Herc Holdings Inc. · NYSE:HRI
Herc — Bank of America Securities Global Industrials Conference 2021
34 slides from Herc's conference presentation, Mar 16, 2021
Slide 1: Bank of America Securities Global Industrials Conference
Larry Silber President and Chief Executive Officer Mark Irion Senior Vice President & Chief Financial Officer HERC HOLDINGS INC. Elizabeth Higashi, CFA Vice President, Investor Relations & Sustainability Bank of America Securities Global Industrials Conference March 16, 2021 ©2021 Herc Rentals Inc.
Slide 2: 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 In addition to results calculated according to accounting principles defined by the federal securi
Slide 3: A Leader in the Equipment Rental Industry
A Leader in the Equipment Rental Industry HRI Listed on the New 277 Locations in 39 states York Stock Exchange and five Canadian on July 1, 2016 provinces 56 Years in the 4,800 equipment rental Employees serving industry North America NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved. 3
Slide 4: Our Strategic Initiatives are Delivering Results
Our Strategic Initiatives are Delivering Results Develop Our Expand and Improve Enhance Disciplined People and Diversify Operating Customer Capital Culture Revenues Effectiveness Experience Management Attract and retain Broaden customer Improve sales force Provide premium Drive EBITDA diverse talent
Slide 5: Margin and Net Leverage Improved Since Spin-off
Margin and Net Leverage Improved Since Spin-off Equipment Rental Revenue Adjusted EBITDA1 $ in millions $ in millions Adjusted EBITDA Margin1 Net Leverage2 1. 2. For a definition and reconciliation to the most comparable GAAP financial measure, see slides 27 and 28 and previously filed presentations
Slide 6: 2020 Takeaways - Overcoming the Challenges
2020 Takeaways - Overcoming the Challenges Maintained positive pricing in 2020 Strong cost management contributed to YoY improvement in adjusted EBITDA margin Disciplined capital spending contributed to substantial improvement in free cash flow Positioned to accelerate top-line growth NYSE: HRI ©202
Slide 7: Full Year 2020 Financial Highlights
Full Year 2020 Financial Highlights Equipment Net Income Rental Revenue Full Year Full Year 55.2% $1,543.7M (9.3)% YoY $73.7M YoY Earnings Per Total Revenues Diluted Share Full Year Full Year (10.9)% 54.0% $1,781.3M YoY $2.51 YoY Adjusted Adjusted EBITDA EBITDA1 Full Year Margin1 Full Year (7.0)% +1
Slide 8: Q4 2020 Operations Review
Q4 2020 OPERATIONS REVIEW NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved. 8
Slide 9: Delivering in a Challenging Environment
Delivering in a Challenging Environment Year-over-year trends in Q4 rental revenue improved compared with double-digit % declines in Q2 and Q3, but was still lower than the prior year Diverse customers and industries helped mitigate the impact of COVID-19 Results in the quarter were also aided by we
Slide 10: Focusing on Safety Delivers Results
Focusing on Safety Delivers Results TRIR improved to 0.86 in 2020 Continued focus on safety by following CDC guidelines All of our branches reported at least 98% Perfect Days in 2020 Conducted 58,395 safety training hours NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved. 10
Slide 11: Investing in High Growth Urban Markets
Investing in High Growth Urban Markets 277 39 states 5 provinces Strong geographic footprint in high growth urban markets New greenfield locations opened in Ft. Lauderdale, Toronto, Denver, and two in Dallas Four locations acquired in Houston Targeting 10 to 20 new locations in urban markets annuall
Slide 12: Managing Fleet to Enhance Utilization
Managing Fleet to Enhance Utilization Fleet Composition at OEC1 Fleet Expenditures at OEC1 $3.59B at OEC $ in millions Fleet Disposals at OEC1 $ in millions Fleet disposals at OEC in Q4 2020 were $234 million, generating ~36% proceeds as a percent of OEC Average age of disposals was 85 months in Q4
Slide 13: Resilient Business Model Delivers
Resilient Business Model Delivers Q4 Revenue by Customer1 Our diverse customer mix, base of national customers and expanded specialty business continues to provide growth opportunities Industrial manufacturing activity began to close the gap with pre-COVID-19 levels Focusing on high growth industry
Slide 14: Continuing Our Journey
Continuing Our Journey Our team is focused on: • Enhancing the well-being of our team by investing in training • Operating a safe environment for our employees, customers and communities • Expanding in fast-growing urban markets to drive top-line growth • Improving utilization by driving more fleet
Slide 15: Q4 Financial Review
Q4 FINANCIAL REVIEW NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved. 15
Slide 16: Q4 and Full Year Financial Summary
Q4 and Full Year Financial Summary Three Months Ended December 31, Years Ended December 31, $ in millions, except per share data 2020 2019 % Chg. 2020 2019 % Chg. Equipment Rental Revenue $427.3 $457.0 (6.5)% $1,543.7 $1,701.8 (9.3)% Total Revenues $520.4 $540.1 (3.6)% $1,781.3 $1,999.0 (10.9)% Net
Slide 17: Pricing and Utilization Performance
Pricing and Utilization Performance Pricing1 Average Fleet at OEC1 $ Utilization2 Average Fleet on Rent at OEC1 0.0% 1. YoY Change. Based on ARA guidelines. NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved. 17 2. Based on ARA guidelines
Slide 18: Q4 and Full Year Adjusted EBITDA
Q4 and Full Year Adjusted EBITDA1 $ in millions Q4 Adjusted EBITDA Bridge Adjusted EBITDA declined 8.8% or $18.8 million in Q4 2020 primarily due to lower volume and rental revenue DOE was reduced by $8.6 million primarily due to lower re-rent and personnel-related expenses in Q4 2020 SG&A declined
Slide 19: Disciplined Capital Management
Disciplined Capital Management Maturities $425M $ in millions, as of December 31, 2020 Senior Unsecured Notes Free cash flow3 of approximately ABL Credit $425 million for YTD 2020 Facility ABL Credit Facility $40.8 AR Finance Leases Facility1 2.4x 2021-2027 Total debt of $1.7 billion as of December
Slide 20: A Resilient Industry
A Resilient Industry N.A. Equipment Rental Market1 Select Market Forecasts2 U.S. Nonresidental Building Starts History Forecast 2017 2018 2019 2020 2021 2022 2023 YOY Growth +12% +4% +5% (23)% +3% +9% +7% Sectors with Tailwinds History Forecast 2017 2018 2019 2020 2021 2022 2023 Healthcare +7% (3)%
Slide 21: Improving Metrics Position Future Growth
Improving Metrics Position Future Growth Adjusted EBITDA Margin1 Focus on top line growth and controlling costs to continue to improve margins over time Strong free cash flow provides flexibility for new growth initiatives Net Leverage2 Will continue opening new greenfield locations Seeking accretiv
Slide 22: Appendix
APPENDIX NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved. 22
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: Q4 and Full Year Total Revenues
Q4 and Full Year Total Revenues $ in millions Q4 Revenue Bridge Equipment rental revenue decreased 6.5% in Q4 $520.4 2020 with lower volume as a result of the impact of the COVID-19 pandemic Sales of rental equipment increased 15.2%, or $10.8 million, in Q4 2020 Total revenues decreased 3.6%, or $19
Slide 25: Q4 and Full Year Net Results
Q4 and Full Year Net Results Q4 Net Results Bridge $ in millions Net income was $35.5 million in Q4 2019 compared to $35.1 million in the prior year $35.5 Interest expense in Q4 2020 declined $4.6 million primarily due to lower average outstanding balances and interest rates on our ABL Credit Facili
Slide 26: Reconciliation of Adjusted Net Income and Adjusted Earnings Per Diluted Share
Reconciliation of Adjusted 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 (loss), restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, im
Slide 27: Reconciliation of Net Income to Adj. EBITDA, REBITDA and Flow-Through
Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through EBITDA, Adjusted EBITDA, and REBITDA - EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental eq
Slide 28: Reconciliation of Net Income to Adj. EBITDA, REBITDA and Flow-Through
Reconciliation of Net Income to Adj. EBITDA, Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through $ in millions Three Months Ended December 31, Years Ended December 31, 2020 2019 2020 2019 Net income $35.5 $35.1 $73.7 $47.5 Income tax provision 9.5 18.1 20.4 16.1 Interes
Slide 29: REBITDA Margin Trend
REBITDA Margin Trend $ in millions Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Total Revenues $475.7 $475.1 $508.1 $540.1 $1,999.0 $436.2 $368.0 $456.7 $520.4 $1,781.3 Less: Sales of rental equipment 85.1 51.3 35.4 71.0 242.8 40.0 31.4 45.3 81.8 198.5 Less: Sales
Slide 30: 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 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 FY 2019 FY $ in millions FY 2016 FY 2017 FY 2018 Q1 2020 Q2 2020 Q3 2020 Q4 2020 2020 Beginning Balance $3,384 $3,556 $3,651 $3,777 $3,822 $3,800 $3,752 $3,726 $3,822 Expenditures $495 $524 $774 $627 $109 $88 $90 $62 $349 Disposals ($328) ($442) ($607) ($593) ($110) ($83) ($
Slide 33: Fleet Mix
Fleet Mix December 31, 2020 December 31, 2019 Aerial - Booms 16.4 % 17.1 % Aerial - Scissors & Other 7.2 % 7.3 % Earthmoving - Compact 8.0 % 8.3 % Earthmoving - Heavy 5.5 % 5.6 % Material Handling - Telehandlers 13.3 % 13.6 % Material Handling - Industrial 4.0 % 4.1 % Trucks and Trailers 14.6 % 14.0
Slide 34: Investor Contact
Investor Contact: Elizabeth M. Higashi, CFA Vice President, Investor Relations & Sustainability elizabeth.higashi@hercrentals.com NYSE: HRI ©2021 Herc Rentals Inc. All Rights Reserved.
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