Herc Holdings Inc. · NYSE:HRI
Herc — FY2022 Earnings Presentation
33 slides from Herc's earnings presentation, Feb 14, 2023
Slide 1: Shifting Into High Gear
Shifting Into High Gear ©2021 Herc Rentals Inc. All Rights Reserved.
Slide 2: Herc Rentals Team & Agenda
Herc Rentals Team & Agenda Agenda • Safe Harbor • 2022 Overview • Q4 Operations Review • Q4 Financial Review Larry Silber Aaron Birnbaum Mark Irion President & Chief Senior Vice President & Senior Vice President & • 2023 Outlook Executive Officer Chief Operating Officer Chief Financial Officer • Q&A
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 by the federal In addition to results calculated according to accounting principles genera
Slide 4: 2022: An Exceptional Year of Growth
2022: An Exceptional Year of Growth Rental Revenue Total Revenues Adjusted EBITDA¹ $ in millions $ in millions $ in millions $2,552 $2,739 $1,227 +34% +32% $895 $1,910 +37% $2,073 $1,977 $1,999 $1,702 $741 $1,658 $685 $689 $1,544 $1,781 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 202
Slide 5: 2022: Exceptional Growth and Market Share Gains
2022: Exceptional Growth and Market Share Gains Equipment rental market in NA grew ~11% in 2022 • Strong demand across all regions, equipment categories and key end markets • Shift from equipment ownership to rental continues • Supply chain constraints persist • Ongoing industry rate discipline cont
Slide 6: 2022: Delivering on Growth Strategies
2022: Delivering on Growth Strategies Strategies to Accelerate ROIC Optimize branch network for fleet / operating efficiencies at scale and Increase Shareholder Returns: • Acquired 18 companies - 29 locations; opened 21 greenfield locations Enhance fleet mix Grow the Core • Expanded high-margin spec
Slide 7: 2023 Investing to Capitalize on Growth Trends
2023 Investing to Capitalize on Growth Trends Industrial Infrastructure Specialty Chip manufacturing Airports Climate control Electric vehicle manufacturing Bridges Disaster response & remediation Energy Flood control Power generation Petrochemical High-speed rail Pumping solutions Industrial plant
Slide 8: Operations Review - Aaron Birnbaum
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 9: Focusing on Safety
Focusing on Safety Total Recordable Incident Rate Improved to 0.52 Continuing focus on Perfect Days • All branches reported > 98% Perfect Days in 2022 • Perfect Days are those with no: ◦ OSHA reportable incidents ◦ At-fault moving vehicle accidents ◦ DOT violations Herc's Safety Program integrated i
Slide 10: Q4 2022 Delivering on Growth Strategy
Q4 2022 Delivering on Growth Strategy Equipment rental revenue increased 31% to a Q4 record $713 million Fleet investments and new locations are contributing to double-digit growth in urban markets Average fleet at OEC increased 31% in Q4 2022 Customer demand is strong and continues to show positive
Slide 11: Diversifying Fleet to Enhance Utilization
Diversifying Fleet to Enhance Utilization Fleet Composition Fleet Expenditures at OEC1 $ in millions $5.6 billion at OEC1 2021 2022 $327 $311 $327 $253 $188 $210 $210 Other 23% $117 Material Q1 Q2 Q3 Q4 Handling 17% Fleet Disposals at OEC1 $ in millions Specialty 2021 2022 Earthmoving 24% $140 13% $
Slide 12: Business Model Driving Growth
Business Model Driving Growth Q4 Revenue by Customer1 Other 23% Contractors 34% Our diverse customer mix and base of large national customers drives sales strategy and growth opportunities Infrastructure and New customer account revenues continue to be a solid Government 15% source of growth Industr
Slide 13: Expanding through M&A in 2022
Expanding through M&A in 2022 EV/EBITDA Multiple—18 Acquisitions EBITDA $85 million Total Cash Outlay $515 million EBITDA Multiple 5.5x Synergized Multiple Opportunity 3.5x - 4.5x # of Locations 29 Strategic M&A opportunity ~$500 million per year NYSE: HRI 13 ©2023 Herc Rentals Inc. All Rights Reser
Slide 14: 2023 Building Blocks to Growth
2023 Building Blocks to Growth National M&A Accounts ProControl On-Site ProSolutions Next Gen Solutions CORE Fleet capital expenditures and investments in greenfield locations drive growth NYSE: HRI 14 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 15: Financial Review - Mark Irion
Financial Review Mark Irion Senior Vice President and Chief Financial Officer
Slide 16: Q4 and 2022 Financial Results
Q4 and 2022 Financial Results Three Months Ended December 31, Year Ended December 31, 2022 vs 2021 % 2022 vs 2021 % 2022 2021 2022 2021 $ in millions, except per share data Change Change Equipment Rental Revenue $713 $542 31% $2,552 $1,910 34% Total Revenues $786 $578 36% $2,739 $2,073 32% Net Incom
Slide 17: Pricing and Utilization Performance
Pricing and Utilization Performance Pricing1 Average Fleet at OEC1 2021 2022 2021 2022 6.6% 35.0% 6.2% 32.1% 31.1% 5.5% 23.4% 4.3% 3.5% 14.9% 2.8% 1.9% 4.3% (1.9)% (0.3)% (5.1)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Utilization2 Average Fleet on Rent at OEC1 2021 2022 2021 2022 46.0% 34.9% 34.9% 45.3% 44.6% 43.
Slide 18: Disciplined Capital Management
Disciplined Capital Management Maturities As of December 31, 2022 No near-term maturities and ample liquidity2 of $ in millions $1.6 billion provide financial flexibility Net capital expenditures outpaced cash flow from operations resulting in free cash outflow of $250 million for ABL Credit Facilit
Slide 19: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 % Industrial Spending2 GR: ~6 $ in billions ’21-'2 6E CA $ in billions $396 $67 $69 $385 $63 $65 $60 $371 $55 $54 $369 $52 $50 $47 $49 $45 $351 $329 $317 $317 $310 $308 $303 $299 15 16 17 18 19 20 21 22 23E 24E 25E 26E 15 16 17 18 1
Slide 20: 2023 Outlook
2023 Outlook Metric 2022 Actual 2023 Guidance % Change over 2022 Adjusted EBITDA $1,227.2 million $1.45 billion to $1.55 billion 18% to 26% Net Rental Equipment $1,047.4 million $1.0 billion to $1.2 billion (5)% to 15% Expenditures Key Assumptions: • Above-market revenue growth on strong project pip
Slide 21: Purpose, Vision, Mission and Values
Purpose, Vision, Mission and Values We equip our customers and communities to build a brighter future NYSE: HRI 21 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 22: NYSE: HRI
NYSE: HRI 22 ©2023 Herc Rentals Inc. All Rights Reserved.
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: Our Strategy is Delivering Results
Our Strategy is Delivering Results Equipment Rental Revenue Adjusted EBITDA1 $ in millions $2,552 $1,227 $1,910 $895 $1,658 $1,702 $741 $1,499 $1,544 $685 $689 $585 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 Adjusted EBITDA Margin1 Net Leverage2 44.8% 43.2% 3.6x 3.1x 38.7% 2.8x 37.1
Slide 25: 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, merger and acquisition related costs, restructuring and restructuring related charges, spin-off costs, loss on exti
Slide 26: Reconciliation of Net Income to Adj. EBITDA and REBITDA
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 equipm
Slide 27: Reconciliation of Net Income to Adj. EBITDA and REBITDA
Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA (REBITDA), REBITDA Margin and Flow-Through $ in millions Three Months Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Net income $97.8 $71.8 $329.9 $224.1 Income tax provision 35.4 19.6 103.5 66.3 I
Slide 28: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Total Revenues $453.8 $490.9 $550.4 $578.0 $2,073.1 $567.3 $640.4 $745.1 $786.0 $2,738.8 Less: Sales of rental equipment 44.2 30.3 16.6 22.0 113.1 27.7 19.3 21.5 57.2 125.7 Le
Slide 29: REBITDA Margin Annual Trend
REBITDA Margin Annual Trend $ in millions 2017 2018 2019 2020 2021 2022 Total Revenues $1,754.5 $1,976.7 $1,999.0 $1,781.3 $2,073.1 $2,738.8 Less: Sales of rental equipment 190.8 256.2 242.8 198.5 113.1 125.7 Less: Sales of new equipment, parts and supplies 52.3 49.3 44.0 28.2 30.1 35.8 Equipment re
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 pre
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 FY FY FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY $ in millions 2017 2018 2019 2020 2021 2021 2021 2021 2021 2022 2022 2022 2022 2022 Beginning Balance $3,556 $3,651 $3,777 $3,822 $3,589 $3,626 $3,763 $4,075 $3,589 $4,381 $4,593 $5,097 $5,421 $4,381 Expenditures $524 $774 $627 $349
Slide 33: For additional information, please contact
For additional information, please contact: Leslie Hunziker SVP Investor Relations leslie.hunziker@hercrentals.com 239 301-1675 NYSE: HRI 33 ©2023 Herc Rentals Inc. All Rights Reserved.