327.6M (19.6)% YoY $2.0M (79.4)% YoY Earnings Per Total Revenues Q2 Diluted Share Q2 (78.8)% $368.0M (22.5)% YoY $0.07 YoY Adjusted Adjusted EBITDA EBITDA1 Margin Q2 Q2 $149.4M (14.6)% YoY 40.6% +380 bps YoY 1. For a reconcili

  7. Slide 7: Q2 2020 Operations Review

    Q2 2020 OPERATIONS REVIEW NYSE: HRI 7 ©2020 Herc Rentals Inc. All Rights Reserved.

  8. Slide 8: Business Strategy

    Business Strategy Health & Safety Committed to keeping our team, their families, our customers and communities safe Operating in a Challenging Environment Focused on our customers' needs, efficient operations, greenfield and specialty locations, and enhancing sales initiatives to generate new busine

  9. Slide 9: Targeted Actions Curb Costs

    Targeted Actions Curb Costs • Hours of operations reduced to balance load to demand • Managed personnel related costs ◦ Reduced overtime costs ◦ Reduced overall staffing company-wide through a hiring freeze, attrition and furloughs • Reduced outside transportation, travel and other variable costs •

  10. Slide 10: Managing Fleet

    Managing Fleet Fleet Composition at OEC 1 Fleet Expenditures at OEC1 $3.75B at OEC $ in millions 2019 2020 Trucks & $289 Trailers $172 14.3% $103 $109 $88 $63 Other Q1 Q2 Q3 Q4 Material 1 Handling 8.1% Fleet Disposals at OEC 17.5% $ in millions 2019 2020 $193 $188 Specialty $110 $123 22.6% $83 $89 E

  11. Slide 11: Resilient Business Model with Diverse Customer Mix

    Resilient Business Model with Diverse Customer Mix Q2 Revenue by Customer1,2 Slow return to normalcy: energy, healthcare, warehousing Other 17% and distribution, utilities, government projects, Contractors 34% infrastructure, and restoration Our diverse customer mix, base of national customers, Infr

  12. Slide 12: Q2 Financial Review

    Q2 FINANCIAL REVIEW NYSE: HRI 12 ©2020 Herc Rentals Inc. All Rights Reserved.

  13. Slide 13: Q2 and Six Months Financial Summary

    Q2 and Six Months Financial Summary Three Months Ended June 30, Six Months Ended June 30, $ in millions, except per share data 2020 2019 % Chg. 2020 2019 % Chg. Equipment Rental Revenue $327.6 $407.6 (19.6)% $714.1 $785.2 (9.1)% Total Revenues $368.0 $475.1 (22.5)% $804.2 $950.8 (15.4)% Net Income (

  14. Slide 14: Pricing and Utilization Performance

    Pricing and Utilization Performance Pricing1 Average Fleet at OEC1 2019 2020 2019 2020 4.6% 4.5% 3.8% 2.0% 1.7% 3.3% 0.4% 0.7% 2.4% (0.5)% (1.3)% (0.3)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Utilization2 Average Fleet on Rent at OEC1 2019 2020 2019 2020 40.8% 40.5% 38.0% 35.6% 35.7% (0.3)% 0.0% (2.0)% (1.6)% (1

  15. Slide 15: Q2 and Six Months Adjusted EBITDA

    Q2 and Six Months Adjusted EBITDA1 Q2 Adjusted EBITDA Bridge (14.6)% $ in millions $174.9 $(0.3) $14.0 $149.4 $44.4 $(4.2) $(0.3) $(79.1) Adjusted EBITDA decreased $25.5 million YoY or 14.6% in Q2 2020 primarily due to lower equipment rental revenue of $79.1 million 2019 Currency Equipment Direct SG

  16. Slide 16: Disciplined Capital Management

    Disciplined Capital Management Maturities $179M $ in millions, as of June 30, 2020 Free cash flow1 of approximately $179 million for YTD 2020 $1,200.0 2.6x Senior Unsecured Notes $577.0 AR $47.0 ABL Credit Facility2 Finance Leases and Other Borrowings Facility 2020-2024+ 130.0 1 Net leverage of 2.6x

  17. Slide 17: A Resilient Industry

    A Resilient Industry Architecture Billings Index1 Select Market Forecasts2 as of July 2020 U.S. Nonresidental Building Starts History Forecast June 40.0 50 2017 2018 2019 2020 2021 2022 2023 YOY Growth +12% +3% +3% (16)% +8% +10% +7% Sectors with Tailwinds History Forecast Jan-05 Jan-13 Jan-20 Jan-0

  18. Slide 18: Strategy Remains the Same in the COVID-19 Slowdown

    Strategy Remains the Same in the COVID-19 Slowdown • Focus on lean cost structure, improving margins, providing excellent customer service and rental equipment to our diverse customer base • Since mid-April, weekly volume and rental revenue have been slowly improving • Expect to see continued sequen

  19. Slide 19: FY 2020 Guidance Update

    FY 2020 Guidance Update Adjusted EBITDA: $625 to $650 million Net Fleet Capital Expenditures: $190 to $210 million NYSE: HRI 19 ©2020 Herc Rentals Inc. All Rights Reserved.

  20. Slide 20: Business Strategies

    Business Strategies Health and Safety Committed to keeping our team, their families, our customers and communities safe Operating in a "New Normal" Environment Focused on our customers' needs, efficient operations, new greenfield locations, and enhancing sales initiatives to generate new business an

  21. Slide 21: Appendix

    APPENDIX NYSE: HRI 21 ©2020 Herc Rentals Inc. All Rights Reserved.

  22. Slide 22: Our Strategic Initiatives

    Our Strategic Initiatives Develop Our Expand and Improve Enhance Disciplined People and Diversify Operating Customer Capital Culture Revenues Effectiveness Experience Management Attract and retain talent Broaden customer Focus on safety, labor Provide premium Drive EBITDA margin base productivity, a

  23. Slide 23: Consistent Organic Growth Since Spin-off

    Consistent Organic Growth Since Spin-off Equipment Rental Revenue Adjusted EBITDA1 1.4% $ in millions $ in millions 9 CA GR: 1 R: 8.0% ’16-‘1 ’16-‘19 CAG $741.0 $720.9 $1,658.3 $1,701.8 $684.8 $1,630.7 $1,499.0 $585.4 $1,352.7 $536.2 2016 2017 2018 2019 Q2 2020 2016 2017 2018 2019 Q2 2020 TTM TTM Ad

  24. Slide 24: Focusing on High Growth Urban Markets

    Focusing on High Growth Urban Markets 270 39 states 6 provinces Approximately 270 locations in North America1 Strong geographic footprint in high growth markets Locations as of June 30, 2020 NYSE: HRI 24 ©2020 Herc Rentals Inc. All Rights Reserved.

  25. Slide 25: Glossary of Terms Commonly Used in the Industry

    Glossary of Terms Commonly Used in the Industry OEC: Original Equipment Cost which is an operating measure based on the guidelines of the American Rental Association (ARA), which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized refurbishment costs

  26. Slide 26: Q2 and Six Months Total Revenues

    Q2 and Six Months Total Revenues $ in millions Q2 Revenue Bridge (19.6)% $475.1 $(1.1) $368.0 $(79.1) $(19.7) $(7.2) Equipment rental revenue decreased 19.6% in Q2 2020 with lower volume as a result of the 2019 Currency Equipment Sales of Sales of new 2020 impact of the COVID-19 pandemic translation

  27. Slide 27: Q2 and Six Months Net Results

    Q2 and Six Months Net Results Q2 Net Results Bridge $ in millions Net income was $2.0 million in Q2 2019 compared $8.3 $(3.2) to $9.7 million in the prior year $(0.9) $(18.1) $7.2 Interest expense in Q2 2020 declined $8.3 million $9.7 $(1.0) primarily related to lower interest expense on the Company

  28. Slide 28: Reconciliation of Adjusted Net Income and Adjusted Earnings Per Diluted Share

    Reconciliation of Adjusted Net Income and Adjusted Earnings Per Diluted Share Adjusted Net Income and Adjusted Earnings Per Diluted Share - Adjusted Net Income represents the sum of net income (loss), restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, im

  29. Slide 29: Reconciliation of Net Income to Adj. EBITDA, REBITDA and Flow-Through

    Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through EBITDA, Adjusted EBITDA, and REBITDA - EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental eq

  30. Slide 30: Reconciliation of Net Income to Adj. EBITDA, REBITDA and Flow-Through

    Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through Three Months Ended June 30, Six Months Ended June 30, $ in millions 2020 2019 2020 2019 Net income (loss) $2.0 $9.7 ($1.7) $3.0 Income tax provision (benefit) (1.9) 5.3 (0.8

  31. Slide 31: REBITDA Margin Trend

    REBITDA Margin Trend $ in millions Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Q1 2020 Q2 2020 Total Revenues $475.7 $475.1 $508.1 $540.1 $1,999.0 $436.2 $368.0 Less: Sales of rental equipment 85.1 51.3 35.4 71.0 242.8 40.0 31.4 Less: Sales of new equipment, parts and supplies 10.9 13.2 10.0 9.9 44.0 7.

  32. Slide 32: Calculation of Net Leverage Ratio

    Calculation of Net Leverage Ratio Net Leverage Ratio –The Company has defined its net leverage ratio as net debt, as calculated below, divided by adjusted EBITDA for the trailing twelve- month period. This measure should be considered supplemental to and not a substitute for financial information pr

  33. Slide 33: Reconciliation of Free Cash Flow

    Reconciliation of Free Cash Flow Free cash flow is not a recognized term under GAAP and should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP. Further, since all companies do not use identical calculations, our definition and presentation

  34. Slide 34: Historical Fleet at OEC

    Historical Fleet at OEC1 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Q1 2020 Q2 2020 $ in millions Beginning Balance $3,777 $3,694 $3,859 $3,943 $3,777 $3,822 $3,800 Expenditures $103 $289 $172 $63 $627 $109 $88 Disposals ($193) ($123) ($89) ($188) ($593) ($110) ($83) Foreign Currency / Other $7 ($1) $1

  35. Slide 35: Q2 and Six Months Net Results Bridge

    Q2 and Six Months Net Results Bridge Three Months Ended June 30, Elements of Net Income (Loss) Bridge Currency1 Depreciation of Interest $ in millions 2020 2019 $ Change Income tax Impairment All other impact rental equip. expense Total revenues $368.0 $475.1 ($107.1) ($1.1) $— $— $— $— ($106.0) Dir

  36. Slide 36: Fleet Mix

    Fleet Mix June 30, 2020 June 30, 2019 Aerial - Booms 16.8 % 17.1 % Aerial - Scissors & Other 7.3 % 7.5 % Earthmoving - Compact 7.9 % 8.5 % Earthmoving - Heavy 5.5 % 6.2 % Material Handling - Telehandlers 13.5 % 13.7 % Material Handling - Industrial 4.0 % 4.2 % Trucks and Trailers 14.3 % 13.4 % ProSo

  37. Slide 37: NYSE: HRI ©2020 Herc Rentals Inc. All Rights Reserved.

    NYSE: HRI ©2020 Herc Rentals Inc. All Rights Reserved.

Herc Holdings — Q2 2020 Earnings Presentation on 6ix