Herc Holdings Inc. · NYSE:HRI

Herc — FY2019 Earnings Presentation

35 slides from Herc's earnings presentation, Feb 27, 2020

  1. Slide 1: Q4 and FY 2019 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. Q4 AND FY 2019 EARNINGS CONFERENCE CALL February 27,

  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: Focus on Quality of Earnings Delivered Strong Results

    Focus on Quality of Earnings Delivered Strong Results Our strategic initiatives are driving improved pricing, dollar utilization, margins and strong free cash flow We are achieving excellent flow-through with better operating efficiencies We are managing fleet capital expenditures and disposals to i

  4. Slide 4: 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

  5. Slide 5: Full Year 2019 Highlights

    Full Year 2019 Highlights Equipment Rental Revenue FY Net Income2 $1,701.8M 2.6% YoY $47.5M 2. Net income includes $53.6 million of debt extinguishment costs related to the refinancing of Total Revenues the Company's Notes and ABL Credit Facility FY $1,999.0M 1.1% YoY Earnings Per Diluted Share Adju

  6. Slide 6: Consistent Organic Growth Since Spin-off

    Consistent Organic Growth Since Spin-off Equipment Rental Revenue Adjusted EBITDA1 $ in millions $ in millions $741.0 ’16-‘19 CAGR: 8.0% $1,701.8 ’16-‘19 CAGR: 11.4% $1,658.3 $684.8 $1,499.0 $585.4 $536.2 $1,352.7 2016 2017 2018 2019 2016 2017 2018 2019 Adjusted EBITDA Margin1 Net Leverage1 37.1% 4.

  7. Slide 7: Q4 and FY 2019 Operations Review

    Q4 AND FY 2019 OPERATIONS REVIEW NYSE: HRI 7 ©2020 Herc Rentals Inc. All Rights Reserved.

  8. Slide 8: Safety is at the Cornerstone of Everything We Do

    Safety is at the Cornerstone of Everything We Do ≥85% All branches achieved ≥ 85% Perfect Days through the fourth quarter of 2019 The Perfect Day 0.84 No OSHA recordable incidents No "at fault" motor vehicle accidents Reduced Total Recordable Incident Rate (TRIR) to .84 in the United No DOT violatio

  9. Slide 9: Continuing Rate Performance and Improving Utilization

    Continuing Rate Performance and Improving Utilization Pricing1 Average Fleet at OEC1 2018 2019 2018 2019 4.6% 4.5% 3.8% 5.7% 5.5% 3.3% 4.4% 2.9% 3.2% 2.9% 3.3% 2.8% 2.0% 0.4% 0.7% (1.3)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Utilization2 Average Fleet on Rent at OEC1 2018 2019 2018 2019 40.8% 40.5% 39.7% 39.2%

  10. Slide 10: Improving Fleet Mix to Drive Growth

    Improving Fleet Mix to Drive Growth Fleet Composition at OEC1,2 Trucks & Trailers 13.8% Other Material $3.82B 7.9% Handling Fleet at OEC1 17.4% Specialty 21.9% ® Specialty ProSolutions 15.6% 21.9% ProContractor 6.3% Earthmoving 13.8% Average fleet age of 45 months in Q4 2019 Aerial 25.2% 1. Based on

  11. Slide 11: Improving Customer Mix and Diversification

    Improving Customer Mix and Diversification FY Revenue by Customer1,2 FY Local vs National Mix1 Other: 20% Contractors: 33% National: 42% Infrastructure and Local: 58% Government: 18% Industrial: 29% 1. North America rental revenues 2. Refer to 10-K for description of industries related to each custo

  12. Slide 12: Focusing on High Growth Urban Markets

    Focusing on High Growth Urban Markets 39 states 275 6 provinces Approximately 275 locations, principally in North America1 Strong geographic footprint in high growth markets ARA Growth 5 Year CAGR by State or Province Targeting six to ten greenfield locations in 2020 Source: ARA IHS Global Insights

  13. Slide 13: Q4 and FY 2019 Financial Review

    Q4 AND FY 2019 FINANCIAL REVIEW NYSE: HRI 13 ©2020 Herc Rentals Inc. All Rights Reserved.

  14. Slide 14: 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 per share data 2019 2018 % Chg. 2019 2018 % Chg. Equipment Rental Revenue $457.0 $447.7 2.1% $1,701.8 $1,658.3 2.6% Total Revenues $540.1 $543.7 (0.7)% $1,999.0 $1,976.7 1.1% Net Inc

  15. Slide 15: Q4 and Full Year Total Revenues

    Q4 and Full Year Total Revenues Q4 Bridge $ in millions $9.4 $543.7 $0.1 $540.1 $(9.7) $(3.4) +2.1% Equipment rental revenue increased 2.1% in Q4 2019 with improvements in pricing and mix, partially 2018 Currency Equipment Sales of Sales of new 2019 offset by lower volume translation rental rental e

  16. Slide 16: Q4 and Full Year Adjusted EBITDA

    Q4 and Full Year Adjusted EBITDA1 Q4 Bridge $8.2 $1.3 $ in millions $5.5 $214.4 $9.4 $198.4 $(7.7) +8.1% $(0.7) Adjusted EBITDA increased $16.0 million YoY or 8.1% in Q4 2019 primarily due to higher equipment rental revenue of $9.4 million 2 2018 Currency Equipment Direct SG&A Other Gain/loss 2019 i

  17. Slide 17: Managing a Fleet of $3.82 billion at OEC to Improve Utilization

    Managing a Fleet of $3.82 billion at OEC1 to Improve Utilization Fleet Expenditures at OEC 2018 2019 $ in millions $321 $289 $414.2M $198 $171 $172 Net fleet capex, on a cash basis was $414.2 $103 million for FY 2019 compared with $499.1 $84 $63 million in the prior year Q1 Q2 Q3 Q4 Fleet expenditur

  18. Slide 18: Disciplined Capital Management

    Disciplined Capital Management Maturities $172M $ in millions, as of 12/31/2019 Free cash flow1 of $172.0 million YTD 2019 compared with negative free cash flow of $7.9 million in 2018 $1,200.0 Senior Unsecured Note $650.0 $61.4 ABL Credit $175.0 AR Finance Leases and Other Borrowings Facility Facil

  19. Slide 19: Industry Outlook

    Industry Outlook Architecture Billings Index1 N.A. Equipment Rental Market2 3.6% ($ in billions) as of February 2020 as of February 2020 ’19-‘23E CAGR: $67 January $62 $64 $58 $60 52.2 $55 $51 $47 $49 $44 $41 $38 $38 50 $35 $31 $32 1 5 6 7 8 9 0 2 3 4 5 6 7 8 9 0 1 0 0 0 0 0 1 1 1 1 1 1 1 1 1 2 - -

  20. Slide 20: 2020 Full Year Guidance

    2020 Full Year Guidance Adjusted EBITDA $760M to $790M 3% to 7% YoY Growth Net Fleet Capital Expenditures $410M to $450M Strong Free Cash Flow NYSE: HRI 20 ©2020 Herc Rentals Inc. All Rights Reserved.

  21. Slide 21: Our Strategic Initiatives are Delivering Results

    Our Strategic Initiatives are Delivering Results Our strategic initiatives continued to drive growth in rental revenues and $ utilization in our latest quarter We improved Q4 2019 adjusted EBITDA margin 320 basis points YoY to 39.7% We increased Q4 2019 $ utilization 80 basis points YoY to 40.5% We

  22. Slide 22: Appendix

    APPENDIX NYSE: HRI 22 ©2020 Herc Rentals Inc. All Rights Reserved.

  23. Slide 23: 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

  24. Slide 24: Q4 and Full Year Net Results

    Q4 and Full Year Net Results Q4 Bridge $ in millions Net income was $35.1 million in Q4 2019 compared $33.3 $11.2 $35.1 to $33.3 million in the prior year $4.1 ($0.7) $6.9 ($6.6) Interest expense decreased in Q4 2019 primarily due ($13.1) to the refinancing of the Company's Notes and ABL Credit Faci

  25. Slide 25: 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

  26. Slide 26: 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

  27. Slide 27: Reconciliation of Net Income to Adj. EBITDA, REBITDA Margin and Flow-Through

    Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through $ in millions Three Months Ended December 31, Full Year Ended December 31, 2019 2018 2019 2018 Net income $35.1 $33.3 $47.5 $69.1 Income tax provision (benefit) 18.1 5.0 16.

  28. Slide 28: REBITDA Margin Trend

    REBITDA Margin Trend $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Total Revenues $431.3 $485.5 $516.2 $543.7 $1,976.7 $475.7 $475.1 $508.1 $540.1 $1,999 Less: Sales of rental equipment 47.3 78.2 50.1 80.6 256.2 85.1 51.3 35.4 71.0 242.8 Less: Sales of

  29. Slide 29: 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

  30. Slide 30: 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

  31. Slide 31: Historical Fleet at OEC

    Historical Fleet at OEC1 $ in millions Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY 2018 FY 2019 2018 2018 2018 2018 2019 2019 2019 2019 Beginning Balance $3,651 $3,732 $3,873 $3,922 $3,651 $3,777 $3,694 $3,859 $3,943 $3,777 Expenditures $198 $321 $171 $84 $774 $103 $289 $172 $63 $627 Disposals ($109) ($179) ($126) (

  32. Slide 32: Q4 and Full Year Net Results Bridge

    Q4 and Full Year Net Results Bridge Three Months Ended December 31, Elements of Net Income (Loss) Bridge Currency1 Spin-off Depreciation of Loss on Interest $ in millions 2019 2018 $ Change impact Income tax Extinguishment All other costs rental equip. of Debt expense Total revenues $540.1 $543.7 ($

  33. Slide 33: SG&A Excluding Spin-off Costs

    SG&A Excluding Spin-off Costs Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY $ in millions 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 SG&A $74.5 $77.3 $78.4 $82.4 $312.6 $71.5 $73.5 $76.2 $73.6 $294.8 Spin-off costs ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) $— ($0.3) ($0.4) $0.2 ($0.5) SG&A excluding Spin-off costs

  34. Slide 34: Fleet Mix: Driving $ Utilization

    Fleet Mix: Driving $ Utilization December 31, December 31, 2018 2019 Aerial - Booms 18.3% 17.7% Aerial - Scissors & Other 7.6% 7.5% Earthmoving - Compact 8.5% 8.2% Earthmoving - Heavy 5.7% 5.6% Material Handling - Telehandlers 13.5% 13.4% Material Handling - Industrial 4.2% 4.0% Trucks and Trailers

  35. Slide 35: NYSE: HRI ©2020 Herc Rentals Inc. All Rights Reserved.

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

Herc Holdings — FY2019 Earnings Presentation on 6ix