Herc Holdings Inc. · NYSE:HRI
Herc — Q2 2018 Earnings Presentation
40 slides from Herc's earnings presentation, Aug 8, 2018
Slide 1: Herc Holdings Inc. Second Quarter 2018 Earnings Call
Herc Holdings Inc. Second Quarter 2018 Earnings Call For the period ended June 30, 2018 August 8, 2018 ©2018 Herc Rentals Inc. All Rights Reserved.
Slide 2: Agenda
Agenda Elizabeth Higashi Welcome and Introductions Vice President, Investor Relations Strategic Update & Larry Silber Industry Outlook President and Chief Executive Officer Mark Irion Q2 and Six Months 2018 Financial Senior Vice President and Review Chief Financial Officer Larry Silber Mark Irion Q&
Slide 3: Safe Harbor Statements
Safe Harbor Statements Forward-Looking Statements This presentation contains statements, including those related to 2018 Guidance, that are not statements of historical fact, but instead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We cau
Slide 4: Business Risks - Continued
Business Risks - Continued ◦ our success depends on our ability to attract and retain key management and other key personnel, and the ability of new employees to learn their new roles; ◦ we may have difficulty obtaining the resources that we need to operate, or our costs to do so could increase sign
Slide 5: Business Risks - Continued and Non-GAAP Financial Measures
Business Risks- Continued and Non-GAAP Financial Measures • Risks related to the securities market and ownership of our stock, including that: the market price of our common stock could decline as a result of the sale or distribution of a large number of our shares or the perception that a sale or d
Slide 6: A Leading Equipment Rental Company
A Leading Equipment Rental Company • Leveraging 50+ years of experience in the equipment rental industry • Separated from Hertz's car rental business and listed on the New York Stock Exchange on July 1, 2016 under the symbol "HRI" • Rolled out Herc Rentals branding in Canada on July 3, 2018 • Comple
Slide 7: Vision, Mission and Values
We are a customer-centric Our organization focused on Vision safety, efficiency and We aspire to be the profitable growth supplier, employer and investment of choice in our industry. Our Our Values Mission We do what’s right. To ensure that end We’re in this together. users of our equipment We take
Slide 8: Focus on Safety
Focus on Safety • 10% reduction in Total Recordable Incident Rate (TRIR) YoY for the LTM period ending June 30, 2018 • Continued focus on a goal of 100% Perfect Days – defined as: ◦ No OSHA recordable incidents ◦ No "at fault" motor vehicle accidents ◦ No DOT violations • Recorded at least 75% Perfe
Slide 9: Our Strategic Initiatives
Our Strategic Initiatives Enhance Expand and Improve Operating Disciplined Capital Customer Diversify Revenues Effectiveness Management Experience ü Broaden customer ü Focus on safety, ü Provide premium ü Drive EBITDA base labor productivity, products and margin growth and warranty solutions-based ü
Slide 10: Our Strategy is Delivering Results
Our Strategy is Delivering Results ü Our strategic initiatives drove volume growth and improved price and mix ü Focus on ProSolutionsTM and ProContractor equipment continues to drive new customer and local account growth ü We continue to invest in people, training and operations to drive operational
Slide 11: Summary of Q2 2018 Results
Summary of Q2 2018 Results $392.5 million Equipment Rental Revenue +11.9% YoY Average Fleet1 Growth +5.7% YoY Pricing1 +2.9% YoY $(0.3) million Net Income (Loss) +$27.3 million YoY $152.2 million Adjusted EBITDA2 31.3% Margin, (70) bps YoY 35.4% Dollar Utilization1 +140 bps YoY Adjusted EBITDA: $630
Slide 12: Strong Q2 2018 Performance
Strong Q2 2018 Performance YoY Rental Revenue Growth YoY Pricing1 2017 2018 2017 2018 16.2% 15.1% 14.7% 3.0% 2.8% 2.9% 11.9% 1.7% 7.0% 1.4% 1.1% 4.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY Change in Average Fleet at OEC1 YoY Change in Average OEC Fleet on Rent1 2017 2018 2017 2018 7.7% 5.3% 5.7% 7.1% 4.7% 6.6%
Slide 13: Successfully Expanding Products and Services
Successfully Expanding Products and Services TM Classic ProSolutions ProContractor Our Classic fleet includes Our industry-specific solutions- A wide variety of tools and aerial, earthmoving, material based services include: equipment that supports handling, trucks and trailers, • Power Generation v
Slide 14: Improving Fleet Mix to Drive Growth
Improving Fleet Mix to Drive Growth YoY Basis Point Change in $ Utilization1 • $ Utilization increased 140 bps YoY to 35.4% 2017 2018 • Continued to diversify equipment in key categories to drive higher $ utilization 350 360 330 ◦ Increased mix of ProSolutionsTM and ProContractor fleet YoY 140 ◦ Con
Slide 15: Market Leader with Significant Scale and Broad Footprint
Market Leader with Significant Scale and Broad Footprint Driving Urban Market Density Approximately 275 locations, principally in North America1 Source: ARA HIS Global Insights May 2018 1. Locations as of June 30, 2018 NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 15
Slide 16: Ongoing Strategy: Driving Urban Market Density
Ongoing Strategy: Driving Urban Market Density • Diversification of fleet and customers ◦ Drives new customer revenue ◦ Increases branch fleet on rent (volume) ◦ Improves mix, drives yield and $ utilization ◦ Improves branch operating efficiencies • Local branch footprint = “One Stop Shop” ◦ Makes d
Slide 17: Improving Customer Mix and Diversification
Improving Customer Mix and Diversification Local vs National % Mix in Q21 Q2 Revenue by Customer 2017 2018 Other: 21% Contractors: 34% 57% 53% 47% 43% Infrastructure and Goverment: 16% Industrial: 29% Local National Strong Q2 YoY Local Revenue1 Growth 2017 2018 18.0% 10.9% 2.7% 1.0% Local National 1
Slide 18: Enhancing Operating Effectiveness
Enhancing Operating Effectiveness • Focusing on reduction/control of direct operating expense and selling, general and administrative costs ◦ Rolling out XPO Logistics to improve efficiency, reduce delivery costs and capture related ancillary revenues ◦ Continuing to focus on maintenance and spare p
Slide 19: Enhancing Operating Effectiveness
Enhancing Operating Effectiveness • Completed multi-phase IT separation from Hertz to establish our own dedicated ERP platform October 2017 RentalMan operational system established on Herc IT platform June 30, 2016 Herc Holdings and "New Hertz" separate July 2018 Herc completes final separation of a
Slide 20: Enhancing Customer Experience through Technology
Enhancing Customer Experience through Technology ProControl • ProControl provides account management, location tracking, utilization and service updates • Rolled out new training programs for ProControl Telematics and Account Management Herc on the Go • “Herc On the Go” rolled out across the U.S. at
Slide 21: Strong Industry Outlook Supports Our Growth
Strong Industry Outlook Supports Our Growth Non-ResidentialArchitecture Billings Starts 3Index1 N.A. Equipment Rental Market 2 as of July 2018 ($ in billions) as of May 2018 5.3% June ’17-‘22E CAGR: 51.3 $64 $66 $61 $57 $54 $51 50 $47 $49 $44 $41 $38 $38 $35 $31 $32 1 5 6 7 8 9 0 2 3 4 5 6 7 8 1 0 0
Slide 22: Q2 2018 Financials
Q2 2018 Financials NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 22 22
Slide 23: Q2 and Six Months Financial Summary
Q2 and Six Months Financial Summary $ in millions, except EPS Three Months Ended June 30, Six Months Ended June 30, 2018 2017 % Chg. 2018 2017 % Chg. Equipment Rental Revenue $392.5 $350.8 11.9% $761.6 $671.4 13.4% Total Revenues 485.5 415.8 16.8% 916.8 805.2 13.9% Net Income (Loss) (0.3) (27.6) NM
Slide 24: Q2 and Six Months Total Revenues
Q2 and Six Months Total Revenues Q2 YoY Total Revenues Q2 Total Revenues Bridge $ in millions • Total revenues increased 16.8%, or $69.7 $31.5 $485.5 $39.7 million, in Q2 2018 $(4.0) $415.8 $2.5 • Equipment rental revenue increased 11.9% in Q2 2018 ◦ Continued improvements in volume, price and mix ◦
Slide 25: Q2 and Six Months Adjusted EBITDA
Q2 and Six Months Adjusted EBITDA1 Q2 Adjusted EBITDA Bridge Q2 Adjusted EBITDA $ in millions • YoY adjusted EBITDA increased $19.1 million or 14.4% in Q2 2018 $39.7 $7.4 $152.2 • Higher equipment rental revenue of $39.7 $133.1 $0.5 million was the largest contributor to the $(23.6) $(4.7) $(0.2) im
Slide 26: Q2 and Six Months Net Results
Q2 and Six Months Net Results Q2 Net Results Bridge Q2 Net Results $ in millions • Net results improved to a loss of $0.3 million in $16.7 Q2 2018 compared to a loss of $27.6 million in $(0.3) the prior year $29.2 • Income taxes increased $23.0 million $(27.6) • Estimated effective tax rate of ~28%
Slide 27: Fleet at Original Equipment Cost (OEC)
Fleet at Original Equipment Cost (OEC)1 Fleet Ending Balance at OEC • Total fleet at OEC was $3.87 billion as of June 30, $ in billions 2018 2017 2018 • Average fleet at OEC increased 5.7% in Q2 2018 $3.87 over the prior-year quarter $3.73 $3.75 $3.65 $3.65 $3.56 • Fleet expenditures at OEC in Q2 20
Slide 28: Disciplined Capital Management
Disciplined Capital Management Net Leverage1 Liquidity $ in millions, as of 06/30/2018 4.1x ABL Facility $1,750.0 3.6x Outstanding (1,110.0) 3.3x Letters of Credit (22.8) Availability from ABL $617.2 Cash & Cash Equivalents 44.0 Total Liquidity $661.2 Q2 2017 Q4 2017 Q2 2018 • Net leverage improved
Slide 29: 2018 Full Year Guidance
2018 Full Year Guidance Affirming 2018 Guidance Adjusted EBITDA $630 to $660 million Net Fleet Capital Expenditures $525 to $575 million NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 29 29
Slide 30: Appendix
Q4 and FY 2017 AppendixFinancials NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 30
Slide 31: Glossary of Terms Commonly Used in the Industry
Glossary of Terms Commonly Used in the Industry 1 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 cos
Slide 32: Reconciliation of Net Income to EBITDA & Adj. EBITDA
Reconciliation of Net Income to EBITDA & Adj. EBITDA and Adj. EBITDA Margin and Flow-Through EBITDA and Adjusted EBITDA are not recognized terms 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 compa
Slide 33: Reconciliation of Net Income to EBITDA & Adj. EBITDA
Reconciliation of Net Income to EBITDA & Adj. EBITDA and Adj. EBITDA Margin and Flow-Through $ in millions Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Net income (loss) ($0.3) ($27.6) ($10.4) ($66.8) Income tax provision (benefit) 0.8 (22.2) (4.3) (37.3) Interest expens
Slide 34: Reconciliation of Net Leverage Ratio
Reconciliation 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
Slide 35: 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
Slide 36: Historic Fleet at OEC
Historic Fleet at OEC1 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 $ in millions 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 Beginning Balance – Fleet at OEC $3,384 $3,391 $3,537 $3,616 $3,384 $3,556 $3,556 $3,653 $3,752 $3,556 $3,651 $3,732 Expenditures – Fleet at OEC $90 $220 $142 $43 $495
Slide 37: Net Results Bridge
Net Results Bridge Three Months Ended June 30, Elements of Net Income (Loss) Bridge Currency $ in millions 2018 2017 $ Change translation Income tax Spin-off costs Impairment Interest Expense All Other Total revenues $485.5 $415.8 $69.7 $2.5 $— $— $— $— $67.2 Direct operating 194.5 168.6 25.9 1.3 —
Slide 38: SG&A Excluding Spin-off Costs
SG&A Excluding Spin-off Costs $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 SG&A $81.2 $78.8 $84.6 $76.0 $320.6 $74.5 $77.3 Spin-off costs ($7.6) ($9.1) ($10.3) ($8.2) ($35.2) ($4.9) ($3.9) SG&A excluding $73.6 $69.7 $74.3 $67.8 $285.4 $69.6 $73.4 Spin-off costs % of Total 18
Slide 39: Expand and Diversify Revenues: Driving $ Utilization
Expand and Diversify Revenues: Driving $ Utilization OEC as of 06/30/17 1 OEC as of 06/30/18 1 $3.65 billion $3.87 billion Lighting Lighting 1.8% 1.7% Other Compaction Compaction 2.6% 1.7% Other 1.6% Air Compressors 2.7% 2.8% Air Compressors ProContractor Aerial - Booms 2.5% Aerial - Booms 5.7% 18.9
Slide 40: Herc Rentals
a HercRentals NYSE: HRI