Herc Holdings Inc. · NYSE:HRI
Herc — FY2018 Earnings Presentation
34 slides from Herc's earnings presentation, Feb 28, 2019
Slide 1: Herc Holdings Inc. Q4 and FY 2018 Earnings Call
Herc Holdings Inc. Q4 and FY 2018 Earnings Call February 28, 2019 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 2: Agenda
Agenda Welcome and Introductions Elizabeth Higashi Vice President, Investor Relations Strategic Update & Industry Outlook Larry Silber President and Chief Executive Officer Q4 and Full Year Financial Review Mark Irion Senior Vice President and Chief Financial Officer Q&A Larry Silber Mark Irion Bruc
Slide 3: Safe Harbor Statements
Safe Harbor Statements Forward-Looking Statements ◦ some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code; This presentation contains statements, including those related to 2019 guidance, that are not statements of historic
Slide 4: Safe Harbor Continued and Non-GAAP Financial Measures
Safe Harbor Continued and Non-GAAP Financial Measures if New Hertz fails to pay its tax liabilities under the tax matters agreement Information Regarding Non-GAAP Financial Measures or to perform its obligations under the separation and distribution agreement, we could incur significant tax and othe
Slide 5: Our Strategy Delivered Results in 2018
Our Strategy Delivered Results in 2018 Our strategic initiatives We achieved strong drove volume growth, revenue growth and improved pricing and flow-through fleet diversification $ utilization and 2018 results are a adjusted EBITDA strong platform for margin increased YoY continued growth in every
Slide 6: Our Strategic Initiatives
Our Strategic Initiatives Develop Our Expand and Improve Enhance Disciplined People and Diversify Operating Customer Capital Culture1 Revenues Effectiveness Experience Management • Attract and retain • Broaden customer • Focus on safety, • Provide premium • Drive EBITDA talent base labor productivit
Slide 7: Focus on Safety
Focus on Safety Total Recordable Incident Rate (TRIR) improved 22% from 2016 to 2018 All regions achieved ≥ 85% perfect days in 2018 The Perfect Day: No OSHA recordable incidents, no "at fault" motor vehicle accidents, no DOT violations "Safety is an action, not a metric" Ultimate goal is zero incid
Slide 8: Full Year 2018 Results
Full Year 2018 Results TOTAL REVENUES ADJUSTED EBITDA $ in millions $ in millions $1,976.7 $684.8 $1,754.5 $585.4 $1,554.8 $536.2 2016 2017 2018 2016 2017 2018 NET RESULTS2 Full Year 2018 vs 2017 $ in millions • Total revenues grew 12.7% $160.3 • Equipment rental revenue increased 10.6% • Net income
Slide 9: Continuing Strong Performance
Continuing Strong Performance YOY CHANGE IN PRICING1 • YoY pricing improved 2.9% in Q4 2018, the 11th 2017 2018 consecutive quarter of year-over-year improvement 3.2% with a 2.9% improvement for FY 2018 2.8% 2.9% 3.0% 2.9% 1.7% • Total OEC at year end was $3.78 billion, an 1.4% 1.1% increase of aver
Slide 10: Improving Fleet Mix to Drive Growth
Improving Fleet Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q4 2018 achieved an all-time 2017 2018 quarterly high since becoming a stand-alone public company, increasing 100 bps YoY to 39.7% 39.7% 38.7% 39.2% 38.7% • FY 2018 $ utilization improved 330 bps to 37.4% 35.3% 35.4% 34.0% compare
Slide 11: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets Approximately 270 locations, principally in North America1 Added greenfield locations in Dallas, St. Louis, Atlanta and Seattle in 2018 Source: ARA IHS Global Insights February 2019 1. Locations as of December 31, 2018 NYSE: HRI ©2019 Herc Rentals Inc. All Right
Slide 12: Improving Customer Mix and Diversification
Improving Customer Mix and Diversification FY LOCAL VS NATIONAL % MIX1 FY REVENUE BY CUSTOMER1,2 Other: 19% Contractors: 35% National: 43% Infrastructure and Local: 57% Government: 17% Industrial: 29% FY LOCAL VS NATIONAL YOY GROWTH1 • Local rental revenue grew 17% YoY in 2018 2017 2018 • Local rent
Slide 13: Strong Industry Outlook Supports Our Growth
Strong Industry Outlook Supports Our Growth ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of January 2019 ($ in billions) .4% as of February 2019 GR: 5 January 2E CA ’17-‘2 55.3 $60 $63 $66 $55 $58 $51 $44 $47 $49 50 $38 $35 $38 $41 $31 $32 Jan-11 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 J
Slide 14: Q4 and FY 2018 Financial Review
Q4 and FY 2018 Financial Review
Slide 15: Q4 and Full Year Financial Summary
Q4 and Full Year Financial Summary Three Months Ended December 31, Full Year Ended December 31, $ in millions, except EPS 2018 2017 % Chg. 2018 2017 % Chg. Equipment Rental Revenue $447.7 $414.5 8.0% $1,658.3 $1,499.0 10.6% Total Revenues $543.7 $491.7 10.6% $1,976.7 $1,754.5 12.7% Net Income1 $33.3
Slide 16: Q4 and Full Year Total Revenues
Q4 and Full Year Total Revenues Q4 BRIDGE FULL YEAR BRIDGE $ in millions $ in millions $158.8 $65.7 $1,976.7 $1,754.5 $0.3 $(2.6) $18.8 $0.6 $543.7 $35.0 $491.7 $(2.4) 2017 Currency Equipment Sales of Sales of new 2018 2017 Currency Equipment Sales of Sales of new 2018 translation rental rental equi
Slide 17: Q4 and Full Year Adjusted EBITDA
Q4 and Full Year Adjusted EBITDA1 Q4 BRIDGE FULL YEAR BRIDGE $ in millions $ in millions $158.8 $4.0 $11.9 $684.8 $585.4 $(62.6) $(9.0) $(3.7) $35.0 $1.5 $0.3 $198.4 $177.8 $0.9 $(9.0) $(8.1) 2017 Currency Equipment Direct SG&A Other Gain/loss 2018 2017 Currency Equipment Direct SG&A Other Gain/loss
Slide 18: Q4 and Full Year Net Results
Q4 and Full Year Net Results Q4 BRIDGE FULL YEAR BRIDGE $ in millions $ in millions $160.3 $214.3 $1.7 ($3.9) $83.6 $69.1 $0 $29.6 $4.2 $4.3 $0.4 $6.6 $33.3 $20.8 $3.1 $0 ($198.2) ($224.4) 2017 Currency Income tax Interest Spin-off Impairment All other 2018 2017 Currency Income tax Interest Spin-off
Slide 19: Fleet at Original Equipment Cost (OEC)
Fleet at Original Equipment Cost (OEC)1 FLEET ENDING BALANCE AT OEC • Total fleet at OEC was $3.78 billion as of $ in billions December 31, 2018 2017 2018 • Average fleet at OEC increased 4.4% in Q4 2018 $3.92 over the prior-year quarter $3.87 $3.73 $3.75 $3.78 $3.65 $3.65 $3.56 • Fleet expenditures
Slide 20: Disciplined Capital Management
Disciplined Capital Management NET LEVERAGE1 LIQUIDITY 3.6x $ in millions Dec 31, 2018 ABL and AR Facility $1,925.0 3.1x Outstanding (1,260.2) Letters of Credit (24.6) Availability from ABL and AR Facility $640.2 Cash & Cash Equivalents 27.8 Q4 2017 Q4 2018 Total Liquidity $668.0 • Net leverage of ~
Slide 21: 2019 Full Year Guidance
2019 Full Year Guidance Adjusted EBITDA: $730 to $760 million Net Fleet Capital Expenditures: $370 to $410 million NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 21
Slide 22: Going Forward
Going Forward Our Strategy is Working Our strategic initiatives We expect to maintain We are initiating our $ utilization and are expected to REBITDA flow-through of FY 2019 adjusted adjusted EBITDA continue to drive approximately 60-70% EBITDA guidance of margin are both growth in revenues and thro
Slide 23: Appendix
Appendix ©2018 Herc Rentals Inc. All Rights Reserved.
Slide 24: 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
Slide 25: Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA)
Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through EBITDA, Adjusted EBITDA, and Rental Adjusted EBITDA (REBITDA) are not recognized terms under GAAP and should not be considered in isolation or as a substitute for our report
Slide 26: Reconciliation of Net Income to Adj. EBITDA and REBITDA
Reconciliation of Net Income to Adj. EBITDA and REBITDA Calculations include Adj. EBITDA Margin, REBITDA Margin and REBITDA Flow-Through $ in millions Three Months Ended December 31, Full Year Ended December 31, 2018 2017 2018 2017 2016 Net income (loss) $33.3 $214.3 $69.1 $160.3 ($19.7) Income tax
Slide 27: REBITDA Margin Trend
REBITDA Margin Trend $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Total Revenues $389.4 $415.8 $457.6 $491.7 $1,754.5 $431.3 $485.5 $516.2 $543.7 $1,976.7 Less: Sales of rental equipment 54.4 46.4 27.7 62.3 190.8 47.3 78.2 50.1 80.6 256.2 Less: Sales
Slide 28: 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 29: 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 30: Historical Fleet at OEC
Historical Fleet at OEC1 $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Beginning Balance $3,556 $3,556 $3,653 $3,752 $3,556 $3,651 $3,732 $3,873 $3,922 $3,651 Expenditures $119 $217 $126 $62 $524 $198 $321 $171 $84 $774 Disposals ($120) ($111) ($66) ($
Slide 31: Net Results Bridge
Net Results Bridge Three Months Ended December 31, Elements of Net Income (Loss) Bridge Currency Interest $ in millions 2018 2017 $ Change impact 1 Income tax Spin-off costs Impairment Expense All Other Total revenues $543.7 $491.7 $52.0 ($2.4) $— $— $— $— $54.4 Direct operating 204.0 194.2 9.8 (1.1
Slide 32: SG&A Excluding Spin-off Costs
SG&A Excluding Spin-off Costs Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 $ in millions SG&A $81.1 $78.8 $84.5 $75.8 $320.2 $74.5 $77.3 $78.4 $82.4 $312.6 Spin-off costs ($7.6) ($9.1) ($10.3) ($8.2) ($35.2) ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) SG&A excluding Spin-o
Slide 33: Expand and Diversify Revenues: Driving $ Utilization
Expand and Diversify Revenues: Driving $ Utilization OEC AS OF 12/31/17 1 OEC AS OF 12/31/18 1 Lighting 1.7% Other Lighting 2.6% Compaction 1.7% Air Compressors 1.6% Other Compaction 2.6% 2.6% 1.5% ProContractor Air Compressors 6.1% Aerial - Booms 2.4% Aerial - Booms ProContractor 18.7% 6.7% 18.3% P
Slide 34: NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved.
NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 34