Herc Holdings Inc. · NYSE:HRI
Herc — Q3 2017 Earnings Presentation
40 slides from Herc's earnings presentation, Nov 8, 2017
Slide 1: Third Quarter Earnings Conference Call
© 2017 Herc Rentals Inc. Click to edit Master title style Click to edit Master subtitle style Herc Holdings Inc. Third Quarter Earnings Conference Call for the period ending September 30, 2017 November 8, 2017
Slide 2: Agenda
© 2017 Herc Rentals Inc. Agenda 2NYSE: HRI Welcome and Introductions Elizabeth Higashi Vice President, Investor Relations Strategic Update and Industry Outlook Larry Silber President and Chief Executive Officer Q3 and Nine Months Financial Review Barbara Brasier Senior Vice President and Chief Finan
Slide 3: Safe Harbor Statements
© 2017 Herc Rentals Inc. Safe Harbor Statements 3NYSE: 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
Slide 4: Safe Harbor Statements - Continued
© 2017 Herc Rentals Inc. Safe Harbor Statements - Continued 4NYSE: HRI • Risks related to the spin-off, which effected our separation from New Hertz, such as: we have limited operating history as a stand-alone public company, and our historical financial information for periods prior to July 1, 2016
Slide 5: Safe Harbor Statements - Continued
© 2017 Herc Rentals Inc. Safe Harbor Statements - Continued 5NYSE: HRI o other operational risks such as: any decline in our relations with our key national account customers or the amount of equipment they rent from us; our equipment rental fleet is subject to residual value risk upon disposition,
Slide 6: Information Regarding Non-GAAP Financial Measures
© 2017 Herc Rentals Inc. Information Regarding Non-GAAP Financial Measures 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 G
Slide 7: Q3 Key Takeaways
© 2017 Herc Rentals Inc.NYSE: HRI 7 Our strategy is driving revenue growth across all of our regions Fleet and customer diversification are driving improvements in volume, price and mix We are increasing fleet spend to meet demand We are raising the lower end of adjusted EBITDA guidance Our strategy
Slide 8: Highlights – Q3 2017
© 2017 Herc Rentals Inc. Highlights – Q3 2017 8NYSE: HRI 1. Fleet at original equipment cost based on ARA guidelines 2. For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 30 Equipment Rental Revenues $413.1 million +14.7% YoY Average Fleet1 Growth
Slide 9: Updated Guidance
© 2017 Herc Rentals Inc. Updated Guidance Prior Guidance New Guidance Adjusted EBITDA1 $550 to $590 million $560 to $590 million Net Fleet Capital Expenditures2 $275 to $325 million $355 to $365 million 9NYSE: HRI 1. Herc Holdings does not provide forward-looking guidance for certain financial measu
Slide 10: Committed to Our Strategic Direction
© 2017 Herc Rentals Inc. Committed to Our Strategic Direction Disciplined Capital Management Expand and Diversify Revenues Improve Operating Effectiveness Enhance Customer Experience On the Path Forward • Broaden customer base • Expand products and services • Increase density • Grow ancillary revenu
Slide 11: Expand and Diversify Revenues: Strong Q3 Revenue Growth
© 2017 Herc Rentals Inc. Expand and Diversify Revenues: Strong Q3 Revenue Growth • Overall rental revenue growth accelerated each month of the third quarter • Strong broad-based performance across North America • Pricing continued to strengthen in both national and local accounts • ProSolutionsTM an
Slide 12: Expand and Diversify Revenues: Growing and Improving Fleet Mix
© 2017 Herc Rentals Inc. Expand and Diversify Revenues: Growing and Improving Fleet Mix 12NYSE: HRI $3.75 Billion of OEC as of September 30, 2017 1• Continued to broaden fleet mix with fleet purchases in targeted categories to drive customer diversification and improve Dollar Utilization • Improved
Slide 13: Improve Operating Effectiveness: Improving Profitability
© 2017 Herc Rentals Inc. Improve Operating Effectiveness: Improving Profitability • Focused on operating leverage in high growth urban markets • Improved branch efficiencies through training in standard operating procedures and expansion of the Herc Operating Model throughout the organization • Cont
Slide 14: Improve Operating Effectiveness: Focus on Safety
© 2017 Herc Rentals Inc. Improve Operating Effectiveness: Focus on Safety • Safety performance remains a major focus • Year to date total recordable incident rate (TRIR) declined 11% versus the same period in 2016 • Our ultimate goal is for zero incidents and safety performance remains our number on
Slide 15: Enhance Customer Experience: Q3 2017 Highlights
© 2017 Herc Rentals Inc. Enhance Customer Experience: Q3 2017 Highlights • ProContractor campaign on implementation of OSHA requirements for controlling silica dust off to a great start • ProContractor equipment is now in nearly 75% of our locations across North America • ProSolutionsTM performance
Slide 16: Enhance Customer Experience: Investing in Technology
© 2017 Herc Rentals Inc. Enhance Customer Experience: Investing in Technology 16NYSE: HRI Herc On the Go Optimus Mobile App • Covers the entire life cycle of equipment pickup & delivery • Captures customer electronic signature and equipment images • Tracks the delivery of equipment and provides esti
Slide 17: Strong Industry Outlook Supports Our Growth Proposition
© 2017 Herc Rentals Inc. $250 $275 $282 $287 200 220 240 260 280 300 320 2016 2017E 2018E 2019E J a n -9 6 J a n -0 0 J a n -0 4 J a n -0 8 J a n -1 2 J a n -1 6 $299.2 $307.9 2016 2017E Strong Industry Outlook Supports Our Growth Proposition Positive market growth and further penetration of rental
Slide 18: Transformation in Process – Our Strategy is Working
© 2017 Herc Rentals Inc. Transformation in Process – Our Strategy is Working • Executing our strategy and driving improvements in operating performance • Successfully diversifying fleet mix to higher Dollar Utilization equipment categories • Achieving above-market growth in major urban locations • G
Slide 19: Financial Overview
© 2017 Herc Rentals Inc. Financial Overview
Slide 20: Q3 Key Takeaways
© 2017 Herc Rentals Inc.NYSE: HRI 20 Our strategy is driving revenue growth across all of our regions Fleet and customer diversification are driving improvements in volume, price and mix We are increasing fleet spend to meet demand We are raising the lower end of adjusted EBITDA guidance Our strateg
Slide 21: Q3 and Nine Months Financial Summary
© 2017 Herc Rentals Inc. Q3 and Nine Months Financial Summary 21NYSE: HRI 1. For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 30 $ in millions, except EPS Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Equip
Slide 22: Q3 and Nine Months Equipment Rental Revenues
© 2017 Herc Rentals Inc. Q3 and Nine Months Equipment Rental Revenues $ in millions Q3 Equipment Rental Revenue Bridge Q3 and Nine Months Summary 22NYSE: HRI Nine Months Equipment Rental Revenue Bridge $413.1 $1.6 $51.2 $360.3 250 270 290 310 330 350 370 390 410 430 2016 Currency translation Overall
Slide 23: Q3 and Nine Months Total Revenues
© 2017 Herc Rentals Inc. $1,262.8 $9.9$87.8 $1,149.6 $1.0 $34.3 1,000 1,050 1,100 1,150 1,200 1,250 1,300 2016 Currency translation Equipment rental revenue Sales of revenue earning equipment Sales of new equipment and other 2017 • Total revenues increased 13.4% for the third quarter YoY, and 9.8% f
Slide 24: Q3 and Nine Months Net Income (Loss)
© 2017 Herc Rentals Inc. $12.8 $6.7 $0.1 $18.2 $2.1 $0.5 $3.0 (10) (5) 0 5 10 15 20 2016 Income tax Spin-off costs Depreciation of REE Impairment Interest Expense All Other 2017 $ in millions Q3 and Nine Months Net Income (Loss) Q3 Net Income (Loss) Bridge 24NYSE: HRI 1. Excludes the impact of curre
Slide 25: Q3 and Nine Months Adjusted EBITDA
© 2017 Herc Rentals Inc. • Adjusted EBITDA increased 16.2% for the quarter and 4.4% for the nine months compared to the prior-year periods • Strong equipment rental revenue growth in Q3 o 47% flow-through on equipment rental revenues in Q3 • Improved results from sales of revenue earning equipment •
Slide 26: Fleet at Original Equipment Cost
© 2017 Herc Rentals Inc.NYSE: HRI 26 1. Original equipment cost based on ARA guidelines. Fleet at Original Equipment Cost1 • Average fleet at OEC1 for the period ended September 30, 2017 o Increased 3.2% in Q3 2017 versus the prior-year period o Increased 4.4% in the nine months 2017 versus the prio
Slide 27: Debt and Liquidity
© 2017 Herc Rentals Inc.NYSE: HRI 27 Debt and Liquidity Debt Liquidity $ in millions, as of 09/30/17 • Stable debt totaling $2.2 billion as of September 30, 2017 provides financial flexibility • Maintained ample liquidity during the quarter with $672 million as of September 30, 2017 • For the nine m
Slide 28: Disciplined Capital Management: Subsequent Events
© 2017 Herc Rentals Inc.NYSE: HRI 28 Disciplined Capital Management: Subsequent Events Sale-Leaseback transaction • In October 2017, we completed a sale-leaseback transaction • 42 US properties were sold with gross proceeds of $119.5 million • Sale of properties does not qualify for sale- leaseback
Slide 29: Long-Tenured National Account Portfolio Provides Stable Base of Business
© 2017 Herc Rentals Inc. Long-Tenured National Account Portfolio Provides Stable Base of Business National Accounts by Tenure (Years) Over 1,800 National Accounts • Dedicated national account managers • Stable revenue base • Longer transactions 78% of National Accounts revenue are from accounts open
Slide 30: Appendix
© 2017 Herc Rentals Inc. Appendix 30
Slide 31: Definitions of Operating Measures
© 2017 Herc Rentals Inc. 31NYSE: HRI 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 costs (with the basi
Slide 32: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
© 2017 Herc Rentals Inc. 32NYSE: HRI Reconciliation of Net Income to EBITDA and Adjusted 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 co
Slide 33: Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
© 2017 Herc Rentals Inc. $ in millions Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net income (loss) $ 12.8 $ 3.0 $ (54.0) $ (6.5) Provision for income taxes 5.8 3.7 (31.5) 9.0 Interest expense, net 32.4 32.3 101.8 52.1 Depreciation of revenue earning equipme
Slide 34: Reconciliation of Free Cash Flow
© 2017 Herc Rentals Inc. 34NYSE: 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 calculati
Slide 35: Reconciliation of Free Cash Flow
© 2017 Herc Rentals Inc. 35NYSE: HRI Reconciliation of Free Cash Flow $ in millions Nine Months Ended September 30, 2017 2016 Net cash provided by operating activities $ 249.9 $ 370.9 Revenue earning equipment expenditures (356.3) (325.7) Proceeds from disposal of revenue earning equipment 121.6 99.
Slide 36: Elements of Net Income (Loss) Bridge
© 2017 Herc Rentals Inc. Three Months Ended September 30, 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 $ 457.6 $ 403.6 $ 54.0 $ 1.9 $ - $ - $ - $ - $ - $ 5
Slide 37: 2017 SG&A excluding Spin-off costs
© 2017 Herc Rentals Inc. 2017 SG&A excluding Spin-off costs 37NYSE: HRI $0.11 EPS $ in millions Q1 2017 Q2 2017 Q3 2017 Nine Months 2017 SG&A $81.2 $78.8 $84.6 $244.6 Spin-off costs ($7.6) ($9.1) ($10.3) ($27.0) SG&A excluding Spin-off costs $73.6 $69.7 $74.3 $217.6 % of Total Revenue 18.9% 16.8% 16
Slide 38: Historic Fleet at Original Equipment Cost
© 2017 Herc Rentals Inc.NYSE: HRI 38 1. Original equipment cost based on ARA guidelines Historic Fleet at Original Equipment Cost1 $ in millions Q1 2016 Q2 2016 Q3 2016 Q4 2016 Full Year 2016 Q1 2017 Q2 2017 Q3 2017 Nine Months 2017 Beginning Balance – Fleet at OEC $3,384 $3,391 $3,537 $3,616 $3,384
Slide 39: Expand and Diversify Revenues: Driving $ Utilization
© 2017 Herc Rentals Inc. Expand and Diversify Revenues: Driving $ Utilization 39NYSE: HRI Aerial - Booms 19.6% Aerial - Scissors & Other 6.4% Earthmoving - Heavy 11.1% Earthmoving - Compact 7.4% Material Handling- Telehandlers 13.4% Material Handling - Industrial 3.2% Trucks and Trailers 12.8% ProSo
Slide 40: 40NYSE: HRI
© 2017 Herc Rentals Inc. 40NYSE: HRI