Herc Holdings Inc. · NYSE:HRI
Herc — Q3 2022 Earnings Presentation
33 slides from Herc's earnings presentation, Oct 20, 2022
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 Irion Agenda President & Chief Senior Vice President & Executive Officer Chief Financial Officer • Introductions • Safe Harbor • Overview • Operations Review Aaron Birnbaum Elizabeth Higashi Senior Vice President & Vice President, Chief Operating Officer
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: Key Takeaways - Steady Demand and Delivering on Growth Strategy
Key Takeaways - Steady Demand and Delivering on Growth Strategy Operating environment remains robust Outstanding performance by our sales, operations and field support teams • Q3 rental revenue increased 36% • Increased adjusted EBITDA YoY by 40% • Adjusted EBITDA margin increased 160 bps to 46.3% C
Slide 5: Third Quarter Financial Highlights: Accelerating Performance
Third Quarter Financial Highlights: Accelerating Performance Rental Revenue Total Revenues Adjusted EBITDA¹ $ in millions $706.2 $ in millions $745.1 $ in millions $345.0 $519.6 $550.4 $516.2 $508.1 $245.9 $449.0 $459.6 +36% +35% $456.7 $209.4 $402.3 $201.5 $196.7 +40% 2018 2019 2020 2021 2022 2018
Slide 6: Herc Rentals Today
Herc Rentals Today 57 Years serving customers ~3,200 Equipment categories 351 Locations in 42 states and five Canadian provinces 1 6,400 Employees serving North America $61 billion addressable market 2 (1) Location count as of September 30, 2022 (2) ARA estimate of the 2022 North American addressabl
Slide 7: Operations Review - Aaron Birnbaum
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 8: Delivering on Growth Strategy
Delivering on Growth Strategy Equipment rental revenue increased 36% to a record $706.2 million Fleet investments and new locations are contributing to growth in fast-growing urban markets Average fleet at OEC increased 35% in Q3 2022 Customer demand is strong and is showing positive momentum Our co
Slide 9: Diversifying Fleet to Enhance Utilization
Diversifying Fleet to Enhance Utilization Fleet Composition Fleet Expenditures at OEC1 $ in millions $5.4 billion at OEC1 2021 2022 $327 $311 $253 $188 $210 $210 Other 22.5% $117 Material Q1 Q2 Q3 Q4 Handling 17.3% Fleet Disposals at OEC1 $ in millions Specialty 2021 2022 Earthmoving 23.8% 13.0% $11
Slide 10: Business Model Driving Growth
Business Model Driving Growth Q3 Revenue by Customer1 Other 25% Contractors 34% Our diverse customer mix and base of large national customers drives sales strategy and growth opportunities Infrastructure and New customer account revenues continue to be a solid Government 15% source of growth Industr
Slide 11: Growth Opportunities in 2023 and Beyond
Growth Opportunities in 2023 and Beyond Infrastructure • Highways and bridges Market data shows recent increase in the • High-speed rail number and dollar value of mega projects • Port renovation and waterway expansion Rental equipment companies of scale benefit • Airports from the size and long-ter
Slide 12: Focusing on Safety
Focusing on Safety Improving Total Recordable Incident Rate (TRIR) Continuing focus on Perfect Days • All of our branches reported at least 98% Perfect Days year to date. • Perfect Days are those with no: ◦ OSHA reportable incidents ◦ At-fault moving vehicle accidents ◦ DOT violations Continuing to
Slide 13: Financial Review - Mark Irion
Financial Review Mark Irion Senior Vice President and Chief Financial Officer
Slide 14: Q3 2022 Results
Q3 2022 Results Three Months Ended September 30, Nine Months Ended September 30, 2022 vs 2021 % 2022 vs 2021 % 2022 2021 2022 2021 $ in millions, except per share data Change Change Equipment Rental Revenue $706.2 $519.6 35.9% $1,838.4 $1,368.0 34.4% Total Revenues $745.1 $550.4 35.4% $1,952.8 $1,49
Slide 15: Pricing and Utilization Performance
Pricing and Utilization Performance Pricing1 Average Fleet at OEC1 2021 2022 2021 2022 35.0% 6.2% 32.1% 5.5% 23.4% 4.3% 3.5% 14.9% 2.8% 1.9% 4.3% (1.9)% (0.3)% (5.1)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Utilization2 Average Fleet on Rent at OEC1 2021 2022 2021 2022 46.0% 34.9% 34.9% 45.3% 44.6% 29.0% 42.1% 42
Slide 16: Expanding through M&A in 2022
Expanding through M&A in 2022 M&A Rationale and Benefits EV/EBITDA Multiple - 16 Acquisitions ◦ Revenue synergies through increased density and cross EBITDA $80.5 million selling Total Cash Outlay $440.9 million ◦ Acquired talented workforce and local customer relationships - EBITDA Multiple 5.5x qu
Slide 17: Disciplined Capital Management
Disciplined Capital Management Maturities Amended ABL to increase the size of the credit facility As of September 30, 2022 to $3.5 billion and extend the maturity to July 2027 $ in millions No near-term maturities and ample liquidity2 of $1.6 billion provide financial flexibility ABL Credit Facility
Slide 18: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 Industrial Spending2 : ~6% $ in billions AGR $ in billions 6E C ’21-'2 $71 $359 $358 $66 $68 $64 $61 $337 $338 $339 $55 $54 $52 $50 $329 $47 $49 $45 $317 $317 $310 $308 $303 $299 15 16 17 18 19 20 21 22E 23E 24E 25E 26E 15 16 17 18
Slide 19: Raising Guidance
Raising Guidance • Record adjusted EBITDA of $866 million through Q3 2022 was up 36% compared with 2021 • Net fleet capital expenditures of $774.6 million through Q3 2022, an increase of 115% over 2021 Metric 2021 Actual Prior Guidance Current Guidance % Chg. over 2021 Adjusted EBITDA $894.7 million
Slide 20: Executing On Our Strategy and Shifting Into High Gear
Executing On Our Strategy and Shifting Into High Gear Grow the Expand Elevate Integrate Allocate Core Specialty Technology ESG Capital • Core fleet growth of 23% • Increased specialty fleet • Ongoing investment in • Office of Sustainability • Net leverage of 2.4x in 2022 to 23.8% of total technology
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 ©2022 Herc Rentals Inc. All Rights Reserved.
Slide 22: NYSE: HRI
NYSE: HRI 22 ©2022 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 $2,381 $1,122.5 $1,910 $894.7 $1,658 $1,702 $741.0 $1,544 $684.8 $689.4 $1,499 $585.4 2017 2018 2019 2020 2021 TTM Sept 2017 2018 2019 2020 2021 TTM Sept 2022 2022 Adjusted EBITDA Margin1 Net Leverage2 44.4% 4
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 (loss), restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, impairment
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 (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental
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, 2022 2021 2022 2021 Net income $101.4 $72.3 $232.1 $152.3 Income tax provision 34.2 23.8 68
Slide 28: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Total Revenues $453.8 $490.9 $550.4 $578.0 $2,073.1 $567.3 $640.4 $745.1 Less: Sales of rental equipment 44.2 30.3 16.6 22.0 113.1 27.7 19.3 21.5 Less: Sales of new equipment, parts and suppl
Slide 29: REBITDA Margin Annual Trend
REBITDA Margin Annual Trend $ in millions 2017 2018 2019 2020 2021 Total Revenues $1,754.5 $1,976.7 $1,999.0 $1,781.3 $2,073.1 Less: Sales of rental equipment 190.8 256.2 242.8 198.5 113.1 Less: Sales of new equipment, parts and supplies 52.3 49.3 44.0 28.2 30.1 Equipment rental, service and other r
Slide 30: 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 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
Slide 32: Historical Fleet at OEC
Historical Fleet at OEC1 FY 2017 FY 2018 FY 2019 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 $ in millions Beginning Balance $3,556 $3,651 $3,777 $3,822 $3,589 $3,626 $3,763 $4,075 $3,589 $4,381 $4,593 $5,097 Expenditures $524 $774 $627 $349 $117 $188 $210 $210 $725 $253
Slide 33: For additional information, please contact
For additional information, please contact: Elizabeth M. Higashi, CFA Vice President, Investor Relations & Sustainability elizabeth.higashi@hercrentals.com 239 301-1024 NYSE: HRI 33 ©2022 Herc Rentals Inc. All Rights Reserved.