Herc Holdings Inc. · NYSE:HRI
Herc — Q1 2019 Earnings Presentation
34 slides from Herc's earnings presentation, May 2, 2019
Slide 1: Herc Holdings Inc. Q1 2019 Earnings Conference Call
Herc Holdings Inc. Q1 2019 Earnings Conference Call May 2, 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 Q1 Financial Review Mark Irion Senior Vice President and Chief Financial Officer Q&A Larry Silber Mark Irion Bruce Dressel, Sen
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: Continued to Achieve Strong Results in Q1 2019
Continued to Achieve Strong Results in Q1 2019 Our strategic initiatives We achieved strong drove improved pricing REBITDA flow-through and rental margins from continued expense controls We are currently We affirm our full year seeing the seasonal 2019 adjusted EBITDA ramp-up for rental and net flee
Slide 6: 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 • Broaden customer • Focus on safety, • Provide premium • Drive EBITDA talent base labor productivity
Slide 7: Focus on Safety and Training
Focus on Safety and Training All regions achieved ≥ 87% Perfect Days in the first quarter of 2019 "Safety is an The Perfect Day • No OSHA recordable incidents action, not a • No "at fault" motor vehicle accidents metric" • No DOT violations Ultimate goal is zero incidents and a safe environment for
Slide 8: Summary of Q1 2019 Results
Summary of Q1 2019 Results $475.7 million Total Revenues +10.3% YoY $377.6 million Equipment Rental Revenue +2.3% YoY Average Fleet1 Growth +2.0% YoY Pricing1 +3.8% YoY $(6.7) million Net Loss +$3.4 million YoY $(0.23) Diluted Loss Per Share +$0.13 YoY $142.3 million Adjusted EBITDA2 +7.2% YoY 35.5%
Slide 9: Continuing Strong Performance
Continuing Strong Performance YOY CHANGE IN PRICING1 • YoY pricing improved 3.8% in Q1 2019, the 12th consecutive quarter of year-over-year improvement 2018 2019 3.8% • Total OEC at year end was $3.69 billion, an 3.2% 2.8% 2.9% 2.9% increase of average fleet at OEC of 2.0% for Q1 • Average fleet on
Slide 10: Improving Fleet Mix to Drive Growth
Improving Fleet Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q1 2019 increased 20 bps YoY to 2018 2019 35.5% 39.2% 39.7% • Average fleet age improved to 46 months in Q1 2019 from 49 months in Q1 2018 35.3% 35.5% 35.4% Q1 Q2 Q3 Q4 1,2 % OF SELECTED FLEET AT OEC1 FLEET COMPOSITION AT OEC VS.
Slide 11: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets Approximately 270 locations, principally in North America1 • 39 states • 7 provinces Targeting four to six greenfield locations in high-growth urban markets in 2019 Source: ARA IHS Global Insights February 2019 1. Locations as of March 31, 2019 NYSE: HRI ©2019 H
Slide 12: Improving Customer Mix and Diversification
Improving Customer Mix and Diversification Q1 LOCAL VS NATIONAL % MIX1 Q1 REVENUE BY CUSTOMER1,2 Other: 19% Contractors: 34% National: 42% Infrastructure and Local: 58% Government: 19% Industrial: 28% Q1 LOCAL VS NATIONAL YOY GROWTH1 • Local rental revenue grew 10% YoY in Q1 2019 2018 2019 • Local r
Slide 13: Strong Industry Outlook Supports Our Growth
Strong Industry Outlook Supports Our Growth ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of March 2019 ($ in billions) .4% as of February 2019 GR: 5 March 2E CA ’17-‘2 47.8 $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 Jan-1
Slide 14: Q1 2019 Financial Review
Q1 2019 Financial Review HercRentals”
Slide 15: Q1 Financial Summary
Q1 Financial Summary Three Months Ended March 31, $ in millions, except per share data 2019 2018 % Chg. Equipment Rental Revenue $377.6 $369.1 2.3% Total Revenues $475.7 $431.3 10.3% Net Loss $(6.7) $(10.1) 33.7% Diluted Loss Per Share $(0.23) $(0.36) 36.1% Adjusted EBITDA1 $142.3 $132.7 7.2% Adjust
Slide 16: Q1 Total Revenues
Q1 Total Revenues Q1 BRIDGE $ in millions $38.5 $475.7 $431.3 $10.4 $(1.8) $(2.7) 2018 Currency Equipment Sales of Sales of new 2019 translation rental rental equipment revenue equipment and other Q1 TOTAL REVENUES • Total revenues increased 10.3%, or $44.4 million, in Q1 2019 • Equipment rental rev
Slide 17: Q1 Adjusted EBITDA
Q1 Adjusted EBITDA1 Q1 BRIDGE $6.8 $ in millions $10.4 $142.3 $(0.3) $(1.7) $132.7 $(3.3) $(2.3) 2018 Currency Equipment Direct SG&A Other Gain/loss 2019 impact rental operating on sales of revenue expenses equipment, parts and supplies Q1 ADJUSTED EBITDA • YoY adjusted EBITDA increased $9.6 million
Slide 18: Fleet at Original Equipment Cost (OEC)
Fleet at Original Equipment Cost (OEC)1 FLEET ENDING BALANCE AT OEC • Total fleet at OEC was $3.69 billion as of $ in billions March 31, 2019 2018 2019 • Average fleet at OEC increased 2.0% in Q1 2019 $3.9 $3.9 over the prior-year quarter $3.8 $3.7 $3.7 • Fleet expenditures at OEC in Q1 2019 were $1
Slide 19: Disciplined Capital Management
Disciplined Capital Management NET LEVERAGE1 LIQUIDITY $ in millions March 31, 2019 3.3x ABL and AR Facility $1,925.0 3.1x 2.9x Outstanding (1,151.0) Letters of Credit (24.6) Availability from ABL and AR Facility $749.4 Cash & Cash Equivalents 24.5 Q1 2018 Q4 2018 Q1 2019 Total Liquidity $773.9 • Ne
Slide 20: 2019 Annual Guidance Affirmed
2019 Annual Guidance Affirmed Adjusted EBITDA: $730 million to $760 million Net Fleet Capital Expenditures: $370 million to $410 million NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 20
Slide 21: Going Forward
Going Forward Our Strategy is Working Our strategic initiatives We expect to maintain $ utilization and We are affirming our are expected to REBITDA flow-through of REBITDA margin are FY 2019 adjusted continue to drive approximately 60-70% both expected to EBITDA guidance of growth in revenues and t
Slide 22: Appendix
Appendix
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
Slide 24: Q1 Net Results
Q1 Net Results Q1 BRIDGE $ in millions $0 $10.3 $4.9 $(6.7) $(10.1) ($1.5) ($2.0) ($1.0) ($7.3) 2018 Currency Income tax Interest Spin-off Depreciation of All other 2018 impact expense costs rental equipment Q1 NET RESULTS • Net results improved to a loss of $6.7 million in Q1 2019 compared to a los
Slide 25: Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, REBITDA, REBITDA Margin 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 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 Calculation of Adjusted EBITDA Margin, REBITDA Margin and REBITDA Flow-Through $ in millions Three Months Ended March 31, 2019 2018 Net income (loss) ($6.7) ($10.1) Income tax provision (benefit) (3.1) (5.1) Interest expense, net 32.9 32.0 Depr
Slide 27: REBITDA Margin Trend
REBITDA Margin Trend $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Total Revenues $431.3 $485.5 $516.2 $543.7 $1,976.7 $475.7 Less: Sales of rental equipment 47.3 78.2 50.1 80.6 256.2 85.1 Less: Sales of new equipment, parts and supplies 11.4 10.8 14.2 12.9 49.3 10.9 Equipment rental
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 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Beginning Balance $3,651 $3,732 $3,873 $3,922 $3,651 $3,777 Expenditures $198 $321 $171 $84 $774 $103 Disposals ($109) ($179) ($126) ($193) ($607) ($193) Foreign Currency / Other ($8) ($1) $4 ($36) ($41) $7 Ending
Slide 31: Net Results Bridge
Net Results Bridge Three Months Ended March 31, Elements of Net Income (Loss) Bridge Depreciation Currency Income Spin-off Interest $ in millions 2019 2018 $ Change of rental All other impact 1 tax costs expense equipment Total revenues $475.7 $431.3 $44.4 ($2.7) $— $— $— $— $47.1 Direct operating 1
Slide 32: SG&A Excluding Spin-off Costs
SG&A Excluding Spin-off Costs Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 $ in millions SG&A $74.5 $77.3 $78.4 $82.4 $312.6 $71.5 Spin-off costs ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) $0.0 SG&A excluding Spin-off costs $69.6 $73.4 $76.7 $78.5 $298.2 $71.5 % of Total Revenue 16.1% 15.1% 14.9% 14.4%
Slide 33: Fleet Mix: Driving $ Utilization
Fleet Mix: Driving $ Utilization OEC AS OF 03/31/181 OEC AS OF 03/31/191 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 6.3% Aerial - Booms 2.3% Aerial - Booms ProContractor 18.6% 6.8% 17.9% ProSolutions™ 13.6% Pro
Slide 34: NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved.
NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 34