Herc Holdings Inc. · NYSE:HRI
Herc — Q3 2019 Earnings Presentation
34 slides from Herc's earnings presentation, Oct 23, 2019
Slide 1: Herc Holdings Inc. Q3 2019 Earnings Conference Call
Herc Holdings Inc. Q3 2019 Earnings Conference Call October 23, 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 Q3 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 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
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 and improved margin from reduced expenses We are managing fleet We are updating our capital expenditures full year 2019 adjusted and di
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
Slide 6: Safety is at the Cornerstone of Everything We Do
Safety is at the Cornerstone of Everything We Do All branches achieved ≥ 90% Perfect Days through the third quarter 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 a
Slide 7: Summary of Q3 2019 Results
Summary of Q3 2019 Results GAAP Measures $459.6 million Equipment Rental Revenue +2.4% YoY $508.1 million Total Revenues (1.6)% YoY Net Income1 $9.4 million Earnings Per Diluted Share $0.32 Non-GAAP Measures and Key Metrics Adjusted Net Income2 $43.2 million Adjusted Earnings Per Diluted Share2 $1.4
Slide 8: Continuing Rate Performance and Improving Utilization
Continuing Rate Performance and Improving Utilization YOY CHANGE IN PRICING1 • YoY pricing improved 4.5% in Q3 2019, the 14th consecutive quarter of year-over-year 2018 2019 improvement 4.6% 4.5% • Total OEC at quarter end was $3.94 billion, with an 3.8% 2.8% 2.9% 3.2% 2.9% increase of average fleet
Slide 9: Improving Fleet Mix to Drive Growth
Improving Fleet Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q3 2019 increased 160 bps YoY to 2018 2019 40.8% 40.8% • Average fleet age improved to 44 months in Q3 39.2% 39.7% 38.0% 2019 from 46 months in Q3 2018 35.3% 35.5% 35.4% Q1 Q2 Q3 Q4 1,2 % OF SELECTED FLEET AT OEC1 FLEET COMPOSITIO
Slide 10: Improving Customer Mix and Diversification
Improving Customer Mix and Diversification Q3 LOCAL VS NATIONAL % MIX1 Q3 REVENUE BY CUSTOMER1,2 Other: 21% Contractors: 34% National: 39% Infrastructure and Local: 61% Government: 18% Industrial: 27% Q3 LOCAL VS NATIONAL YOY GROWTH1 • Local rental revenue grew 4.9% YoY in Q3 2019 and now accounts f
Slide 11: Industry Outlook
Industry Outlook ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of August 2019 ($ in billions) .8% as of August 2019 GR: 3 August 3E CA ’19-‘2 47.2 $67 $60 $62 $64 $55 $57 $51 50 $44 $47 $49 $38 $35 $38 $41 $31 $32 Jan-11 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-12 Jan-13 Jan-14
Slide 12: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets Strong geographic footprint in high growth markets Approximately 270 locations, principally in North America1 • 39 states • 7 provinces Targeting four to six greenfield locations in 2019 Source: ARA IHS Global Insights August 2019 1. Locations as of September 30
Slide 13: Q3 2019 Financial Review
Q3 2019 Financial Review
Slide 14: Q3 and Nine Months Financial Summary
Q3 and Nine Months Financial Summary Three Months Ended September 30, Nine Months Ended September 30, $ in millions, except per share data 2019 2018 % Chg. 2019 2018 % Chg. Equipment Rental Revenue $459.6 $449.0 2.4% $1,244.8 $1,210.6 2.8% Total Revenues $508.1 $516.2 (1.6)% $1,458.9 $1,433.0 1.8% N
Slide 15: Q3 and Nine Months Total Revenues
Q3 and Nine Months Total Revenues Q3 BRIDGE NINE MONTHS BRIDGE $ in millions $ in millions $38.1 $1,458.9 $1,433.0 $(2.6) $(4.3) $(5.3) $11.1 $516.2 $508.1 $(0.7) $(14.6) $(3.9) 2018 Currency Equipment Sales of Sales of new 2019 translation rental rental equipment 2018 Currency Equipment Sales of Sa
Slide 16: Q3 and Nine Months Adjusted EBITDA
Q3 and Nine Months Adjusted EBITDA1 Q3 BRIDGE NINE MONTHS BRIDGE $ in millions $ in millions $10.1 $38.1 $526.6 $(1.0) $(1.5) $(5.4) $486.4 $(0.1) $11.1 $1.8 $209.4 $201.5 $(3.0) $(0.7) $(1.1) $(0.2) 2 2 2018 Currency Equipment Direct SG&A Other Gain/loss 2019 2018 Currency Equipment Direct SG&A Oth
Slide 17: Managing Fleet at OEC to Improve Utilization
Managing Fleet at OEC1 to Improve Utilization • Average fleet at OEC increased 0.4% in Q3 2019 FLEET ENDING BALANCE AT OEC over the prior-year quarter and increased 0.3% for $ in billions the nine months 2018 2019 • Fleet expenditures at OEC in Q3 2019 were $172 $3.87 $3.86 $3.92 $3.94 million with
Slide 18: Disciplined Capital Management
Disciplined Capital Management NET LEVERAGE1 LIQUIDITY September 30, $ in millions 3.4x 2019 3.1x ABL and AR Facility $1,925.0 3.0x Outstanding (927.0) Letters of Credit (21.5) Availability from ABL and AR Facility $976.5 Cash & Cash Equivalents 34.5 Q3 2018 Q4 2018 Q3 2019 Total Liquidity $1,011.0
Slide 19: 2019 Annual Guidance
2019 Annual Guidance Prior Current Adjusted EBITDA: $735 to $760 million $740 to $750 million Net Fleet CapEx: $370 to $410 million $400 to $410 million NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 19
Slide 20: 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 adjusted EBITDA margin 220 basis points to 41.2% • We increased $ utilization 160 basis points to 40.8% • We improved YTD free
Slide 21: Appendix
Appendix HercRentals”
Slide 22: 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 23: Q3 and Nine Months Net Results
Q3 and Nine Months Net Results Q3 BRIDGE NINE MONTHS BRIDGE $ in millions $ in millions $46.2 $3.2 $35.8 $1.6 ($0.1) ($3.4) $6.6 $9.4 $28.4 $12.4 $1.3 $9.8 $0 $0 ($43.3) ($4.5) ($43.6) ($16.2) 2018 Currency Income tax Interest Spin-off Depreciation All other 2019 2018 Currency Income tax Interest Sp
Slide 24: Reconciliation of Adjusted Net Income and Adjusted Earnings Per Diluted Common Share
Reconciliation of Adjusted Net Income and Adjusted Earnings Per Diluted Common 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 d
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 September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net income $9.4 $46.2 $12.4 $35.8 Income tax provision (benefit) (
Slide 27: REBITDA Margin Trend
REBITDA Margin Trend $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Q3 2019 Total Revenues $431.3 $485.5 $516.2 $543.7 $1,976.7 $475.7 $475.1 $508.1 Less: Sales of rental equipment 47.3 78.2 50.1 80.6 256.2 85.1 51.3 35.4 Less: Sales of new equipment, parts and supplies 11.4 1
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 Q2 2019 Q3 2019 Beginning Balance $3,651 $3,732 $3,873 $3,922 $3,651 $3,777 $3,694 $3,859 Expenditures $198 $321 $171 $84 $774 $103 $289 $172 Disposals ($109) ($179) ($126) ($193) ($607) ($193) ($123) ($89) Foreig
Slide 31: Q3 and Nine Months Net Results Bridge
Q3 and Nine Months Net Results Bridge Three Months Ended September 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 $508.1 $516.2 ($8.1) ($0.7) $— $— $— $— ($7
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 Q2 2019 Q3 2019 $ in millions SG&A $74.5 $77.3 $78.4 $82.4 $312.6 $71.5 $73.5 $76.2 Spin-off costs ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) $— ($0.3) ($0.4) SG&A excluding Spin-off costs $69.6 $73.4 $76.7 $78.5 $298.2 $71.5 $73
Slide 33: Fleet Mix: Driving $ Utilization
Fleet Mix: Driving $ Utilization OEC AS OF 09/30/181 OEC AS OF 09/30/191 Lighting 1.7% Other Lighting 2.6% Compaction 1.7% Air Compressors 1.6% Other Compaction 2.7% 2.4% 1.4% ProContractor Air Compressors 6.2% Aerial - Booms 2.5% Aerial - Booms ProContractor 18.5% 6.3% 17.8% ProSolutions™ 13.8% Pro
Slide 34: NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved.
NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved. 34