Herc Holdings Inc. · NYSE:HRI
Herc — Investor Presentation (June 2019)
35 slides from Herc's investor presentation, Jun 24, 2019
Slide 1: Herc Holdings Inc. Investor Presentation
Herc Holdings Inc. Investor Presentation June 24, 2019 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward-Looking Statements ◦ some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code; This presentation contains statements, that are not statements of historical fact, but instead are forward-looking s
Slide 3: Safe Harbor Continued and Non-GAAP Financial Measures
Safe Harbor Continued and Non-GAAP Financial Measures if New Hertz fails to pay its tax liabilities under the tax matters agreement Information Regarding Non-GAAP Financial Measures or to perform its obligations under the separation and distribution agreement, we could incur significant tax and othe
Slide 4: Company Overview
Company Overview 4
Slide 5: A Leader in the Equipment Rental Industry
A Leader in the Equipment Rental Industry • 50+ years of experience in the equipment rental industry • One of the leading equipment rental suppliers in North America • Recognized for its strong brand and reputation • Listed on the New York Stock Exchange on July 1, 2016 under the symbol "HRI" • High
Slide 6: Vision, Mission and Values
Vision, Mission and Values We are a customer-centric organization focused on safety, efficiency and profitable growth . . NYSE: HRI 6 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 7: Highly Experienced Leadership Team
Highly Experienced Leadership Team EXECUTIVE LEADERSHIP CEO, CFO & COO Average More Than 25 Years of Equipment Industry Experience Larry Silber Mark Irion Bruce Dressel Chris Cunningham Tamir Peres Maryann Waryjas CEO CFO COO CHRO CIO CLO 35+ years 20+ years 30+ years 30+ years 20+ years 30+ years S
Slide 8: Our Strategic Initiatives
Our Strategic Initiatives Develop Our Expand and Improve Enhance Disciplined People and Diversify Operating Customer Capital Culture Revenues Effectiveness Experience Management • Attract and retain • Broaden customer • Focus on safety, • Provide premium • Drive EBITDA talent base labor productivity
Slide 9: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets Strong geographic footprint in high growth markets Approximately 270 locations, principally in North America1 • 39 states • 7 provinces Targeting four to six greenfield locations in 2019 Source: ARA IHS Global Insights as of May 2019 1. Locations as of March 31,
Slide 10: Expanding Products and Services to Meet Customer Needs
Expanding Products and Services to Meet Customer Needs CLASSIC PROSOLUTIONS PROCONTRACTOR Our classic fleet includes aerial, ProSolutionsTM, our industry-specific ProContractor specialty equipment earthmoving, material handling, solutions-based services, includes power includes professional grade to
Slide 11: Improving Fleet and Customer Mix to Drive Growth
Improving Fleet and Customer Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q1 2019 increased 350 bps since 2017 • Total fleet at OEC was $3.69 billion as of Q1 2019 35.3% 35.5% • Local rental revenue accounts for 58% of the total 32.0% • Diversification and growth in new customer accounts re
Slide 12: Strong Industry Outlook Supports Our Growth
Strong Industry Outlook Supports Our Growth ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of May 2019 ($ in billions) as of May 2019 May $67 $64 50.2 $58 $61 $55 $51 $47 $49 $44 $41 $38 $38 $35 50 $31 $32 NON-RESIDENTIAL STARTS3 INDUSTRIAL SPENDING4 ($ in billions) ($ in billions) as
Slide 13: Financial Summary
Financial Summary $ in millions LTM Ended March 31, 2019 2018 % Chg. Equipment Rental Revenue $1,666.8 $1,547.5 7.7% Total Revenues $2,021.1 $1,796.4 12.5% Adjusted EBITDA1 $694.4 $620.3 11.9% Adjusted EBITDA Margin1 34.4% 34.5% (10) bps REBITDA Margin1,2 40.2% 38.7% +150 bps Q1 2019 REBITDA YoY Flo
Slide 14: Credit Highlights
Credit Highlights HercRentals”
Slide 15: Key Credit Highlights
Key Credit Highlights 1 Fragmented N.A. Market Structure Favors Scale 2 Strong Brand and Reputation 3 Improving Margin and Profitability 4 Growing Fleet at OEC with Balanced Capital Expenditures 5 Increasing Free Cash Flow and Declining Leverage 6 Downturn Resiliency NYSE: HRI 15 ©2019 Herc Rentals
Slide 16: Fragmented N.A. Market Structure Favors Scale
1 Fragmented N.A. Market Structure Favors Scale 2018 ESTIMATED MARKET SHARE1 • A leading rental equipment company in North America servicing broad customer base • Scale provides operating leverage, pricing and 3% purchasing strength • Total revenues and adjusted EBITDA grew above market through rate
Slide 17: Strong Brand and Reputation
2 Strong Brand and Reputation • Recognized by the industry and customers as HERC (Hertz Equipment Rental Corp.) for 50 years • Renamed Herc Rentals in anticipation of the separation from its former parent in February 2016 • Locations and equipment rebranded with the new Herc Rentals logo in the U.S.
Slide 18: Improving Margin and Profitability
3 Improving Margin and Profitability SG&A % OF TOTAL REVENUES YOY CHANGE IN PRICING1 (excluding spin-off costs) 2018 2019 16.1% 15.0% 15.1% 14.9% 14.4% Q1 Q2 Q3 Q4 ADJUSTED EBITDA MARGIN2 • YoY pricing improved to 3.8% in Q1 2019, the 12th consecutive quarter of year-over-year improvement 34.6% 34.4
Slide 19: Growing Fleet at OEC with Balanced Capital Expenditures
4 Growing Fleet at OEC with Balanced Capital Expenditures FLEET EXPENDITURES AT OEC1 FLEET DISPOSALS AT OEC1 ($ in millions) ($ in millions) YOY CHANGE IN AVERAGE FLEET AT OEC1 • Net fleet capex2 of $483 million for the LTM ended March 31, 2019 • YoY average fleet at OEC increased 2.0% in Q1 2019 •
Slide 20: Increasing Free Cash Flow and Declining Leverage
5 Increasing Free Cash Flow and Declining Leverage FREE CASH FLOW1 NET LEVERAGE1 ($ in millions) $13.4 3.6 x ($7.9) 3.1 x 2.9 x ($60.9) FY 2017 FY 2018 LTM Q1 2019 FY 2017 FY 2018 Q1 2019 LIQUIDITY2 • Free cash flow1 of $13.4 million for the LTM ended ($ in millions) $754.0 March 31, 2019 • Ample li
Slide 21: Downturn Resiliency
6 Downturn Resiliency High growth Moderate to flat growth Declining market • Revenue and EBITDA pick up • Revenue and EBITDA decline • Fleet is replenished • Industry de-fleets • Cash flow is invested in re- • Cash flow generated from de-fleeting, fleeting and growth which can be applied to debt red
Slide 22: Strongly Positioned for Growth
Strongly Positioned for Growth Leading player in a highly fragmented industry Strong brand and reputation with a highly experienced senior management team Fleet and customer diversification driving revenue growth Expanded margin and cash flow profile De-levered balance sheet Counter-cyclical cash ge
Slide 23: Going Forward Our Strategy is Working
Going Forward Our Strategy is Working Our strategic initiatives Improving operating $ utilization and margin Net results and are expected to continue efficiencies and cost are both expected to capital management to drive growth in controls are expected to steadily increase should generate revenues a
Slide 24: Appendix
Appendix
Slide 25: Herc Rentals Corporate History & Key Events
Herc Rentals Corporate History & Key Events Financial Strategic Growth / Consolidation Path Forward Crisis Changes Launched industry-first online rental Larry Silber • Acquired account named HERC management • Acquired CEO and began New HERC President building new Introduced Entered Launc
Slide 26: 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 27: Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, 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
Slide 28: Reconciliation of Net Income to Adj. EBITDA and REBITDA
Reconciliation of Net Income to Adj. EBITDA and REBITDA Calculation of Adjusted EBITDA Margin, REBITDA Margin and REBITDA Flow-Through LTM Ended Full Year Ended $ in millions March 31, December 31, 2019 2018 2018 2017 Net income (loss) $72.5 $189.4 $69.1 $160.3 Income tax provision (benefit) 1.7 (21
Slide 29: REBITDA Margin Trend
REBITDA Margin Trend Q1 Q2 Q3 Q4 LTM Q1 LTM Q1 $ in millions Q1 2019 2018 2018 2018 2018 2018 2019 Total Revenues $431.3 $485.5 $516.2 $543.7 $475.7 $1,796.4 $2,021.1 Less: Sales of rental equipment 47.3 78.2 50.1 80.6 85.1 183.7 294.0 Less: Sales of new equipment, parts and supplies 11.4 10.8 14.2
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
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
Slide 32: Historical Fleet at OEC
Historical Fleet at OEC1 $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Beginning Balance $3,651 $3,732 $3,873 $3,922 $3,651 $3,777 Expenditures $198 $321 $171 $84 $774 $103 Disposals ($109) ($179) ($126) ($193) ($607) ($193) Foreign Currency / Other ($8) ($1) $4 ($36) ($41) $7 Ending
Slide 33: SG&A Excluding Spin-off Costs
SG&A Excluding Spin-off Costs $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 SG&A $74.5 $77.3 $78.4 $82.4 $312.6 $71.5 Spin-off costs ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) $0.0 SG&A excluding Spin-off costs $69.6 $73.4 $76.7 $78.5 $298.2 $71.5 % of Total Revenue 16.1% 15.1% 14.9% 14.4%
Slide 34: Fleet Mix: Driving $ Utilization
Fleet Mix: Driving $ Utilization OEC as of 03/31/20181 OEC as of 03/31/191 $3.73 billion $3.69 billion 1. Original equipment cost based on ARA guidelines NYSE: HRI 34 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 35: NYSE: HRI
NYSE: HRI 35 ©2019 Herc Rentals Inc. All Rights Reserved.