Herc Holdings Inc. · NYSE:HRI
Herc — Evercore ISI Industrials Day 2019
36 slides from Herc's conference presentation, Mar 5, 2019
Slide 1: Evercore ISI Industrials Day
Evercore ISI Industrials Day March 5, 2019 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward-Looking Statements ◦ some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code; This presentation contains statements, including those related to 2019 guidance, that are not statements of historic
Slide 3: Safe Harbor Continued and Non-GAAP Financial Measures
Safe Harbor Continued and Non-GAAP Financial Measures if New Hertz fails to pay its tax liabilities under the tax matters agreement Information Regarding Non-GAAP Financial Measures or to perform its obligations under the separation and distribution agreement, we could incur significant tax and othe
Slide 4: A Leading Equipment Rental Company
A Leading Equipment Rental Company • Leveraging 50+ years of experience in the equipment rental industry, Herc Rentals is one of the leading equipment rental suppliers in North America • Listed on the New York Stock Exchange on July 1, 2016 under the symbol "HRI" • Approximately 270 locations in 39
Slide 5: Vision, Mission and Values
Vision, Mission and Values We are a customer-centric organization focused on safety, efficiency and profitable growth NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved 5
Slide 6: Expanding Products and Services to Meet Customer Needs
Expanding Products and Services to Meet Customer Needs CLASSIC PROSOLUTIONS PROCONTRACTOR Our classic fleet includes aerial, ProSolutionsTM, our industry-specific ProContractor specialty equipment earthmoving, material handling, solutions-based services, includes power includes professional grade to
Slide 7: Our Strategy Delivered Results in 2018
Our Strategy Delivered Results in 2018 Our strategic initiatives We achieved strong drove volume growth, revenue growth and improved pricing and flow-through fleet diversification $ utilization and 2018 results are a adjusted EBITDA strong platform for margin increased YoY continued growth in every
Slide 8: Our Strategic Initiatives
Our Strategic Initiatives Develop Our Expand and Improve Enhance Disciplined People and Diversify Operating Customer Capital Culture1 Revenues Effectiveness Experience Management • Attract and retain • Broaden customer • Focus on safety, • Provide premium • Drive EBITDA talent base labor productivit
Slide 9: Focus on Safety
Focus on Safety Total Recordable Incident Rate (TRIR) improved 22% from 2016 to 2018 All regions achieved ≥ 85% perfect days in 2018 The Perfect Day: No OSHA recordable incidents, no "at fault" motor vehicle accidents, no DOT violations "Safety is an action, not a metric" Ultimate goal is zero incid
Slide 10: Full Year 2018 Results
Full Year 2018 Results TOTAL REVENUES ADJUSTED EBITDA $ in millions $ in millions NET RESULTS2 Full Year 2018 vs 2017 $ in millions • Total revenues grew 12.7% • Equipment rental revenue increased 10.6% • Net income2 of $69.1 million versus $160.3 million • Diluted EPS2 of $2.39 versus $5.60 • Adjus
Slide 11: Continuing Strong Performance
Continuing Strong Performance YOY CHANGE IN PRICING1 • YoY pricing improved 2.9% in Q4 2018, the 11th consecutive quarter of year-over-year improvement with a 2.9% improvement for FY 2018 • Total OEC at year end was $3.78 billion, an increase of average fleet at OEC of 4.4% for Q4 and 4.8% for FY 20
Slide 12: Improving Fleet Mix to Drive Growth
Improving Fleet Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q4 2018 achieved an all-time quarterly high since becoming a stand-alone public company, increasing 100 bps YoY to 39.7% • FY 2018 $ utilization improved 330 bps to 37.4% compared with FY 2016 • Average fleet age improved to 46 mo
Slide 13: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets Approximately 270 locations, principally in North America1 Added greenfield locations in Dallas, St. Louis, Atlanta and Seattle in 2018 Source: ARA IHS Global Insights February 2019 1. Locations as of December 31, 2018 NYSE: HRI 13 ©2019 Herc Rentals Inc. All Ri
Slide 14: Improving Customer Mix and Diversification
Improving Customer Mix and Diversification FY LOCAL VS NATIONAL % MIX1 FY REVENUE BY CUSTOMER1,2 FY LOCAL VS NATIONAL YOY GROWTH1 • Local rental revenue grew 17% YoY in 2018 • Local rental revenue accounts for 57% of the total • Growth in new customer accounts remains strong 1. North America rental
Slide 15: Strong Industry Outlook Supports Our Growth
Strong Industry Outlook Supports Our Growth ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of January 2019 ($ in billions) as of February 2019 January 55.3 50 NON-RESIDENTIAL STARTS3 INDUSTRIAL SPENDING4 ($ in billions) ($ in billions) as of November 2018 as of February 2019 1. Source
Slide 16: Q4 and FY 2018 Financial Review
Q4 and FY 2018 Financial Review
Slide 17: Q4 and Full Year Financial Summary
Q4 and Full Year Financial Summary Three Months Ended December 31, Full Year Ended December 31, $ in millions, except EPS 2018 2017 % Chg. 2018 2017 % Chg. Equipment Rental Revenue $447.7 $414.5 8.0% $1,658.3 $1,499.0 10.6% Total Revenues $543.7 $491.7 10.6% $1,976.7 $1,754.5 12.7% Net Income1 $33.3
Slide 18: Q4 and Full Year Total Revenues
Q4 and Full Year Total Revenues Q4 BRIDGE FULL YEAR BRIDGE $ in millions $ in millions Q4 TOTAL REVENUES • Total revenues increased 10.6%, or $52.0 million, in Q4 2018 • Equipment rental revenue increased 8.0% in Q4 2018 ◦ Continued improvements in volume, price and mix ◦ Substantial growth from loc
Slide 19: Q4 and Full Year Adjusted EBITDA
Q4 and Full Year Adjusted EBITDA1 Q4 BRIDGE FULL YEAR BRIDGE $ in millions $ in millions Q4 ADJUSTED EBITDA • YoY adjusted EBITDA increased $20.6 million or 11.6% in Q4 2018 • Higher equipment rental revenue of $35.0 million was the largest contributor to the improvement • DOE accounted for $9.0 mil
Slide 20: Q4 and Full Year Net Results
Q4 and Full Year Net Results Q4 BRIDGE FULL YEAR BRIDGE $ in millions $ in millions $0 $0 Q4 NET RESULTS • Net income decreased to $33.3 million in Q4 2018 compared to $214.3 million in the prior year • Income tax benefit decreased $198.2 million primarily due a net tax benefit of $6.0 million in 20
Slide 21: Fleet at Original Equipment Cost (OEC)
Fleet at Original Equipment Cost (OEC)1 FLEET ENDING BALANCE AT OEC • Total fleet at OEC was $3.78 billion as of $ in billions December 31, 2018 • Average fleet at OEC increased 4.4% in Q4 2018 over the prior-year quarter • Fleet expenditures at OEC in Q4 2018 were $84 million • Average fleet age im
Slide 22: Disciplined Capital Management
Disciplined Capital Management NET LEVERAGE1 LIQUIDITY $ in millions Dec 31, 2018 ABL and AR Facility $1,925.0 Outstanding (1,260.2) Letters of Credit (24.6) Availability from ABL and AR Facility $640.2 Cash & Cash Equivalents 27.8 Q4 2017 Q4 2018 Total Liquidity $668.0 • Net leverage of ~3.1x1 MATU
Slide 23: 2019 Full Year Guidance
2019 Full Year Guidance Adjusted EBITDA: $730 to $760 million Net Fleet Capital Expenditures: $370 to $410 million NYSE: HRI 23 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 24: Going Forward
Going Forward Our Strategy is Working Our strategic initiatives We expect to maintain We are initiating our $ utilization and are expected to REBITDA flow-through of FY 2019 adjusted adjusted EBITDA continue to drive approximately 60-70% EBITDA guidance of margin are both growth in revenues and thro
Slide 25: Appendix
Appendix ©2018 Herc Rentals Inc. All Rights Reserved.
Slide 26: 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 27: 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 28: Reconciliation of Net Income to Adj. EBITDA and REBITDA
Reconciliation of Net Income to Adj. EBITDA and REBITDA Calculations include Adj. EBITDA Margin, REBITDA Margin and REBITDA Flow-Through $ in millions Three Months Ended December 31, Full Year Ended December 31, 2018 2017 2018 2017 2016 Net income (loss) $33.3 $214.3 $69.1 $160.3 ($19.7) Income tax
Slide 29: REBITDA Margin Trend
REBITDA Margin Trend $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Total Revenues $389.4 $415.8 $457.6 $491.7 $1,754.5 $431.3 $485.5 $516.2 $543.7 $1,976.7 Less: Sales of rental equipment 54.4 46.4 27.7 62.3 190.8 47.3 78.2 50.1 80.6 256.2 Less: Sales
Slide 30: 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 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 $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Beginning Balance $3,556 $3,556 $3,653 $3,752 $3,556 $3,651 $3,732 $3,873 $3,922 $3,651 Expenditures $119 $217 $126 $62 $524 $198 $321 $171 $84 $774 Disposals ($120) ($111) ($66) ($
Slide 33: Net Results Bridge
Net Results Bridge Three Months Ended December 31, Elements of Net Income (Loss) Bridge Currency Interest $ in millions 2018 2017 $ Change impact 1 Income tax Spin-off costs Impairment All Other Expense Total revenues $543.7 $491.7 $52.0 ($2.4) $— $— $— $— $54.4 Direct operating 204.0 194.2 9.8 (1.1
Slide 34: SG&A Excluding Spin-off Costs
SG&A Excluding Spin-off Costs Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 $ in millions SG&A $81.1 $78.8 $84.5 $75.8 $320.2 $74.5 $77.3 $78.4 $82.4 $312.6 Spin-off costs ($7.6) ($9.1) ($10.3) ($8.2) ($35.2) ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) SG&A excluding Spin-o
Slide 35: Expand and Diversify Revenues: Driving $ Utilization
Expand and Diversify Revenues: Driving $ Utilization OEC AS OF 12/31/17 1 OEC AS OF 12/31/18 1 $3.65 billion $3.78 billion Increased Reduced • Earthmoving - Compact • Earthmoving - Heavy • Material Handling - Industrial • Aerial - Booms • ProContractor and ProSolutionsTM • Air Compressors 1. Origina
Slide 36: NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved.
NYSE: HRI 36 ©2019 Herc Rentals Inc. All Rights Reserved.