Herc Holdings Inc. · NYSE:HRI

Herc — Q3 2018 Earnings Presentation

36 slides from Herc's earnings presentation, Nov 8, 2018

  1. Slide 1: Third Quarter 2018 Earnings Call

    Herc Holdings Inc. Third Quarter 2018 Earnings Call For the period ended September 30, 2018 November 8, 2018 ©2018 Herc Rentals Inc. All Rights Reserved.

  2. Slide 2: Agenda

    Agenda Elizabeth Higashi Welcome and Introductions Vice President, Investor Relations Strategic Update & Larry Silber Industry Outlook President and Chief Executive Officer Mark Irion Q3 and Nine Months 2018 Financial Senior Vice President and Review Chief Financial Officer Larry Silber Mark Irion Q

  3. Slide 3: Safe Harbor Statements

    Safe Harbor Statements Forward-Looking Statements This presentation contains statements, including those related to 2018 Guidance, that are not statements of historical fact, but instead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We cau

  4. Slide 4: Business Risks - Continued

    Business Risks - Continued ◦ we may have difficulty obtaining the resources that we need to operate, or our costs to do so could increase significantly; ◦ any occurrence that disrupts rental activity during our peak periods, given the seasonality of the business, especially in the construction indus

  5. Slide 5: Business Risks Continued and Non-GAAP Financial Measures

    Business Risks- Continued and Non-GAAP Financial Measures • Risks related to the securities market and ownership of our stock, including that: the market price of our common stock could decline as a result of the sale or distribution of a large number of our shares or the perception that a sale or d

  6. Slide 6: Our Strategy Delivered Results in Q3

    Our Strategy Delivered Results in Q3 ü Our strategic initiatives drove volume growth and improved price and mix ü We achieved strong rental revenue growth, controlled DOE, reduced SG&A and improved flow-through ü Both quarterly $ utilization and adjusted EBITDA margin increased to the highest quarte

  7. Slide 7: Our Strategic Initiatives

    Our Strategic Initiatives Enhance Expand and Improve Operating Disciplined Capital Customer Diversify Revenues Effectiveness Management Experience ü Broaden customer ü Focus on safety, ü Provide premium ü Drive EBITDA base labor productivity, products and margin growth and warranty solutions-based ü

  8. Slide 8: Focus on Safety

    Focus on Safety • Continued to improve LTM Total Recordable Incident Rate (TRIR) through September 30, 2018 as compared with the same period in 2017 • Remain focused on a goal of 100% Perfect Days – defined as: Safety is an action, not a metric ◦ No OSHA recordable incidents ◦ No "at fault" motor ve

  9. Slide 9: Summary of Q3 2018 Results

    Summary of Q3 2018 Results $449.0 million Equipment Rental Revenue +8.7% YoY Average Fleet1 Growth +5.5% YoY Pricing1 +3.2% YoY $46.2 million Net Income +$33.4 million YoY Diluted Earnings Per Share $1.60 $201.5 million Adjusted EBITDA2 39.0% Margin, +40 bps YoY 39.2% Dollar Utilization1 +50 bps YoY

  10. Slide 10: Strong Q3 2018 Performance

    Strong Q3 2018 Performance Equipment Rental Revenue YoY Pricing1 $ in millions 2017 2018 2017 2018 $449 3.2% 3.0% 2.8% 2.9% $413 $415 $393 1.7% $369 1.4% $351 1.1% $321 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY Change in Average Fleet at OEC1 YoY Change in Average OEC Fleet on Rent1 2017 2018 2017 2018 7.7% 5.3%

  11. Slide 11: Improving Fleet Mix to Drive Growth

    Improving Fleet Mix to Drive Growth 1 $ Utilization • $ Utilization in Q3 2018 achieved an all-time quarterly high since becoming a stand-alone 2017 2018 public company, increasing 50 bps YoY to 39.2% 39.2% 38.7% 38.7% • Continued to diversify equipment in key categories to drive higher $ utilizatio

  12. Slide 12: Market Leader with Significant Scale and Broad Footprint

    Market Leader with Significant Scale and Broad Footprint Driving Urban Market Density - Added Locations in St. Louis, Atlanta and Seattle Approximately 275 locations, principally in North America1 Source: ARA IHS Global Insights August 2018 1. Locations as of September 30, 2018 NYSE: HRI ©2018 Herc

  13. Slide 13: Improving Customer Mix and Diversification

    Improving Customer Mix and Diversification Local vs National % Mix in Q31 Q3 Revenue by Customer1 2017 2018 Other: 22% 60% Contractors: 35% 56% 44% 40% Infrastructure and Government: 16% Local National Industrial: 27% Strong Q3 YoY Local Revenue1 Growth • Local rental revenue grew 15% YoY in 2017 20

  14. Slide 14: Enhancing Operating Effectiveness

    Enhancing Operating Effectiveness • XPO Logistics launched in August 2018 ◦ Improved savings through reductions in cost per mile ◦ Enhanced ability to track performance versus expectations • Improved transportation quote tool and visibility to field operations • RPP program continued to grow substan

  15. Slide 15: Strong Industry Outlook Supports Our Growth

    Strong Industry Outlook Supports Our Growth Non-ResidentialArchitecture Billings Starts 3Index1 N.A. Equipment Rental Market 2 ($ in billions) as of October 2018 as of August 2018 5.6% September ’17-‘22E CAGR: $67 51.1 $64 $61 $58 $55 $51 50 $47 $49 $44 $41 $38 $38 $35 $31 $32 1 5 6 7 8 9 0 2 3 4 5

  16. Slide 16: Q3 2018 Financials

    Q3 2018 Financials NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 16 16

  17. Slide 17: Q3 and Nine Months Financial Summary

    Q3 and Nine Months Financial Summary $ in millions, except EPS Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 % Chg. 2018 2017 % Chg. Equipment Rental Revenue $449.0 $413.1 8.7% $1,210.6 $1,084.5 11.6% Total Revenues 516.2 457.6 12.8% 1,433.0 1,262.8 13.5% Net Income (Los

  18. Slide 18: Q3 and Nine Months Total Revenues

    Q3 and Nine Months Total Revenues Q3 YoY Total Revenues Q3 Total Revenues Bridge $ in millions • Total revenues increased 12.8%, or $58.6 $22.8 $0.4 $516.2 $37.7 million, in Q3 2018 $457.6 $(2.3) • Equipment rental revenue increased 8.7% in Q3 2018 ◦ Continued improvements in volume, price and mix ◦

  19. Slide 19: Q3 and Nine Months Adjusted EBITDA

    Q3 and Nine Months Adjusted EBITDA1 Q3 Adjusted EBITDA Bridge Q3 Adjusted EBITDA $ in millions • YoY adjusted EBITDA increased $24.8 million or 14.0% in Q3 2018 $0.6 $37.7 $201.5 $176.7 $(0.1) $(6.3) $(2.8) $(1.2) • Higher equipment rental revenue of $37.7 $(3.1) million was the largest contributor

  20. Slide 20: Q3 and Nine Months Net Results

    Q3 and Nine Months Net Results Q3 Net Results Bridge Q3 Net Results $ in millions • Net income improved to $46.2 million in Q3 $26.7 $46.2 2018 compared to $12.8 million in the prior year • Income taxes decreased $6.8 million primarily due to a $15 million tax benefit related to a revision to the tr

  21. 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 $3.92 billion as of September 30, $ in billions 2018 2017 2018 • Average fleet at OEC increased 5.5% in Q3 2018 over $3.92 $3.87 the prior-year quarter $3.73 $3.75 $3.65 $3.65 $3.56 • Fleet expenditures at O

  22. Slide 22: Disciplined Capital Management

    Disciplined Capital Management Net Leverage1 Liquidity $ in millions, as of 09/30/2018 ABL Facility $1,750.0 4.0x Outstanding (1,177.8) 3.6x 3.4x Letters of Credit (25.5) Availability from ABL $546.7 Cash & Cash Equivalents 18.0 Total Liquidity $564.7 Q3 2017 Q4 2017 Q3 2018 • Net leverage of ~3.4x1

  23. Slide 23: 2018 Full Year Guidance

    2018 Full Year Guidance Improving 2018 Guidance Previous Guidance Current Guidance Adjusted EBITDA $630 to $660 million $675 to $685 million Net Fleet Capital Expenditures $525 to $575 million $525 to $540 million NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 23 23

  24. Slide 24: Q3 Takeaways

    Q3 Takeaways Q3 2018 • Drove strong rental revenue growth – 10 consecutive quarters of YoY rate increases – Increased ancillary revenues – Higher volume and improved mix • Cost containment initiatives showed results • Achieved highest adjusted EBITDA margin and $ utilization since spin-off • Maintai

  25. Slide 25: Appendix

    Q4 and FY 2017 AppendixFinancials NYSE: HRI ©2018 Herc Rentals Inc. All Rights Reserved. 25

  26. Slide 26: Glossary of Terms Commonly Used in the Industry

    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 (ARA), which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized refurbishment cos

  27. Slide 27: Reconciliation of Net Income to Adj. EBITDA, REBITDA

    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

  28. 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 Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Net income (loss) $46.2 $12.8 $35.8 ($54.0) Income tax provision

  29. Slide 29: REBITDA Margin Trend

    REBITDA Margin Trend $ in millions 9 9 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 months FY 2017 months 2016 2017 2017 2017 2017 2018 2018 2018 2017 2018 Total Revenues $405.2 $389.4 $415.8 $457.6 $491.7 $1,262.8 $1,754.5 $431.3 $485.5 $516.2 $1,433.0 Less: Sales of rental equipment 28.5 54.4 46.4 27.7 62.3 128.5 190.

  30. 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

  31. 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

  32. Slide 32: Historic Fleet at OEC

    Historic Fleet at OEC1 $ in millions Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018 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 $3,651 $3,732 $3,873 Expenditures – Fleet at OEC $90 $22

  33. Slide 33: Net Results Bridge

    Net Results Bridge Three Months Ended September 30, Elements of Net Income (Loss) Bridge Currency $ in millions 2018 2017 $ Change impact 1 Income tax Spin-off costs Impairment Interest Expense All Other Total revenues $516.2 $457.6 $58.6 ($2.3) $— $— $— $— $60.9 Direct operating 194.4 188.1 6.3 (1.

  34. Slide 34: SG&A Excluding Spin-off Costs

    SG&A Excluding Spin-off Costs $ in millions Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018 Q2 2018 Q3 2018 SG&A $81.1 $78.8 $84.5 $75.8 $320.2 $74.5 $77.3 $78.4 Spin-off costs ($7.6) ($9.1) ($10.3) ($8.2) ($35.2) ($4.9) ($3.9) ($1.7) SG&A $73.5 $69.7 $74.2 $67.6 $285.0 $69.6 $73.4 $76.7 excluding S

  35. Slide 35: Expand and Diversify Revenues: Driving $ Utilization

    Expand and Diversify Revenues: Driving $ Utilization OEC as of 09/30/17 1 OEC as of 09/30/18 1 $3.75 billion $3.92 billion Lighting Lighting 1.7% Compaction 1.7% Other Other Compaction 1.6% 2.6% 2.6% 1.6% Air Compressors Air Compressors Aerial - Booms 2.7% 2.5% ProContractor ProContractor 18.5% Aeri

  36. Slide 36: Herc Rentals

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