Herc Holdings Inc. · NYSE:HRI

Herc — Investor Day (September 2021)

60 slides from Herc's investor day presentation, Sep 20, 2021

Slide 2: Agenda: Shifting Into High Gear
Agenda: Shifting Into High Gear 4:00 PM Welcome and Introduction 5:00 PM Q&A Elizabeth Higashi All Participants Looking Back: Implementing Our Strategy 5:30 PM Cocktail Larry Silber Reception Shifting Into High Gear Aaron Birnbaum - Grow the Core - Expand Specialty - Elevate Technology Sustainabilit
Slide 3: Herc Rentals Team
Herc Rentals Team Larry Silber Aaron Birnbaum Mark Irion Elizabeth Higashi President & Chief Senior Vice President & Chief Senior Vice President & Chief Vice President, Executive Officer Operating Officer Financial Officer Investor Relations & Sustainability Our Purpose: We equip our customers and c
Slide 4: 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 defined by the federal In addition to results calculated according to accounting principles genera
Slide 6: More than 56 Years Serving Customers
More than 56 Years Serving Customers Our outstanding legacy is a strong foundation for the next chapter of our journey Growth / Industry Consolidation Implementing the Strategy Acquired Launched Introduced Specialty industry-first Completed Divested industry-first AA Rentals Larry Silber Entered Gro
Slide 7: Herc Rentals Today
Herc Rentals Today 56 Years serving customers 2,000 Equipment categories (1) 295 Locations in 39 states and five Canadian provinces 5,100 Employees serving North America $52 billion addressable market (1) Approximate location count as of September 20, 2021 NYSE: HRI 7 ©2021 Herc Rentals Inc. All Rig
Slide 8: Think Safety Delivers Results
Think Safety Delivers Results Total Recordable Incident Rate 1.35 1.11 1.05 • Continued focus on health and safety of our .99 employees, customers and communities .86 .801 • New Health & Safety Management System implemented this year helps us work more safely and streamlines reviews and audits • Ach
Slide 9: Major Accomplishments
Major Accomplishments Fleet Optimization Operational Efficiencies Market & Customer Diversification Financial Performance Focused on premium brands to Implemented Herc Operating Diversified customer base Strengthened balance sheet by enhance the customer experience Model improving net leverage from
Slide 10: Optimizing Branch Network and Fleet to Improve Profitability
Optimizing Branch Network and Fleet to Improve Profitability Contribution to Rental Revenue 2016 - 2021 Shift in Fleet $ in billions $1.90 $1.35 2016 Existing Greenfields Acquisitions 2021E Locations • Select greenfields maximize our urban market strategy As Total Branches as of September 20, 2021 •
Slide 11: Our Strategy is Delivering Results
Our Strategy is Delivering Results Equipment Rental Revenue $ Utilization1 $ in millions Adjusted EBITDA Margin2 Net Leverage1 (1) For definitions and calculations, see appendix beginning on slide 55 (2) For a definition and reconciliation to the most comparable GAAP financial measure, see slide 58
Slide 12: We Aspire to be the Supplier, Employer and Investment of Choice
We Aspire to be the Supplier, Employer and Investment of Choice in Our Industry Our Team Our Customers Our Communities Our Investors Experienced leadership Highly focused customer service Supporting our communities in Strong balance sheet model times of need Culture focused on integrity, Business mo
Slide 13: Shifting into High Gear – Key Takeaways
Shifting into High Gear – Key Takeaways 1 Grow Core the 2 Expand Specialty 3 Elevate Technology 4 Integrate ESG 5 Allocate Capital Increasing fleet and Accelerating secular Ongoing investment in New sustainability Ability to retain low locations in urban shift from ownership to technology to improve
Slide 15: Grow the Core
Shifting into High Gear 1 Grow Core the Grow fleet on existing locations Leverage scale of large urban markets Diversify end markets and broaden customer base Expand with greenfields and M&A NYSE: HRI 15 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 16: Core Fleet
Core Fleet Aerial Material Handling Earthmoving Equipment Other Boom lifts Carry-deck cranes Backhoes Air compressors Electric atrium lifts Electric forklifts Compact utility Solar light towers Electric scissor lifts Industrial forklifts Dozers Trucks and trailers Hybrid lifts Specialized lifting ge
Slide 17: Invest in More Fleet on Existing Locations
Invest in More Fleet on Existing Locations $ in millions Core Fleet at OEC • Core network of ~260 locations that has been purpose-built over the last 50 years $4,000 • Capacity to add $1.0 billion of core fleet growth over $3,000 the next three years to existing locations $2,000 • Operating leverage
Slide 18: Leverage Scale of Large Urban Markets
Leverage Scale of Large Urban Markets Diverse end markets and broad customer base Diverse fleet provides a range of solutions for a variety of customers Greenfields and M&A build branch density and create logistics efficiencies • Aviation • Infrastructure • Warehouses/Distribution • Contractors • Ut
Slide 19: Expand with Greenfields
Expand with Greenfields Targeted greenfield expansion strategy • Optimizing footprint in existing urban markets • Leveraging existing infrastructure to accelerate maturity of new locations • Develop specialty on existing real estate and expand to standalone facilities when ready for next growth phas
Slide 20: Adding Density to Large, Urban Markets Enhances Scale and Profitability
Adding Density to Large, Urban Markets Enhances Scale and Profitability Branch EBITDA Margin1 by Market Scale 70% 60% 50% 40% 30% 20% Developing Maturing Scaled (1) EBITDA margins exclude corporate overhead NYSE: HRI 20 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 21: Investing In Fleet & Expansion: New York City Metro Market
Investing In Fleet & Expansion: New York City Metro Market Locations 2016 2021E 2024E Broad Customer End User Markets Locations 6 8 16 • Warehousing/Distribution Rental Revenue $57M $84M $168M • Government • Infrastructure Market Size $2.4B $2.4B $2.8B • Entertainment • Healthcare Market Share 2% 4%
Slide 22: Growth with Acquisitions: Houston Market
Growth with Acquisitions: Houston Market Locations 2016 2021E 2024E Locations 6 13 15 Broad Customer End User Markets Rental Revenue $52M $75M $105M • Aviation Market Size $1.4B $1.4B $1.7B • Government • Infrastructure Market Share 4% 5% 6% • Contractors (general, electrical, mechanical, specialty)
Slide 23: Expand Existing Footprint: Toronto Market
Expand Existing Footprint: Toronto Market Locations 2016 2021E 2024E Locations 4 6 12 Broad Customer End User Markets Rental Revenue $20M $25M $85M • Warehousing/Distribution • Government Market Size $1.0B $1.2B $1.4B • Infrastructure • Entertainment Market Share 2% 2% 6% • Healthcare Density Status
Slide 25: Expand Specialty
Shifting into High Gear 2 Expand Specialty Continue aggressive investment in specialty fleet Expanding addressable market and continuing shift from ownership to rental Take advantage of cross-selling opportunities to increase wallet share NYSE: HRI 25 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 26: Specialty Fleet
Specialty Fleet Climate Control & Remediation Power & Distribution Pump Entertainment Services & Other Air quality control Electric air compressors Centrifugal pumps Aerial and lifting equipment Chillers and heaters Portable generators Self-priming pumps Carts Dehumidification Portable load banks St
Slide 27: Continue Investment in Specialty
Continue Investment in Specialty $ in millions Average Specialty Fleet at OEC $1,500 • Specialty equipment typically averages 14% to 16% higher $ utilization than core equipment • Growing specialty branch network enables rapid $1,000 response to meet customer demand • For urgent response, resources
Slide 28: Expanding Addressable Market and Continuing Shift from Ownership to Rental
Expanding Addressable Market and Continuing Shift from Ownership to Rental Expected increase in market size through rental penetration Herc Revenue Opportunity by Specialty Market in $m Current 2024 Current Future Market Market Target Rental Rental Share Market Penetration1 Penetration Climate Share
Slide 29: Take Advantage of Cross Selling Opportunities to Increase Wallet Share
Take Advantage of Cross Selling Opportunities to Increase Wallet Share 83% of revenue comes from $34 spent in our specialty lines for customers that rent from core every $100 in our core and specialty, contractor tools business 51% of revenue comes from Collaboration Sales structure set up to levera
Slide 30: Accelerating Specialty Growth Through 2024
Accelerating Specialty Growth Through 2024 Market Forces Herc Rentals Opportunity Target $ Utilization Accelerating 25% Increase Specialty secular trend to 25% - 30% in specialty rental Expanding + 30% of total OEC Increase = addressable share of market Higher $ customer wallet 50% - 60% Utilization
Slide 31: Elevate Technology
Shifting into High Gear 3 Elevate Technology Digital transformation that enables the rental consumption chain Continual investment in the technology platform to enhance the customer experience Leverage data and long-standing relationships to provide further customer value NYSE: HRI 31 ©2021 Herc Ren
Slide 32: Technology Investments Enhance Customer and Employee Experience
Technology Investments Enhance Customer and Employee Experience Technology Enabled People & Culture Digitally Enabled Every touch point along the rental consumption Account Management chain is an opportunity to provide easy, effective, and efficient customer service Our goal is to execute all of the
Slide 33: People & Culture; Smart Ordering
Digital Transformation People & Culture Smart Ordering • Enhancing e-commerce and digital customer access • Omni-channel experience • Manager training and development • Mobile enabled • Technician training programs • Solutions-based guided ordering • Digital on-demand learning for • Scheduling renta
Slide 34: Optimized Logistics; Data Driven Business Intelligence
Digital Transformation Optimized Logistics Data Driven Business Intelligence • Delivery and pickup updates • Broad and drillable data sources • Mapping and routing • Fleet optimization • Time to destination • Customer • Dispatch optimization management • Real-time documentation of • Algorithmic-driv
Slide 35: Intelligent Fleet Management; Digitally Enabled Account Management
Digital Transformation Intelligent Fleet Management Digitally Enabled Account Management • Telematics for • Account management equipment status • Self-service rental decision making • GPS for equipment location • Smart alerts • Geofencing for • Easy bill pay & PO management equipment security • Perf
Slide 36: Leverage Data and Customer Relationships
Leverage Data and Customer Relationships… 20 years of rich customer data to leverage future growth ~15M ~26M ~680M Generating Contracts Invoices Days on Rent > 20,000 new customers ~2M ~770K ~$25B every year Customers Assets Rented Revenue NYSE: HRI 36 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 37: Continual Investments in the Technology Platform
Continual Investments in the Technology Platform to Enhance the Customer Experience DIGITAL SALES & OPERATIONS ENTERPRISE SYSTEMS BUSINESS INTELLIGENCE INFRASTRUCTURE NYSE: HRI 37 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 39: Integrate ESG
Shifting into High Gear 4 Integrate ESG Our 2021 Corporate Citizenship Report aligned with Global Reporting Initiative standards Equipment rental represents the epitome of a sharing economy Improvements in equipment fuel economy and alternative fuels will contribute to reduction of our carbon footpr
Slide 40: Improvements in Equipment Will Contribute to Reduction of Our Carbon Footprint
Improvements in Equipment Will Contribute to Reduction of Our Carbon Footprint 4 Integrate ESG Our 2021 Corporate Citizenship Report aligned with Global Reporting Initiative standards We are developing initiatives to support our new 2030 sustainability goals for 2030 Reduce greenhouse gas emissions
Slide 42: Macro Economic Data Supports Future Growth
Macro Economic Data Supports Future Growth $ in billions U.S. Non-Residential Starts1 $ in billions Industrial Spending2 350 340 320 300 300 250 280 260 200 240 150 220 100 200 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21E 22E 23E 24E 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21E 22E 23E 24E Dodge M
Slide 43: Taking Advantage of a New Cycle
Taking Advantage of a New Cycle N.A. Equipment Rental Market1 Rental Penetration3 70% 65% 65% 60% 55% 50% 45% 40% 35% 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21E 22E 23E 24E Architecture Billings Index2 July 54.6 50 • Equipment rental market is forecast to grow ~10% in 2022 and from about $49 b
Slide 44: Allocate Capital
Shifting into High Gear 5 Allocate Capital Investment in fleet growth on existing locations Greenfield and M&A expansion Return capital to shareholders NYSE: HRI 44 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 45: Organic Growth
Organic Growth Total Average Fleet at OEC Organic Rental Revenue $ in millions $ in millions $5,600 $3,000 $2,500 $4,200 $2,000 $2,800 $1,500 $1,000 $1,400 $500 $0 $0 2020 2021E 2024E 2020 2021E 2024E $ in millions Organic Adjusted EBITDA Organic Net Leverage 3.0 $1,600 Target Net Leverage: 2.0x to
Slide 46: Growth in Fleet and Revenue Increases ROIC
Growth in Fleet and Revenue Increases ROIC ROIC1 20% 18% • Improving $ utilization and fleet 16% returns, as well as focus on 12% operating leverage and margin 12% improvement, are accelerating 8% 8% ROIC and support shareholder 8% 7% returns 4% 4% 4% • Investment in fleet early in the cycle and foc
Slide 47: Near Term Guidance
Near Term Guidance • Increased 2021 guidance for the third time this year – midpoint of adjusted EBITDA growth up 28% compared with 2020 • Issued new 2022 guidance – further increase to adjusted EBITDA of 25% from midpoint of growth over 2021 2021 2022 Metric Former Current Growth New Growth from pr
Slide 48: Financial Goals 2021-2024
Goal Metric 2016 - 2020 2021 - 20241 Rental Revenue CAGR 3.4% 12% to 15% Adjusted EBITDA CAGR 6.5% 17% to 20% Adj. EBITDA Margin Range 33% to 41% 45% to 50% Flow-Through 68% 60% to 70% Net Fleet Capital Expenditures $1.8 billion $2.5 to $3.0 billion Implied Market Share - through organic growth 3% 5
Slide 49: A New Capital Allocation Plan
A New Capital Allocation Plan We are committed to delivering long-term sustainable value for shareholders with a balanced, disciplined and opportunistic approach to capital deployment 1 Invest for Organic Growth 2 Strategic M&A 3 Dividend 4 Surplus Capital Committed to organic Pursue strategic Initi
Slide 50: Expanding through M&A
Expanding through M&A • Improve $ utilization through increased density and cross selling Herc Rentals Acquisitions to Date Cumulative Value • Acquiring talented workforce and local customer relationships – quicker than greenfields Average fleet: $223 million • Estimated opportunity for $500+ millio
Slide 51: How Do We Invest Surplus Capital?
How Do We Invest Surplus Capital? For illustrative purposes only, assume: Maintaining leverage at the lower end of our target Invest $1.5B in M&A range of 2.0x to 3.0x, we generate surplus capital of If you assume: $2.0 to $3.0 billion to be deployed in accordance with our capital allocation plan. •
Slide 52: Vision, Mission and Values
Vision, Mission and Values We are a customer-centric organization focused on safety, efficiency and profitable growth NYSE: HRI 52 ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 53: Summary
Summary 1 Grow Core the 2 Expand Specialty 3 Elevate Technology 4 Integrate ESG 5 Allocate Capital Increasing fleet and Accelerating secular Ongoing investment in New sustainability Ability to retain low locations in urban shift from ownership to technology to improve goals for 2030 versus leverage
Slide 56: Expanding Our Strategic Initiatives
Expanding Our Strategic Initiatives Develop Our Expand and Improve Operating Enhance Customer Disciplined Capital People and Culture Diversify Revenues Effectiveness Experience Management Attract and retain diverse Broaden customer base Improve sales force Provide premium products Drive EBITDA margi
Slide 57: 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 58: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin EBITDA and Adjusted EBITDA - EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA
Slide 59: Calculation of Net Leverage Ratio
Calculation 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 pr
Slide 60: Historical Fleet at OEC
Historical Fleet at OEC1 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q1 2021 Q2 2021 $ in millions Beginning Balance $3,384 $3,556 $3,651 $3,777 $3,822 $3,589 $3,626 Expenditures $495 $524 $774 $627 $349 $117 $188 Disposals ($328) ($442) ($607) ($593) ($551) ($111) ($71) Foreign Currency / Other $5 $13

Herc Holdings — Investor Day (September 2021) on 6ix

Herc — Investor Day (September 2021)

Slide 1: Shifting Into High Gear

Slide 2: Agenda: Shifting Into High Gear

Slide 3: Herc Rentals Team

Slide 4: Safe Harbor Statements and Non-GAAP Financial Measures

Slide 5: Looking Back: Implementing Our Strategy

Slide 6: More than 56 Years Serving Customers

Slide 7: Herc Rentals Today

Slide 8: Think Safety Delivers Results

Slide 9: Major Accomplishments

Slide 10: Optimizing Branch Network and Fleet to Improve Profitability

Slide 11: Our Strategy is Delivering Results

Slide 12: We Aspire to be the Supplier, Employer and Investment of Choice

Slide 13: Shifting into High Gear – Key Takeaways

Slide 14: Shifting Into High Gear

Slide 15: Grow the Core

Slide 16: Core Fleet

Slide 17: Invest in More Fleet on Existing Locations

Slide 18: Leverage Scale of Large Urban Markets

Slide 19: Expand with Greenfields

Slide 20: Adding Density to Large, Urban Markets Enhances Scale and Profitability

Slide 21: Investing In Fleet & Expansion: New York City Metro Market

Slide 22: Growth with Acquisitions: Houston Market

Slide 23: Expand Existing Footprint: Toronto Market

Slide 24: Expand with Greenfields and M&A

Slide 25: Expand Specialty

Slide 26: Specialty Fleet

Slide 27: Continue Investment in Specialty

Slide 28: Expanding Addressable Market and Continuing Shift from Ownership to Rental

Slide 29: Take Advantage of Cross Selling Opportunities to Increase Wallet Share

Slide 30: Accelerating Specialty Growth Through 2024

Slide 31: Elevate Technology

Slide 32: Technology Investments Enhance Customer and Employee Experience

Slide 33: People & Culture; Smart Ordering

Slide 34: Optimized Logistics; Data Driven Business Intelligence

Slide 35: Intelligent Fleet Management; Digitally Enabled Account Management

Slide 36: Leverage Data and Customer Relationships

Slide 37: Continual Investments in the Technology Platform

Slide 38: Sustainability

Slide 39: Integrate ESG

Slide 40: Improvements in Equipment Will Contribute to Reduction of Our Carbon Footprint

Slide 41: Financial Review

Slide 42: Macro Economic Data Supports Future Growth

Slide 43: Taking Advantage of a New Cycle

Slide 44: Allocate Capital

Slide 45: Organic Growth

Slide 46: Growth in Fleet and Revenue Increases ROIC

Slide 47: Near Term Guidance

Slide 48: Financial Goals 2021-2024

Slide 49: A New Capital Allocation Plan

Slide 50: Expanding through M&A

Slide 51: How Do We Invest Surplus Capital?

Slide 52: Vision, Mission and Values

Slide 53: Summary

Slide 54: NYSE: HRI

Slide 55: NYSE: HRI

Slide 56: Expanding Our Strategic Initiatives

Slide 57: Glossary of Terms Commonly Used in the Industry

Slide 58: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin

Slide 59: Calculation of Net Leverage Ratio

Slide 60: Historical Fleet at OEC