Herc Holdings Inc. · NYSE:HRI
Herc — Q3 2023 Earnings Presentation
35 slides from Herc's earnings presentation, Oct 24, 2023
Slide 1: Shifting Into High Gear
Shifting Into High Gear ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 2: Herc Rentals Team & Agenda
Herc Rentals Team & Agenda Larry Silber Mark Humphrey President & Chief Senior Vice President & Executive Officer Chief Financial Officer Agenda • Safe Harbor • Q3 2023 Overview • Q3 Operations Review Aaron Birnbaum Leslie Hunziker • Q3 Financial Review Senior Vice President & Senior Vice President
Slide 3: 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 4: Third Quarter Financial Highlights: Accelerating Performance
Third Quarter Financial Highlights: Accelerating Performance Rental Revenue Total Revenues Adjusted EBITDA¹ $ in millions $765 $ in millions $908 $ in millions $410 $706 $745 $345 $520 $551 8% $508 22% $246 $460 19% $456 $209 $402 $196 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021
Slide 5: Third Quarter 2023 Highlights
Third Quarter 2023 Highlights Equipment rental market in N.A. • Return to normal seasonal demand trends • Supply chain recovering; although constraints persist in high-demand categories • Positive industry trends aided by stimulus, reshoring, electrification, energy efficiency • Shift from equipment
Slide 6: Q3 2023: Delivering on Growth Strategies
Q3 2023: Delivering on Growth Strategies Strategies to Accelerate ROIC and Increase Shareholder Returns: Optimize branch network for fleet / operating efficiencies at scale Grow the Core • Completed 2 acquisitions - 4 locations; opened 4 greenfield locations Enhance fleet mix Expand Specialty • Expa
Slide 7: Exploring Alternatives for Cinelease Studio Entertainment as Industry Model Shifts
Exploring Alternatives for Cinelease Studio Entertainment as Industry Model Shifts Cinelease is Herc's studio management and lighting and grip business • One of the only scaled studio-platform businesses in industry • Lighting and grip equipment represents ~5% of Herc OEC Studio ownership is becomin
Slide 8: Operations Review - Aaron Birnbaum
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 9: Q3 2023 Focusing on Safety
Q3 2023 Focusing on Safety Total Recordable Incident Rate of 0.78 YTD Proven safety record is a must-have for customers Herc's Safety Program integrated into all acquisitions Continuing focus on Perfect Days • All branches reported > 97% Perfect Days • Perfect Days are those with no: ◦ OSHA recordab
Slide 10: Delivering on Growth Strategies - Increasing Branch Network Density
Delivering on Growth Strategies - Increasing Branch Network Density Expanding Through Acquisitions and Greenfields Adding locations increases density and share in urban markets • Q3:23 - 2 acquisitions - 4 locations; 4 greenfield locations • YTD:23 - 8 acquisitions - 14 locations; 13 greenfield loca
Slide 11: Delivering on Growth Strategies — Enhancing Fleet Mix
Delivering on Growth Strategies — Enhancing Fleet Mix Equipment rental revenue +8%; Q3 record $765 million Fleet Composition • Pricing strategy and tools support discipline and greater market insight $6.2 billion at OEC1 • Core business driven by solid operating performance and demand from megaproje
Slide 12: Managing Fleet for Enhanced Utilization
Managing Fleet for Enhanced Utilization Fleet Expenditures at OEC1 Fleet Disposals at OEC1 $ in millions $ in millions 2022 2023 2022 2023 $400 $348 $327 $327 $309 $311 $253 $274 $186 $144 $140 $64 $64 $54 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Capital allocated for category classes that are • Increased fleet di
Slide 13: Business Model Driving Growth
Business Model Driving Growth Q3 Local vs. National Mix • Diverse end market mix and large national customers drives revenue growth in Q3, while project pipeline remains strong ◦ National account revenue up double-digits N ational: 42% ◦ In early innings of federal-funding opportunities Local: 58% •
Slide 14: Financial Review - Mark Humphrey
Financial Review Mark Humphrey Senior Vice President and Chief Financial Officer
Slide 15: Q3 2023 Financial Results
Q3 2023 Financial Results Three Months Ended September 30, Nine Months Ended September 30, 2023 vs 2022 % 2023 vs 2022 % 2023 2022 2023 2022 $ in millions, except per share data Change Change Equipment Rental Revenue $765 $706 8% $2,121 $1,838 15% Total Revenues $908 $745 22% $2,450 $1,953 25% Net I
Slide 16: Q3 2023 Adjusted EBITDA and Rental Revenue Bridge
Q3 2023 Adjusted EBITDA and Rental Revenue Bridge Equipment Rental Revenue Adjusted EBITDA $ in millions $ in millions $765 $410 $706 $345 2022 Pricing OEC on Ancillary Other Inflation Studio 2023 2022 Equipment Gain on DOE SG&A Studio Other 2023 Rent Entertainment Rental Sale of Entertainment Reven
Slide 17: Q3 2023 Financial Results Excluding Studio Entertainment
Q3 2023 Financial Results Excluding Studio Entertainment Three Months Ended September 30, Nine Months Ended September 30, 2023 vs 2022 % 2023 vs 2022 % 2023 2022 2023 2022 $ in millions Change Change Equipment Rental Revenue $760 $672 13% $2,081 $1,747 19% Total Revenues $901 $705 28% $2,404 $1,851
Slide 18: Disciplined Capital Management
Disciplined Capital Management Maturities As of September 30, 2023 No near-term maturities and ample liquidity2 of $ in millions $1.5 billion provide financial flexibility Net capital expenditures outpaced cash flow from operations due to investments in growth, resulting in ABL Credit Facility free
Slide 19: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 Industrial Spending2 $ in billions $ in billions $409 $86 $398 $83 $392 $80 $384 $76 $69 $60 $61 $57 $55 $353 $48 $50 $52 $329 — — — — — — — — — — — — — — — — $317 $317 $310 $308 $303 $299 15 16 17 18 19 20 21 22 23E 24E 25E 26E 15
Slide 20: Narrowing 2023 Guidance to Reflect Impact from Studio Entertainment
Narrowing 2023 Guidance to Reflect Impact from Studio Entertainment Metric 2023 Previous Guidance 2023 New Guidance % Change over 2022 Adjusted EBITDA $1.45 billion to $1.55 billion $1.45 billion to $1.50 billion 18% to 22% Net Rental Equipment $1.0 billion to $1.2 billion $1.0 billion to $1.1 billi
Slide 21: Purpose, Vision, Mission and Values
Purpose, Vision, Mission and Values We equip our customers and communities to build a brighter future NYSE: HRI 21 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 22: NYSE: HRI
NYSE: HRI 22 ©2023 Herc Rentals Inc. All Rights Reserved.
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: Our Strategy is Delivering Results
Our Strategy is Delivering Results Equipment Rental Revenue Adjusted EBITDA1 $ in millions $2,834 $1,431 $2,552 $1,227 $1,910 $895 $1,702 $1,544 $741 $689 2019 2020 2021 2022 TTM 2023 2019 2020 2021 2022 TTM 2023 Adjusted EBITDA Margin1 Net Leverage2 2.8x 44.8% 44.2% 43.2% 2.5x 2.4x 2.4x 38.7% 37.1%
Slide 25: Reconciliation of Net Income and Adjusted Earnings Per Diluted Share
Reconciliation of 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, merger and acquisition related costs, restructuring and restructuring related charges, spin-off costs, loss on exti
Slide 26: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, REBITDA
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through EBITDA, Adjusted EBITDA, and REBITDA - EBITDA represents the sum of net income, provision (benefit) for income taxes, interest expense, net, depreciation of rental equipm
Slide 27: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, REBITDA
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through $ in millions Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income $113 $101 $256 $232 Income tax provision 33 34 68 68 Interes
Slide 28: Reconciliation of Net Income to Adj. EBITDA, Excluding Studio Entertainment
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through, Excluding Studio Entertainment $ in millions Three Months Ended September 30, 2023 2022 Herc Studio Entertainment Herc, excl Studio Herc Studio Entertainment Herc, excl
Slide 29: Reconciliation of Net Income to Adj. EBITDA, Excluding Studio Entertainment
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through, Excluding Studio Entertainment $ in millions Nine Months Ended September 30, 2023 2022 Herc Studio Entertainment Herc, excl Studio Herc Studio Entertainment Herc, excl S
Slide 30: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Q3 2023 Total Revenues $568 $640 $745 $786 $2,740 $740 $802 $908 Less: Sales of rental equipment 28 19 21 57 125 71 83 124 Less: Sales of new equipment, parts and supplies 8 9 10 9 36 8 10 11 Equipme
Slide 31: REBITDA Margin Annual Trend
REBITDA Margin Annual Trend $ in millions 2018 2019 2020 2021 2022 Total Revenues $1,978 $1,999 $1,780 $2,073 $2,740 Less: Sales of rental equipment 256 243 198 113 125 Less: Sales of new equipment, parts and supplies 49 44 28 31 36 Equipment rental, service and other revenues $1,673 $1,712 $1,554 $
Slide 32: 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 pre
Slide 33: 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 34: Historical Fleet at OEC
Historical Fleet at OEC1 FY FY FY FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 $ in millions 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 2023 2023 Beginning Balance $3,651 $3,777 $3,822 $3,589 $4,381 $4,593 $5,097 $5,421 $4,381 $5,637 $5,915 $6,211 Expenditures $774 $627 $348 $725 $253 $327 $311 $327 $1,218 $34
Slide 35: For additional information, please contact: Leslie Hunziker
For additional information, please contact: Leslie Hunziker SVP Investor Relations leslie.hunziker@hercrentals.com 239-301-1675 NYSE: HRI 35 ©2023 Herc Rentals Inc. All Rights Reserved.