Herc Holdings Inc. · NYSE:HRI
Herc — Q2 2023 Earnings Presentation
32 slides from Herc's earnings presentation, Jul 25, 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 • Q2 2023 Overview • Q2 Operations Review Aaron Birnbaum Leslie Hunziker • Q2 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: Second Quarter Financial Highlights: Accelerating Performance
Second Quarter Financial Highlights: Accelerating Performance Rental Revenue Total Revenues Adjusted EBITDA¹ $ in millions $702 $ in millions $802 $ in millions $352 $605 $640 $284 16% $475 $491 25% $448 $207 24% $408 $368 $175 $328 $150 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 20
Slide 5: Second Quarter 2023 Highlights
Second Quarter 2023 Highlights Equipment rental market in N.A. grew 8%1 in Q2 2023 • Return to normal seasonal demand trends • Supply chain recovering; constraints persist only in highest-demand categories • Positive industry trends aided by stimulus, reshoring, electrification, energy efficiency •
Slide 6: Q2 2023: Delivering on Growth Strategies
Q2 2023: Delivering on Growth Strategies Strategies to Accelerate ROIC and Increase Shareholder Returns: Optimize branch network for fleet / operating efficiencies at scale • Completed 3 acquisitions - 4 locations; opened 6 greenfield locations Grow the Core Enhance fleet mix • Expanded high-margin
Slide 7: Operations Review
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 8: Q2 2023 Focusing on Safety
Q2 2023 Focusing on Safety Industry leading Total Recordable Incident Rate of 0.54 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: ◦
Slide 9: Delivering on Growth Strategies - Increasing Branch Network Density
Delivering on Growth Strategies - Increasing Branch Network Density Expanding Through Acquisitions Adding locations through acquisitions increases density and market share in urban markets • Q2: 3 acquisitions - 4 locations; 6 greenfield locations • YTD: 6 acquisitions - 10 locations; 9 greenfield l
Slide 10: Delivering on Growth Strategies — Enhancing Fleet Mix
Delivering on Growth Strategies — Enhancing Fleet Mix Fleet Composition Equipment rental revenue +16%; Q2 record $702 million 1 $6.2 billion at OEC • Core business benefiting from solid operating performance and demand from megaprojects, onshoring, infrastructure projects Specialty Other 22% 23% • P
Slide 11: 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 $186 $348 $327 $327 $311 $144 $140 $253 $64 $64 $54 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Q2 2023 fleet expenditures reflect 2021/2022 • Fleet disposals generated ~47%
Slide 12: Business Model Driving Growth
Business Model Driving Growth Q2 Local vs. National Mix • Diverse customer mix and base of large national customers drives sales strategy and growth opportunities ◦ 2Q:23 project pipeline remains strong ◦ In early innings of federal-funding opportunities National: 44% Local: 56% • 2Q:23 new local-cu
Slide 13: Financial Review
Financial Review Mark Humphrey Senior Vice President and Chief Financial Officer
Slide 14: Q2 2023 Financial Results
Q2 2023 Financial Results Three Months Ended June 30, Six Months Ended June 30, 2023 vs 2022 % 2023 vs 2022 % 2023 2022 2023 2022 $ in millions, except per share data Change Change Equipment Rental Revenue $702 $605 16% $1,356 $1,132 20% Total Revenues $802 $640 25% $1,542 $1,208 28% Net Income $76
Slide 15: Q2 2023 Adjusted EBITDA and Rental Revenue Bridge
Q2 2023 Adjusted EBITDA and Rental Revenue Bridge Equipment Rental Revenue Adjusted EBITDA $ in millions $ in millions $702 $352 $605 $284 2022 Pricing OEC on Ancillary Re-rent Inflation Studio 2023 2022 Equipment Gain on DOE SG&A Studio Other 2023 Rent Entertainment Rental Sale of Entertainment Rev
Slide 16: Disciplined Capital Management
Disciplined Capital Management Maturities As of June 30, 2023 No near-term maturities and ample liquidity2 of $1.5 $ in millions billion provide financial flexibility Net capital expenditures outpaced cash flow from operations due to investments in growth, resulting in free ABL Credit cash outflow o
Slide 17: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 Industrial Spending2 $ in billions $ in billions $399 $389 $382 $379 $69 $72 $65 $67 $61 $353 $52 $55 $54 $47 $49 $50 $45 $329 — — — — — — — — — — — — — — — — $317 $317 $310 $308 $303 $299 15 16 17 18 19 20 21 22 23E 24E 25E 26E 15
Slide 18: Reaffirming 2023 Guidance
Reaffirming 2023 Guidance Metric 2022 Actual 2023 Guidance % Change over 2022 Adjusted EBITDA $1,227 million $1.45 billion to $1.55 billion 18% to 26% Net Rental Equipment $1,047 million $1.0 billion to $1.2 billion (4)% to 15% Expenditures Key Assumptions: • Net rental equipment expenditures now ex
Slide 19: Purpose, Vision, Mission and Values
Purpose, Vision, Mission and Values We equip our customers and communities to build a brighter future NYSE: HRI 19 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 20: NYSE: HRI
NYSE: HRI 20 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 21: 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 22: Our Strategy is Delivering Results
Our Strategy is Delivering Results Equipment Rental Revenue Adjusted EBITDA1 $ in millions $1,366 $2,775 $2,552 $1,227 $1,910 $895 $1,702 $741 $1,544 $689 2019 2020 2021 2022 TTM 2023 2019 2020 2021 2022 TTM 2023 Adjusted EBITDA Margin1 Net Leverage2 2.8x 44.8% 44.5% 43.2% 2.5x 2.4x 2.4x 38.7% 37.1%
Slide 23: 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 24: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA
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 25: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA
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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income $76 $73 $143 $131 Income tax provision 27 25 $35 $34 Interest expense,
Slide 26: 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 June 30, 2023 2022 Herc Studio Entertainment Herc, excl Studio Herc Studio Entertainment Herc, excl Studi
Slide 27: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Total Revenues $568 $640 $745 $786 $2,740 $740 $802 Less: Sales of rental equipment 28 19 21 57 125 71 83 Less: Sales of new equipment, parts and supplies 8 9 10 9 36 8 10 Equipment rental, service a
Slide 28: 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 29: 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 30: 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 31: Historical Fleet at OEC
Historical Fleet at OEC1 FY FY FY FY Q1 Q2 Q3 Q4 FY Q1 Q2 $ in millions 2018 2019 2020 2021 2022 2022 2022 2022 2022 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 Expenditures $774 $627 $348 $725 $253 $327 $311 $327 $1,218 $348 $400 Disposal
Slide 32: For additional information, please contact
For additional information, please contact: Leslie Hunziker SVP Investor Relations leslie.hunziker@hercrentals.com 239-301-1675 NYSE: HRI 32 ©2023 Herc Rentals Inc. All Rights Reserved.