Herc Holdings Inc. · NYSE:HRI
Herc — Q3 2024 Earnings Presentation
34 slides from Herc's earnings presentation, Oct 22, 2024
Slide 1: Scaling for Sustainable Growth
Scaling for Sustainable Growth Q3 2024 EARNINGS CONFERENCE CALL October 22, 2024
Slide 2: Herc Rentals Team and Agenda
Herc Rentals Team and Agenda Agenda Safe Harbor YTD Overview Q3 Operations Review Q3 Financial Review 2024 Outlook Larry Silber Aaron Birnbaum Mark Humphrey Leslie Hunziker President & Chief Senior Vice President Senior Vice President Senior Vice President Q&A Executive Officer & Chief Operating & C
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 In addition to results calculated according to accounting principles generally by the fede
Slide 4: YTD 2024: Delivering on Growth Strategies
YTD 2024: Delivering on Growth Strategies Optimize branch network for fleet / operating efficiencies at scale Strategies to Accelerate • Completed 8 acquisitions—26 locations; opened 16 greenfield locations ROIC and Increase Enhance fleet mix Shareholder Returns: • Expanded OEC specialty fleet YoY t
Slide 5: YTD 2024: Financial Performance
YTD 2024: Financial Performance1 Equipment Rental Revenue Total Revenues Adjusted EBITDA2 $ in millions $ in millions $ in millions $1,145 $2,350 $2,617 $2,450 $1,070 $2,121 $1,838 $1,953 $866 7% 7% 11% $1,368 $1,495 $637 $1,117 $1,260 $493 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021
Slide 6: 2024 Outlook
2024 Outlook Revenue • On track to deliver record rental revenue; pricing remains disciplined • Expected to significantly outpace industry growth rate1 • Acquisitions and greenfield openings should continue to offset slowing growth in local markets • Capturing 10-15% of total mega project activity,
Slide 7: Operations Review
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer Herc Holdings Inc. NYSE: HRI Q3 2024 7
Slide 8: Focusing on Safety
Focusing on Safety Q3 2024: Continuing focus on Perfect Days • All branches reported > 97% Perfect Days • Perfect Days are those with no: • OSHA reportable incidents • At-fault moving vehicle accidents • DOT violations Total Recordable Incident Rate is 0.82 — favorable to industry standard of 1.0 Pr
Slide 9: Scaling for Sustainable Growth
Scaling for Sustainable Growth Expanding Through Acquisitions and Greenfields Adding locations increases density and share in urban markets • 439 locations at September 30, 2024, +16% YoY Targeting Top 100 metropolitan markets • Q3: 2 acquisitions - 5 locations; 5 greenfield locations • YTD: 8 acqui
Slide 10: Optimizing Fleet Mix and Lifecycle Performance
Optimizing Fleet Mix and Lifecycle Performance Fleet Expenditures at OEC1 $7.1 billion at OEC1,2 $ in millions 2023 2024 Other Specialty $400 $348 $344 $366 22% 23% $274 $196 $167 Fleet Q1 Q2 Q3 Q4 Composition 19% Fleet Disposals at OEC1 Material $ in millions Handling 25% 2023 2024 Aerial 11% $309
Slide 11: Delivering Growth and Resiliency through Diversification
Delivering Growth and Resiliency through Diversification Contractors 36% 25% Q3 Revenue Industrial Q3 Local vs. 44% National by Customer1 Local National Mix 56% 8% Other 14% 17% Commercial Facilities Infrastructure & Government • Local account revenue increased due to acquisitions and greenfields, a
Slide 12: Capitalizing on Growth Trends Across Diverse Customer and Project Base
Capitalizing on Growth Trends Across Diverse Customer and Project Base Infrastructure Commercial Contractors (36%) Industrial (25%) Other (8%) & Gov. Direct (17%) Facilities (14%) • Electrical • Agriculture • Aerospace • Airports • Banks • Sporting Events • General Contractors • Chemical Processing
Slide 13: Financial Review
Financial Review Mark Humphrey Senior Vice President and Chief Financial Officer
Slide 14: Q3 2024 Financial Results
Q3 2024 Financial Results Three Months Ended September 30, Nine Months Ended September 30, 2024 vs 2023 2024 vs 2023 2024 2023 2024 2023 $ in millions, except per share data % Change % Change Equipment Rental Revenue $866 $765 13.2% $2,350 $2,121 10.8% Total Revenues $965 $908 6.3% $2,617 $2,450 6.8
Slide 15: Q3 2024 Financial Results Excluding Cinelease Studio Entertainment
Q3 2024 Financial Results Excluding Cinelease Studio Entertainment1 Three Months Ended September 30, Nine Months Ended September 30, 2024 vs 2023 2024 vs 2023 2024 2023 2024 2023 $ in millions % Change % Change Core Equipment Rental Revenue $850 $760 11.8% $2,279 $2,081 9.5% Core Total Revenues $947
Slide 16: Q3 24 YoY Results Bridge Excluding Cinelease Studio Entertainment
Q3 24 YoY Results Bridge Excluding Cinelease Studio Entertainment1 Core Equipment Rental Revenue Core Adjusted EBITDA $850 $445 $419 $760 2023 Equipment Gain on DOE SG&A Other 2024 2023 Pricing OEC on Rent Mix Ancillary 2024 Rental Sale of Revenue Rental Equipment Core Adjusted EBITDA Margin drivers
Slide 17: Disciplined Capital Management
Disciplined Capital Management Maturities • No near-term maturities and ample liquidity2 of $1.9 As of September 30, 2024 billion provide financial flexibility $ in millions • Free cash flow of $218 million for the nine months ABL Credit ended September 30, 2024 ABL Credit Facility Facility • Net le
Slide 18: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 Industrial Spending2 $ in billions $ in billions $368 $372 $372 $367 $365 $93 $97 $84 $89 $78 $69 $328 $57 $60 $61 — — — — — — — — — — — — — — — — — — — $52 $55 $317 $315 $310 $309 $298 17 18 19 20 21 22 23 24E 25E 26E 27E 17 18 19
Slide 19: Updated 2024 Guidance Ex-Cinelease
Updated 2024 Guidance Ex-Cinelease 2023 Excluding Metric Cinelease Prior 2024 Guidance Current 2024 Guidance Equipment Rental Revenue $2,820 million +7% to 10% +9.5% to 11% Adjusted EBITDA $1,462 million $1.55 billion to $1.60 billion $1.55 billion to $1.60 billion Net Rental Equipment Expenditures
Slide 20: Purpose, Vision, Mission and Values
Purpose, Vision, Mission and Values We equip our customers and communities to build a brighter future Herc Holdings Inc. NYSE: HRI Q3 2024 20
Slide 21: Appendix
Appendix oe a aw .
Slide 22: Glossary of Terms Commonly Use in the Industry
Glossary of Terms Commonly Use 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 23: 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 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 equipmen
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 Three Months Ended September 30, Nine Months Ended September 30, $ in millions 2024 2023 2024 2023 Net income $122 $113 $257 $256 Income tax provision 38 33 77 68 Interes
Slide 26: Reconciliation of Net Income to Adj. EBITDA, Excluding Studio Entertainment (Q3)
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, 2024 2023 $ in millions Herc Studio Entertainment Herc, excl Studio Herc Studio Entertainment Herc, excl
Slide 27: Reconciliation of Net Income to Adj. EBITDA, Excluding Studio Entertainment (Nine Months)
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through, Excluding Studio Entertainment Nine Months Ended September 30, 2024 2023 $ in millions Herc Studio Entertainment Herc, excl Studio Herc Studio Entertainment Herc, excl S
Slide 28: REBITDA Margin and Flow-Through Quarterly Trend
REBITDA Margin and Flow-Through Quarterly Trend $ in millions Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Q2 2024 Q3 2024 Net income $67 $76 $113 $91 $347 $65 $70 $122 Income tax provision 8 27 33 32 100 16 23 38 Interest expense, net 48 54 60 62 224 61 63 69 Depreciation of rental equipment 152
Slide 29: REBITDA Margin and Flow-Through Annual Trend
REBITDA Margin and Flow-Through Annual Trend $ in millions 2019 2020 2021 2022 2023 Net income $47 $74 $224 $330 $347 Income tax provision 16 20 67 104 100 Interest expense, net 174 93 86 122 224 Depreciation of rental equipment 410 403 420 536 643 Non-rental depreciation and amortization 62 63 68 9
Slide 30: 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 31: 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 pr
Slide 32: 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 33: Historical Fleet at OEC
Historical Fleet at OEC1 $ in millions FY 2019 FY 2020 FY 2021 FY 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Q2 2024 Q3 2024 Beginning Balance $3,777 $3,822 $3,589 $4,381 $5,637 $5,915 $6,211 $6,217 $5,637 $6,328 $6,416 $6,714 Expenditures 627 348 725 1,218 348 400 274 196 1,218 167 344 36
Slide 34: For additional information, please contact:
For additional information, please contact: Leslie Hunziker SVP Investor Relations, Communications & Sustainability leslie.hunziker@hercrentals.com 239-301-1675 Herc Holdings Inc. NYSE: HRI Q3 2024 34