Herc Holdings Inc. · NYSE:HRI
Herc — Q4 2023 Earnings Presentation
38 slides from Herc's earnings presentation, Feb 13, 2024
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 • 2023 Overview • Q4 Operations Review Aaron Birnbaum Leslie Hunziker • Q4 Financial Review Senior Vice President & Senior Vice President Chi
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: FY 2023: Another Exceptional Year of Growth
FY 2023: Another Exceptional Year of Growth Equipment Rental Revenue Total Revenues Adjusted EBITDA¹ $ in millions $2,870 $ in millions $3,282 $ in millions $1,452 $2,552 12% 20% $1,227 $2,740 18% $1,910 $895 $2,073 $1,702 $1,999 $741 $689 $1,544 $1,780 2019 2020 2021 2022 2023 2019 2020 2021 2022 2
Slide 5: FY 2023: Delivering on Growth Strategies
FY 2023: Delivering on Growth Strategies Strategies to Accelerate ROIC Optimize branch network for fleet / operating efficiencies at scale and Increase Shareholder Returns: • Completed 12 acquisitions - 21 locations; opened 21 greenfield locations Enhance fleet mix Grow the Core • Expanded high-marg
Slide 6: FY 2024 Perspective
FY 2024 Perspective Equipment rental market in N.A. • Supply chain recovering, but constraints persist in high-demand AWP categories • Positive industry trends aided by stimulus, reshoring, data usage and cloud adoption • Mega projects continue to ramp up • Shift from equipment ownership to rental c
Slide 7: Operations Review
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 8: 2023: Focusing on Safety
2023: Focusing on Safety Continuing focus on Perfect Days • All branches reported > 98% Perfect Days • Perfect Days are those with no: ◦ OSHA recordable incidents ◦ At-fault motor vehicle accidents ◦ DOT violations Total Recordable Incident Rate of 0.8, below 1.0 industry standard Proven safety reco
Slide 9: Delivering on Growth Strategies—Increasing Branch Network Density
Delivering on Growth Strategies—Increasing Branch Network Density Expanding Through Acquisitions and Greenfields Adding locations increases density and share in urban markets • Q4:23 - 4 acquisitions - 7 locations; 8 greenfield locations • FY:23 - 12 acquisitions - 21 locations; 21 greenfield locati
Slide 10: Effectively Managing Fleet Lifecycle and Balancing Equipment Mix
Effectively Managing Fleet Lifecycle and Balancing Equipment Mix Fleet Expenditures at OEC1 Fleet Composition $ in millions $6.3 billion at OEC1,2 2022 2023 $400 $348 $327 $327 Other 22% $253 $311 $274 Specialty 24% $196 Q1 Q2 Q3 Q4 Material Handling 18% Aerial 24% Fleet Disposals at OEC1 Earthmovin
Slide 11: Business Model Driving Growth
Business Model Driving Growth Q4 Local vs. National Mix Q4 Revenue by Customer1 Other 6.0% Commercial Facilities 14% Contractors 37% National: 43% Infrastructure Local: 57% & Government 16% Industrial 27% • 4Q:23 revenue in local markets up double-digit YoY • 4Q:23 National account revenue continues
Slide 12: Investing to Capitalize on Growth Trends Across a Diverse Customer and Project Base
Investing to Capitalize on Growth Trends Across a Diverse Customer and Project Base Infrastructure Commercial Contractors (37%) Industrial (27%) Other (6%) & Gov. Direct (16%) Facilities (14%) • Electrical • Agriculture • Aerospace • Airports • Banks • Sporting Events • General Contractors • Chemica
Slide 13: 2024 Key Initiatives
2024 Key Initiatives Capturing Pricing to Offset Managing Fleet Mega Project Tailwind Inflation Efficiency Improving Processes Increasing Density Optimizing Customer and Customer Through Greenfields Experience Through Experience Through and M&A Technology E3OS NYSE: HRI 13 ©2024 Herc Rentals Inc. Al
Slide 14: Financial Review
Financial Review Mark Humphrey Senior Vice President and Chief Financial Officer
Slide 15: Q4 and FY 2023 Financial Results
Q4 and FY 2023 Financial Results Three Months Ended December 31, Year Ended December 31, 2023 vs 2022 % 2023 vs 2022 % 2023 2022 2023 2022 $ in millions, except per share data Change Change Equipment Rental Revenue $748 $713 5% $2,870 $2,552 12% Total Revenues $831 $786 6% $3,282 $2,740 20% Net Inco
Slide 16: Q4 2023 Adjusted EBITDA and Rental Revenue Bridge
Q4 2023 Adjusted EBITDA and Rental Revenue Bridge Equipment Rental Revenue Adjusted EBITDA $ in millions $ in millions $748 $713 $382 $361 2022 Pricing OEC on Ancillary Other Inflation Studio 2023 2022 Equipment Gain on DOE SG&A Studio Other 2023 Rent Entertainment Rental Sale of Entertainment Reven
Slide 17: Q4 and FY 2023 Financial Results Excluding Studio Entertainment
Q4 and FY 2023 Financial Results Excluding Studio Entertainment Three Months Ended December 31, Year Ended December 31, 2023 vs 2022 % 2023 vs 2022 % 2023 2022 2023 2022 $ in millions Change Change Core Equipment Rental Revenue1 $738 $682 8% $2,820 $2,430 16% Core Total Revenues1 $820 $753 9% $3,226
Slide 18: Disciplined Capital Management
Disciplined Capital Management Maturities No near-term maturities and ample liquidity2 of $1.5 As of December 31, 2023 $ in millions billion provide financial flexibility Net capital expenditures outpaced cash flow from operations due to investments in growth, resulting in free cash outflow of $65 m
Slide 19: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 Industrial Spending2 $ in billions $ in billions $413 $408 $89 $93 $406 $408 $86 $392 $82 $77 $69 $60 $61 $57 $55 $352 $50 $52 $328 $317 — — — $317 — — — — — — — — — — — — — — — — $310 $309 $299 16 17 18 19 20 21 22 23 24E 25E 26E 2
Slide 20: 2024 Outlook excluding Cinelease
2024 Outlook excluding Cinelease Metric 2023 Excluding Cinelease1 2024 Full Year Guidance Equipment Rental Revenue $2,820 million +7% to 10% Adjusted EBITDA $1,462 million $1.55 billion to $1.60 billion Net Rental Equipment Expenditures $500 to $700 million after gross capex $995 million after Gross
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 ©2024 Herc Rentals Inc. All Rights Reserved.
Slide 22: NYSE: HRI
NYSE: HRI 22 ©2024 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 $2,870 $1,452 $2,552 $1,227 $1,910 $895 $1,702 $741 $1,544 $689 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Adjusted EBITDA Margin1 Net Leverage2 2.8x 44.8% 44.2% 43.2% 2.5x 2.4x 2.4x 38.7% 37.1% 2.1x 20
Slide 25: Cinelease Studio Entertainment Assets Held for Sale
Cinelease Studio Entertainment Assets Held for Sale Cinelease is Herc's studio management and lighting and grip business • Market preference for lighting and grip equipment to be part of studio ownership • Owning studio real estate does not align with Herc strategy • Lighting and grip equipment repr
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, provision (benefit) for income taxes, interest expense, net, depreciation of rental equipm
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 December 31, Year Ended December 31, 2023 2022 2023 2022 Net income $91 $98 $347 $330 Income tax provision 32 35 100 104 Interest expense
Slide 28: Q4 2023 and 2022 Reconciliation, Excluding Studio Entertainment
Q4 2023 and 2022 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 December 31, 2023 2022 Herc Studio Entertainment Herc, excl Studio Herc Studio Entertain
Slide 29: Full Year 2023 and 2022 Reconciliation, Excluding Studio Entertainment
Full Year 2023 and 2022 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 Year Ended December 31, 20231 2022 Herc Studio Entertainment Herc, excl Studio Herc Studio Entertain
Slide 30: Q1 and Q2 2023 Reconciliation, Excluding Studio Entertainment
Q1 and Q2 2023 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 March 31, 2023 June 30, 2023 Herc Studio Entertainment Herc, excl Studio Herc Studio Enter
Slide 31: Q3 and Q4 2023 Reconciliation, Excluding Studio Entertainment
Q3 and Q4 2023 Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through, Excluding Studio Entertainment Three Months Ended September 30, 2023 December 31, 2023 Herc Studio Entertainment Herc, excl Studio Herc Studio Entertainme
Slide 32: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 20222 Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 20232 Total Revenues $568 $640 $745 $786 $2,740 $740 $802 $908 $831 $3,282 Less: Sales of rental equipment 28 19 21 57 125 71 83 124 68 346 Less: Sales of new equipment, parts and
Slide 33: REBITDA Margin Annual Trend
REBITDA Margin Annual Trend $ in millions 2018 2019 2020 2021 2022 2023 Total Revenues $1,978 $1,999 $1,780 $2,073 $2,740 $3,282 Less: Sales of rental equipment 256 243 198 113 125 346 Less: Sales of new equipment, parts and supplies 49 44 28 31 36 38 Equipment rental, service and other revenues $1,
Slide 34: 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, transaction related costs, restructuring and restructuring related charges, spin-off costs, loss on extinguishment
Slide 35: 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 36: 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 37: Historical Fleet at OEC
Historical Fleet at OEC1 FY FY FY FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY $ in millions 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 2023 2023 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 $6,211 $6,217 $5,637 Expenditures $774 $627 $348 $725
Slide 38: For additional information, please contact
For additional information, please contact: Leslie Hunziker SVP Investor Relations leslie.hunziker@hercrentals.com 239-301-1675 NYSE: HRI 38 ©2024 Herc Rentals Inc. All Rights Reserved.