Herc Holdings Inc. · NYSE:HRI
Herc — Q3 2020 Earnings Presentation
35 slides from Herc's earnings presentation, Oct 22, 2020
Slide 1: Q3 & Nine Months 2020 Earnings Conference Call
Larry Silber President & Chief Executive Officer Aaron Birnbaum Senior Vice President & Chief Operating Officer Mark Irion Senior Vice President & Chief Financial Officer Elizabeth Higashi, CFA Vice President, Investor Relations HERC HOLDINGS INC. Q3 & NINE MONTHS 2020 EARNINGS CONFERENCE CALL Octob
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: HRI Strengths: The Right People, Assets and Strategy
HRI Strengths: The Right People, Assets and Strategy Our People + Network + Equipment + Service = Results Experienced Top tier — 3rd Broad array of Diverse mix of Highest largest equipment customers and quarterly Nimble and equipment rental including aerial, industries adjusted flexible company mate
Slide 4: Q3 2020 Takeaways
Q3 2020 Takeaways Sequential improvement in volume and rental revenue from mid-April through September Strong cost management contributed to YoY improvement in margin Disciplined capital spending and working capital contributed to improvement in free cash flow Raising FY 2020 adjusted EBITDA guidanc
Slide 5: Third Quarter 2020 Highlights
Third Quarter 2020 Highlights Equipment Net Income Rental Revenue Q3 Q3 324.5% $402.3M (12.5)% YoY $39.9M YoY Earnings Per Total Revenues Q3 Diluted Share Q3 321.9% $456.7M (10.1)% YoY $1.35 YoY Adjusted Adjusted EBITDA EBITDA1 Q3 Margin1 Q3 $196.7M (6.1)% YoY 43.1% +190 bps YoY 1. For a reconciliat
Slide 6: Q3 2020 Operations Review
Q3 2020 OPERATIONS REVIEW NYSE: HRI 6 ©2020 Herc Rentals Inc. All Rights Reserved.
Slide 7: Return to Normal Seasonal Cadence
Return to Normal Seasonal Cadence Volumes improved each week throughout the quarter The quarter benefited from a return to a more normal seasonal cadence compared with the second quarter Diverse customers and industries helped mitigate the impact of COVID-19 Results in the quarter were also aided by
Slide 8: Managing Costs While Focusing on Safety
Managing Costs While Focusing on Safety Our operations remained open throughout the pandemic to serve and support our customers All of our operations adhere to the Centers for Disease Control and Prevention's guidelines on COVID-19 safety All regions reported at least 88% Perfect Days for the nine m
Slide 9: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets 270 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 We continue to target new locations in urban markets with a goal of 6 to 10 new locations annu
Slide 10: Managing $3.73 Billion Fleet
Managing $3.73 Billion Fleet Fleet Composition at OEC 1 Fleet Expenditures at OEC1 $3.73B at OEC $ in millions 2019 2020 $289 Trucks & $172 $103 $109 $88 $90 Trailers 14.5% $63 Q1 Q2 Q3 Q4 Other 7.9% 1 Material Fleet Disposals at OEC Handling $ in millions 17.4% 2019 2020 $193 $188 Specialty $123 $1
Slide 11: Resilient Business Model with Diverse Customer Mix
Resilient Business Model with Diverse Customer Mix Q3 Revenue by Customer1 Focusing on high growth industry verticals Other 19% Contractors 34% Our diverse customer mix, base of national customers and expanded specialty business Infrastructure and Government continues to provide growth opportunities
Slide 12: Picking Up the Pace
Picking Up the Pace Weekly volume and rental revenue have been improving and returning to normal seasonality Our team is focused on providing excellent customer service and premium equipment to our customers Delivering a lean cost structure and improved margins Fourth quarter volume of fleet on rent
Slide 13: Q3 Financial Review
Q3 FINANCIAL REVIEW NYSE: HRI 13 ©2020 Herc Rentals Inc. All Rights Reserved.
Slide 14: Q3 and Nine Months Financial Summary
Q3 and Nine Months Financial Summary Three Months Ended September 30, Nine Months Ended September 30, $ in millions, except per share data 2020 2019 % Chg. 2020 2019 % Chg. Equipment Rental Revenue $402.3 $459.6 (12.5)% $1,116.4 $1,244.8 (10.3)% Total Revenues $456.7 $508.1 (10.1)% $1,260.9 $1,458.9
Slide 15: Pricing and Utilization Performance
Pricing and Utilization Performance Pricing1 Average Fleet at OEC1 2019 2020 2019 2020 4.6% 4.5% 2.0% 1.7% 3.8% 0.4% 0.7% 3.3% 2.4% (0.5)% (1.3)% (4.5)% (0.3)% (0.8)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Utilization2 Average Fleet on Rent at OEC1 2019 2020 2019 2020 40.8% 40.5% 38.0% 37.6% 35.6% 35.7% (0.3)% 0
Slide 16: Q3 and Nine Months Adjusted EBITDA
Q3 and Nine Months Adjusted EBITDA1 Q3 Adjusted EBITDA Bridge Adjusted EBITDA decreased $12.7 million YoY or $ in millions 6.1% in Q3 2020 primarily due to lower equipment $209.4 rental revenue of $57.0 million $17.8 $0.6 $196.7 $28.8 $(2.2) $(0.7) $(57.0) DOE decreased $28.8 million in Q3 2020 prim
Slide 17: Disciplined Capital Management
Disciplined Capital Management $252M Maturities $ in millions, as of September 30, 2020 Senior Unsecured Free cash flow3 of approximately Notes ABL Credit $1,200.0 $252 million for YTD 2020 Facility 2.5x ABL Credit Facility $44.3 AR Finance Leases Facility1 2020-2027 $445.0 160.0 2020 2021 2022 2023
Slide 18: A Resilient Industry
A Resilient Industry N.A. Equipment Rental Market1 Select Market Forecasts2 ~5% U.S. Nonresidental Building Starts CA GR: 2 4E ’20-' $64 $58 $60 History Forecast $55 $57 $51 $51 $51 $47 $49 2017 2018 2019 2020 2021 2022 2023 $41 $44 $38 $38 $35 YOY Growth +12% +3% +5% (20)% +4% +10% +8% $31 $32 Sect
Slide 19: FY 2020 Guidance Update
FY 2020 Guidance Update OLD NEW Adjusted EBITDA: $625 to $650 million $655 to $675 million Net Fleet Capex: $190 to $210 million $190 to $210 million NYSE: HRI 19 ©2020 Herc Rentals Inc. All Rights Reserved.
Slide 20: 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 talent Broaden customer Focus on safety, labor Provide premium Drive EBITDA marg
Slide 21: Consistent Organic Growth Since Spin-off
Consistent Organic Growth Since Spin-off Equipment Rental Revenue Adjusted EBITDA1 R: 1 1.4% $ in millions R: 8.0% $ in millions 9 CAG ’16-‘19 CAG ’16-‘1 $741.0 $708.2 $1,658.3 $1,701.8 $684.8 $1,499.0 $1,573.4 $585.4 $1,352.7 $536.2 2016 2017 2018 2019 Q3 2020 2016 2017 2018 2019 Q3 2020 TTM TTM Ad
Slide 22: Appendix
APPENDIX NYSE: HRI 22 ©2020 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: Q3 and Nine Months Total Revenues
Q3 and Nine Months Total Revenues $ in millions Q3 Revenue Bridge $508.1 $9.9 $456.7 Equipment rental revenue decreased 12.5% in $(0.3) $(4.0) Q3 2020 with lower volume as a result of the $(57.0) impact of the COVID-19 pandemic Sales of rental equipment increased 28.0% to $9.9 million in Q3 2020 201
Slide 25: Q3 and Nine Months Net Results
Q3 and Nine Months Net Results Q3 Net Results Bridge $ in millions Net income was $39.9 million in Q3 2019 compared to $9.4 million in the prior year $59.5 $39.9 Interest expense in Q3 2020 declined $59.5 million $(15.0) primarily due to last year's $53.6 million debt $9.4 ($15.9) extinguishment exp
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 Three Months Ended Nine Months Ended $ in millions September 30, September 30, 2020 2019 2020 2019 Net income (loss) $39.9 $9.4 $38.2 $12.4 Income tax provision (benefit) 11
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 Total Revenues $475.7 $475.1 $508.1 $540.1 $1,999.0 $436.2 $368.0 $456.7 Less: Sales of rental equipment 85.1 51.3 35.4 71.0 242.8 40.0 31.4 45.3 Less: Sales of new equipment, parts and supplies 10.9 1
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 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Q1 2020 Q2 2020 Q3 2020 $ in millions Beginning Balance $3,777 $3,694 $3,859 $3,943 $3,777 $3,822 $3,800 $3,752 Expenditures $103 $289 $172 $63 $627 $109 $88 $90 Disposals ($193) ($123) ($89) ($188) ($593) ($110) ($83) ($124) Foreign C
Slide 33: Q3 and Nine Months Net Results Bridge
Q3 and Nine Months Net Results Bridge Three Months Ended September 30, Elements of Net Income (Loss) Bridge Currency1 Depreciation of Interest $ in millions 2020 2019 $ Change Income tax Impairment All other impact rental equip. expense Total revenues $456.7 $508.1 ($51.4) ($0.3) $— $— $— $— ($51.1)
Slide 34: Fleet Mix
Fleet Mix September 30, 2020 September 30, 2019 Aerial - Booms 16.8 % 17.2 % Aerial - Scissors & Other 7.3 % 7.3 % Earthmoving - Compact 7.8 % 8.3 % Earthmoving - Heavy 5.4 % 6.0 % Material Handling - Telehandlers 13.4 % 13.9 % Material Handling - Industrial 4.0 % 4.2 % Trucks and Trailers 14.5 % 13
Slide 35: Investor Contact
Investor Contact: Elizabeth M. Higashi, CFA Vice President, Investor Relations elizabeth.higashi@hercrentals.com NYSE: HRI ©2020 Herc Rentals Inc. All Rights Reserved.