Herc Holdings Inc. · NYSE:HRI

Herc — Q2 2019 Earnings Presentation

36 slides from Herc's earnings presentation, Aug 1, 2019

  1. Slide 1: Herc Holdings Inc. Q2 2019 Earnings Conference Call

    Herc Holdings Inc. Q2 2019 Earnings Conference Call August 1, 2019 ©2019 Herc Rentals Inc. All Rights Reserved.

  2. Slide 2: Agenda

    Agenda Welcome and Introductions Elizabeth Higashi Vice President, Investor Relations Strategic Update & Industry Outlook Larry Silber President and Chief Executive Officer Q2 Financial Review Mark Irion Senior Vice President and Chief Financial Officer Q&A Larry Silber Mark Irion Bruce Dressel, Sen

  3. Slide 3: Safe Harbor Statements and Non-GAAP Financial Measures

    Safe Harbor Statements and Non-GAAP Financial Measures Forward-Looking Statements • issues we face with environmental, health and safety laws and regulations and the costs of complying with them; This presentation includes "forward-looking statements," as that term is defined by the • difficulty in

  4. Slide 4: Focus on Quality of Earnings Delivered Strong Results

    Focus on Quality of Earnings Delivered Strong Results Our strategic initiatives We achieved excellent drove improved pricing REBITDA flow-through and rental margins from reduced expenses We are managing fleet We are raising the capital expenditures lower end of our full and disposals to year 2019 ad

  5. Slide 5: 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

  6. Slide 6: Aligning our Performance with a Shared Purpose

    Aligning our Performance with a Shared Purpose We equip our customers and communities to build a brighter future NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 6

  7. Slide 7: The Company of Choice: Herc Rentals Honored by Military Veterans

    The Company of Choice Herc Rentals Honored by Military Veterans • Employer Support of the Guard and Reserve’s (ESGR) Patriot Award was awarded to Herc Rentals and President and CEO Larry Silber • Herc was also awarded the "Above and Beyond Award" for its program to support its guard and reserve empl

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

    Safety is at the Cornerstone of Everything We Do All regions achieved ≥ 85% Perfect Days for the first half of 2019 The Perfect Day • No OSHA recordable incidents • No "at fault" motor vehicle accidents • No DOT violations Ultimate goal is zero incidents and a safe environment for our team and custo

  9. Slide 9: Summary of Q2 2019 Results

    Summary of Q2 2019 Results $475.1 million Total Revenues (2.1)% YoY $407.6 million Equipment Rental Revenue +3.8% YoY Average Fleet1 (1.3)% YoY Pricing1 +4.6% YoY $9.7 million Net Income +$10.0 million YoY $0.33 Diluted Income Per Share +$0.34 YoY $174.9 million Adjusted EBITDA2 +14.9% YoY 38.0% Dol

  10. Slide 10: Continuing Rate Performance and Improving Utilization

    Continuing Rate Performance and Improving Utilization YOY CHANGE IN PRICING1 • YoY pricing improved 4.6% in Q2 2019, the 13th consecutive quarter of year-over-year 2018 2019 improvement 4.6% • Total OEC at quarter end was $3.86 billion, with a 3.8% 2.8% 2.9% 3.2% 2.9% decrease of average fleet at OE

  11. Slide 11: Improving Fleet Mix to Drive Growth

    Improving Fleet Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q2 2019 increased 260 bps YoY to 2018 2019 38.0% 39.2% 39.7% • Average fleet age improved to 44 months in Q2 38.0% 2019 from 46 months in Q2 2018 35.3% 35.5% 35.4% Q1 Q2 Q3 Q4 1,2 % OF SELECTED FLEET AT OEC1 FLEET COMPOSITION AT O

  12. Slide 12: Focusing on High Growth Urban Markets

    Focusing on High Growth Urban Markets Strong geographic footprint in high growth markets Approximately 265 locations, principally in North America1 • 39 states • 7 provinces Targeting four to six greenfield locations in 2019 Source: ARA IHS Global Insights May 2019 1. Locations as of June 30, 2019 N

  13. Slide 13: Improving Customer Mix and Diversification

    Improving Customer Mix and Diversification Q2 LOCAL VS NATIONAL % MIX1 Q2 REVENUE BY CUSTOMER1,2 Other: 21% Contractors: 33% National: 41% Local: 59% Infrastructure and Government: 18% Industrial: 28% Q2 LOCAL VS NATIONAL YOY GROWTH1 • Local rental revenue grew 7.7% YoY in Q2 2019 and now accounts f

  14. Slide 14: Strong Industry Outlook Supports Our Growth

    Strong Industry Outlook Supports Our Growth ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of June 2019 ($ in billions) .2% as of May 2019 GR: 5 June 2E CA ’18-‘2 49.1 $61 $64 $67 $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-10 Jan-1

  15. Slide 15: Q2 2019 Financial Review

    Q2 2019 Financial Review

  16. Slide 16: 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 2019 2018 % Chg. 2019 2018 % Chg. Equipment Rental Revenue $407.6 $392.5 3.8% $785.2 $761.6 3.1% Total Revenues $475.1 $485.5 (2.1)% $950.8 $916.8 3.7% Net income (loss) $9.

  17. Slide 17: Q2 and Six Months Total Revenues

    Q2 and Six Months Total Revenues Q2 BRIDGE SIX MONTHS BRIDGE $ in millions $ in millions $27.0 $12.0 $950.8 $916.8 $(0.3) $(4.7) $485.5 $16.6 $1.5 $475.1 $(2.0) $(26.5) 2018 Currency Equipment Sales of Sales of new 2019 2018 Currency Equipment Sales of Sales of new 2019 translation rental rental equ

  18. Slide 18: Q2 and Six Months Adjusted EBITDA

    Q2 and Six Months Adjusted EBITDA1 Q2 BRIDGE SIX MONTHS BRIDGE $ in millions $ in millions $13.0 $317.2 $27.0 $284.9 $0.1 $(2.8) $(0.7) $(4.3) $6.1 $1.1 $174.9 $16.6 $152.2 $2.4 $(2.6) $(0.9) 2 2 2018 Currency Equipment Direct SG&A Other Gain/loss 2019 2018 Currency Equipment Direct SG&A Other Gain/

  19. Slide 19: Managing Fleet at OEC to Improve Utilization

    Managing Fleet at OEC1 to Improve Utilization FLEET ENDING BALANCE AT OEC • Total fleet at OEC was $3.86 billion as of June 30, $ in billions 2019 2018 2019 • Average fleet at OEC decreased 1.3% in Q2 2019 $3.92 over the prior-year quarter and increased 0.3% for $3.87 $3.86 $3.73 $3.69 $3.78 the fir

  20. Slide 20: Disciplined Capital Management

    Disciplined Capital Management NET LEVERAGE1 LIQUIDITY $ in millions June 30, 2019 3.3x ABL and AR Facility $1,925.0 3.1x Outstanding (1,137.0) 2.8x Letters of Credit (24.6) Availability from ABL and AR Facility $763.4 Cash & Cash Equivalents 27.9 Q2 2018 Q4 2018 Q2 2019 Total Liquidity $791.3 • Net

  21. Slide 21: Re-Financing Extends Maturity and Reduces Interest

    Re-Financing Extends Maturity and Reduces Interest • In July 2019, issued $1.2 billion aggregate principal amount of its 5.50% Senior Notes due 2027 ◦ Net proceeds were used to redeem Senior Secured Second Priority Notes due 2022 and 2024 and to partially repay indebtedness outstanding under the exi

  22. Slide 22: 2019 Annual Guidance

    2019 Annual Guidance Prior Current Adjusted EBITDA: $730 to $760 million $735 to $760 million Net Fleet CapEx: $370 to $410 million $370 to $410 million NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 22

  23. Slide 23: Going Forward

    Going Forward Our Strategy is Working Our strategic initiatives We expect REBITDA $ utilization and We are increasing the are expected to flow-through of greater REBITDA margin are lower end of our FY continue to drive than 60% for the rest of both expected to 2019 adjusted EBITDA growth in revenues

  24. Slide 24: Appendix

    Appendix HercRentals”

  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 Net Results

    Q2 and Six Months Net Results Q2 BRIDGE SIX MONTHS BRIDGE $ in millions $ in millions $21.7 $3.0 $11.4 $9.7 $0 $8.5 $1.6 $3.2 $3.6 $(10.4) $0 $0.7 ($6.6) ($0.2) $(0.3) ($4.6) ($4.3) ($11.6) 2018 Currency Income tax Interest Spin-off Depreciation All other 2019 2018 Currency Income tax Interest Spin-

  27. Slide 27: 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 Rental Adjusted EBITDA (REBITDA) are not recognized terms under GAAP and should not be considered in isolation or as a substitute for our report

  28. Slide 28: 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 June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net income (loss) $9.7 ($0.3) $3.0 ($10.4) Income tax provision (benefit) 5.3

  29. Slide 29: REBITDA Margin Trend

    REBITDA Margin Trend $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Total Revenues $431.3 $485.5 $516.2 $543.7 $1,976.7 $475.7 $475.1 Less: Sales of rental equipment 47.3 78.2 50.1 80.6 256.2 85.1 51.3 Less: Sales of new equipment, parts and supplies 11.4 10.8 14.2 12.9 49.3 1

  30. Slide 30: 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

  31. Slide 31: 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

  32. Slide 32: Historical Fleet at OEC

    Historical Fleet at OEC1 $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Beginning Balance $3,651 $3,732 $3,873 $3,922 $3,651 $3,777 $3,694 Expenditures $198 $321 $171 $84 $774 $103 $289 Disposals ($109) ($179) ($126) ($193) ($607) ($193) ($123) Foreign Currency / Other ($8) ($

  33. Slide 33: 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 1 Currency Income Spin-off Depreciation of Interest $ in millions 2019 2018 $ Change All other impact tax costs rental equip. expense Total revenues $475.1 $485.5 ($10.4) ($2.0) $— $— $— $— ($8.4) D

  34. Slide 34: SG&A Excluding Spin-off Costs

    SG&A Excluding Spin-off Costs Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 $ in millions SG&A $74.5 $77.3 $78.4 $82.4 $312.6 $71.5 $73.5 Spin-off costs ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) $— ($0.3) SG&A excluding Spin-off costs $69.6 $73.4 $76.7 $78.5 $298.2 $71.5 $73.2 % of Total Revenue

  35. Slide 35: Fleet Mix: Driving $ Utilization

    Fleet Mix: Driving $ Utilization OEC AS OF 06/30/181 OEC AS OF 06/30/191 Lighting 1.6% Other Lighting 2.7% Compaction 1.6% Air Compressors 1.6% Other Compaction 2.7% 2.5% 1.5% ProContractor Air Compressors 6.1% Aerial - Booms 2.5% Aerial - Booms ProContractor 18.8% 6.2% 17.8% ProSolutions™ 13.6% Pro

  36. Slide 36: NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved.

    NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 36

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