Herc Holdings Inc. · NYSE:HRI
Herc — Q4 2017 Earnings Presentation
39 slides from Herc's earnings presentation, Feb 28, 2018
Slide 1: Q4 and Full Year 2017 Earnings Call
Herc Holdings Inc. Q4 and Full Year 2017 Earnings Call For the period ended December 31, 2017 February 28, 2018 ©2018 Herc Rentals Inc. All Rights Reserved.
Slide 2: Agenda
NYSE: HRI Agenda 2 Welcome and Introductions Elizabeth Higashi Vice President, Investor Relations Strategic Update & Industry Outlook Larry Silber President and Chief Executive Officer Q4 and Full Year Financial Review Barbara Brasier Senior Vice President and Chief Financial Officer Questions and A
Slide 3: Basis of Presentation and Forward-Looking Statements
NYSE: HRI Basis of Presentation The financial information included in this presentation is based upon the condensed consolidated financial statements of the Company which are presented in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). These fina
Slide 4: Business risks
NYSE: HRI • Business risks could have a material adverse effect on our business, results of operations, financial condition and/or liquidity, including: o the cyclicality of our business, and its dependence on levels of capital investment and maintenance expenditures by our customers; a slowdown in
Slide 5: Risks related to the spin-off
NYSE: HRI • Risks related to the spin-off, which effected our separation from New Hertz, such as: the liabilities we have assumed and will share with New Hertz in connection with the spin-off could have a material adverse effect on our business, financial condition and results of operations; if ther
Slide 6: Non-GAAP measures
NYSE: HRI In addition to results calculated according to accounting principles generally accepted in the United States (“GAAP”), the Company has provided certain information in this presentation which is not calculated according to GAAP (“non-GAAP”), such as adjusted EBITDA, adjusted EBITDA margin a
Slide 7: Customer-centric organization: vision, mission, values
NYSE: HRI 7 We are a customer-centric organization focused on safety, efficiency and profitable growth Our Vision To ensure that end users of our equipment and services achieve optimal performance safely, efficiently and effectively. Our Mission Our Values We do what’s right. We’re in this together.
Slide 8: Our Strategy is Delivering Results
NYSE: HRI Our Strategy is Delivering Results 8 ✓ Safety performance exceeded all target metrics ✓ Our initiatives drove growth in volume, price and mix ✓ We continue to invest in people and operations ✓ The stage is set for strong growth in 2018 ©2018 Herc Rentals Inc. All Rights Reserved.
Slide 9: Summary of Q4 and Full Year Results
NYSE: HRI Summary of Q4 and Full Year Results Q4 2017 FY 2017 Equipment Rental Revenue $414.5M +16.2% YoY $1,499.0M +10.8% YoY Average Fleet1 Growth +3.6% YoY +4.2% YoY Pricing +3.0% YoY +1.9% YoY Net Income2 $214.3M $160.3M Adjusted EBITDA3 $177.8M 36.1% Margin $585.4M 33.4% Margin Dollar Utilizati
Slide 10: Strong Q4 Revenue Growth
NYSE: HRI YoY Price Change Strong Q4 Revenue Growth 1.1% 4.2% 7.0% 14.7% 16.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 • Rental revenue growth outpaced fleet growth o Growth continued to accelerate in Q4 o Rental revenue increased 16.2% YoY o Av
Slide 11: Improving Customer and Fleet Mix
NYSE: HRI Aerial 26% Earthmoving 16% Material Handling 17% Trucks & Trailers 12% Other 8% 14% ProContractor 7% Specialty 21% • Accelerated growth of new local customer signings2 • Grew Specialty to 21% of total fleet (at OEC3) in Q4 • Continued to optimize fleet mix to improve $ UT Local vs National
Slide 12: ProSolutions Driving Higher Dollar Utilization
NYSE: HRI ProSolutions™ Driving Higher Dollar Utilization ProContractor ProContractor specialty equipment includes professional grade tools. ProSolutionsTM, our industry-specific solutions-based services, includes pumping solutions, power generation, climate control, remediation and restoration, and
Slide 13: Focusing on Safety
NYSE: HRI Focusing on Safety • Total Recordable Incident Rate (TRIR) declined nearly 16% over 2016 • Ultimate goal is zero incidents and a safe environment for our team and customers • The Perfect Day: No OSHA recordable incidents, “at fault” motor accidents, or DOT violations • Every day begins wit
Slide 14: Improving Operating Effectiveness
NYSE: HRI 14 Improving Operating Effectiveness • Continued to invest in training for new and seasoned personnel • Focused on improving performance of sales organization • Continued to embed the Herc Way operating model throughout the organization • Improved efficiency through warranty, vendor manage
Slide 15: Enhancing Customer Experience through Technology
NYSE: HRI Provides our customers with account management, location tracking, utilization and service updates Enhancing Customer Experience through Technology Herc on the Go Our mobile app provides live pricing and print-on- demand contracts for customers at their sites Streamlines online customer ac
Slide 16: Strong Industry Outlook Supports Our Growth
NYSE: HRI Strong Industry Outlook Supports Our Growth J a n -0 5 J a n -0 6 J a n -0 7 J a n -0 8 J a n -0 9 J a n -1 0 J a n -1 1 J a n -1 2 J a n -1 3 J a n -1 4 J a n -1 5 J a n -1 6 J a n -1 7 J a n -1 8 $310.2 $328.5 2017 2018E ($ in billions) as of February 2018 N.A. Equipment Rental Market 2N
Slide 17: Implementing Our Strategic Initiatives
NYSE: HRI Expand and Diversify Revenues Improve Operating Effectiveness Enhance Customer Experience Disciplined Capital Management • Broaden customer base • Expand products and services • Grow pricing and ancillary revenues • Improve sales force effectiveness • Focus on safety, labor productivity, a
Slide 18: Q4 and Full Year Financials
NYSE: HRI Q4 and Full Year Financials ©2018 Herc Rentals Inc. All Rights Reserved. 18
Slide 19: Q4 and Full Year Financial Summary
NYSE: HRI Q4 and Full Year Financial Summary $ in millions, except EPS Q4 2017 Q4 2016 FY 2017 FY 2016 Equipment Rental Revenue $ 414.5 $ 356.7 $ 1,499.0 $ 1,352.7 Total Revenues 491.7 405.2 1,754.5 1,554.8 Net Income (Loss)1 214.3 (13.2) 160.3 (19.7) Diluted Earnings (Loss) Per Share 7.44 (0.47) 5.
Slide 20: Impact of Tax Cuts and Jobs Act of 2017
NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. Impact of Tax Cuts and Jobs Act of 2017 • The impact of the 2017 Tax Act was an estimated one-time net tax benefit of $207.1 million, comprised of: o a one-time tax benefit of $245.2 million, associated with the revaluation of the Company’s net
Slide 21: Q4 and Full Year Equipment Rental Revenue
NYSE: HRI $ in millions Q4 Equipment Rental Revenue Bridge Q4 and Full Year Summary Full Year Equipment Rental Revenue Bridge • YoY equipment rental revenue increased 16.2% in Q4 2017 and 10.8% for the FY o Improvements in volume, price and mix • Substantial YoY growth from ProSolutionsTM and ProCon
Slide 22: Q4 and Full Year Total Revenues
NYSE: HRI $1,754.5 $15.1$143.3 $1,554.8 $3.8 $67.7 1,300 1,400 1,500 1,600 1,700 1,800 2016 Currency translation Equipment rental revenue Sales of revenue earning equipment Sales of new equipment and other 2017 $491.7 $5.2 $55.5 $405.2 $2.8 $33.4 300 350 400 450 500 550 2016 Currency translation Equ
Slide 23: Q4 and Full Year Net Income (Loss)
NYSE: HRI Q4 and Full Year Net Income (Loss) $160.3 $239.5 $55.8 $29.4 $14.0 $27.6 $39.3 ($19.7)(50) 0 50 100 150 200 250 300 350 400 2016 Income tax benefit Spin-off costs Depreciation of REE Impairment Interest Expense All Other 2017 $214.3 $0.1 $6.1 $199.0 $3.3 $0.6 $30.8 ($13.2) (50) 0 50 100 15
Slide 24: Q4 and Full Year Adjusted EBITDA
NYSE: HRI $585.4$60.3 $55.5$1.3 $143.3 $20.2 $0.2 $536.2 0 100 200 300 400 500 600 700 800 2016 Currency translation Equipment Rental Revenue Gain / loss on sales of revenue earning equipment Direct operating expenses SG&A All Other 2017 Q4 and Full Year Adjusted EBITDA1 • YoY adjusted EBITDA increa
Slide 25: Fleet at Original Equipment Cost (OEC)
NYSE: HRI Fleet at Original Equipment Cost (OEC)1 1. Original equipment cost based on ARA guidelines. • Average fleet at OEC for the period ended December 31, 2017: o Increased 3.6% in Q4 2017 versus the prior-year period o Increased 4.2% in FY 2017 versus FY 2016 o Average age of fleet was 49 month
Slide 26: Debt and Liquidity
NYSE: HRI $1,130 $488 $500 '18 '19 '20 '21 '22 '23 '24 Capital Leases and Other borrowings $56.3 4.1x 3.6x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x Q4 2016 Q4 2017 • Net leverage1 improved to ~3.6x o Stable debt of ~$2.2 billion • Ample liquidity and long dated maturities provide financial flexibility o $639 m
Slide 27: 2018 Full Year Guidance
NYSE: HRI Adjusted EBITDA $620 to $655 million Net Fleet Capital Expenditures $525 to $575 million 2018 Full Year Guidance ©2018 Herc Rentals Inc. All Rights Reserved. 27
Slide 28: Q4 and FY 2017 Financials Appendix
NYSE: HRI Q4 and FY 2017 Financials ©2018 Herc Rentals Inc. All Rights Reserved. Appendix 28
Slide 29: Glossary of Terms Commonly Used in the Industry
NYSE: HRI Glossary of Terms Commonly Used in the Industry 1 OEC: Original Equipment Cost which is an operating measure based on the guidelines of the American Rental Association, which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized refurbishment
Slide 30: Reconciliation of Net Income to EBITDA & Adj. EBITDA
NYSE: HRI Reconciliation of Net Income to EBITDA & Adj. EBITDA EBITDA and Adjusted EBITDA are not recognized terms 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 calc
Slide 31: Reconciliation of Net Income to EBITDA & Adj. EBITDA
NYSE: HRI Reconciliation of Net Income to EBITDA & Adj. EBITDA $ in millions Three Months Ended December 31, Years Ended December 31, 2017 2016 2017 2016 Net income (loss) $ 214.3 $ (13.2) $ 160.3 $ (19.7) Provision for income taxes (193.2) 5.8 (224.7) 14.8 Interest expense, net 38.2 32.1 140.0 84.2
Slide 32: Reconciliation of Net Leverage Ratio
NYSE: HRI Reconciliation of Net Leverage Ratio $ in millions 2017 2016 Long-Term Debt, Net $2,137.1 $2,178.6 (Plus) Current maturities of long-term debt 22.7 15.7 (Plus) Unamortized debt issuance costs 14.5 21.0 (Less) Cash and Cash Equivalents (41.5) (24.0) Net Debt $2,132.8 $2,191.3 Adjusted EBITD
Slide 33: Reconciliation of Free Cash Flow
NYSE: HRI 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 pre
Slide 34: Reconciliation of Free Cash Flow
NYSE: HRI Reconciliation of Free Cash Flow Years Ended December 31, $ in millions 2017 2016 Net cash provided by operating activities $ 341.7 $ 433.4 Revenue earning equipment expenditures (501.4) (468.3) Proceeds from disposal of revenue earning equipment 160.1 115.4 Net Fleet Capital Expenditures
Slide 35: Elements of Net Income (Loss) Bridge
NYSE: HRI Years Ended December 31, Elements of Net Income (Loss) Bridge $ in millions 2017 2016 $ Change Currency translation Income tax Spin-off costs Depreciation of REE Impairment Interest Expense All Other Total revenues $ 1,754.5 $ 1,554.8 $ 199.7 $ 3.8 $ - $ - $ - $ - $ - $ 195.9 Direct operat
Slide 36: SG&A Excluding Spin-off Costs
NYSE: HRI 18.9% 16.8% 16.2% 13.8% 16.3% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 SG&A Expense (ex Spin-off costs) as % of Total Revenue 2017 SG&A Excluding Spin-off Costs $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 SG&A $81.2 $78.8 $84.6 $76.0 $320.6 Spin
Slide 37: Historic Fleet at Original Equipment Cost
NYSE: HRI Historic Fleet at Original Equipment Cost1 $ in millions Q1 2016 Q2 2016 Q3 2016 Q4 2016 FY 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Beginning Balance – Fleet at OEC $3,384 $3,391 $3,537 $3,616 $3,384 $3,556 $3,556 $3,653 $3,752 $3,556 Expenditures – Fleet at OEC $90 $220 $142 $43 $495
Slide 38: Expand and Diversify Revenues: Driving $ Utilization
NYSE: HRI Expand and Diversify Revenues: Driving $ Utilization OEC as of 12/31/2016 1 OEC as of 12/31/2017 1 Increased • Aerial – Scissor Lifts • Material Handling - Industrial • ProContractor and ProSolutionsTM Reduced • Aerial – Booms • Earthmoving - Heavy • Air Compressors 1. Original equipment c
Slide 39: NYSE: HRI
NYSE: HRI