Herc Holdings Inc. · NYSE:HRI
Herc — Non-Deal Roadshow (September 2019)
35 slides from Herc's roadshow presentation, Sep 23, 2019
Slide 1: Herc Holdings Inc. Investor Presentation
Herc Holdings Inc. Investor Presentation September 23-24, 2019 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 2: Safe Harbor Statements and Non-GAAP Financial Measures
Safe Harbor Statements and Non-GAAP Financial Measures Forward-Looking Statements • issues we face with environmental, health and safety laws and regulations and the costs of complying with them; This presentation includes "forward-looking statements," as that term is defined by the • difficulty in
Slide 3: 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 • Listed on the New York Stock Exchange on July 1, 2016 under the symbol "HRI" • Approximately 265 locations in 39 states and seven Ca
Slide 4: Focusing on High Growth Urban Markets
Focusing on High Growth Urban Markets Strong geographic footprint in high growth markets Approximately 265 locations, principally in North America1 • 39 states • 7 provinces Targeting four to six greenfield locations in 2019 Source: ARA IHS Global Insights August 2019 1. Locations as of June 30, 201
Slide 5: Vision, Mission and Values
Vision, Mission and Values We are a customer-centric organization focused on safety, efficiency and profitable growth . . NYSE: HRI 5 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 6: Aligning our Performance with a Shared Purpose
Aligning our Performance with a Shared Purpose We equip our customers and communities to build a brighter future NYSE: HRI 6 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 7: Company Overview
Company Overview 2018 ESTIMATED MARKET SHARE1 TOTAL REVENUES $ in millions 3% 2018 Market Size: ~$55 billion ADJUSTED EBITDA NET RESULTS2 $ in millions $ in millions 1. Source: ARA IHS Global Insights February 2019, company reports; updated in June 2019. 2. Net results include a net tax benefit of $
Slide 8: Strong Industry Outlook Supports Our Growth
Strong Industry Outlook Supports Our Growth ARCHITECTURE BILLINGS INDEX1 N.A. EQUIPMENT RENTAL MARKET2 as of August 2019 ($ in billions) as of August 2019 August 47.2 50 NON-RESIDENTIAL STARTS3 INDUSTRIAL SPENDING4 ($ in billions) ($ in billions) as of July 2019 as of August 2019 1. Source: The Amer
Slide 9: 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 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: Focus on Quality of Earnings Delivered Strong Q2 Results
Focus on Quality of Earnings Delivered Strong Q2 Results Our strategic initiatives We achieved excellent drove improved pricing REBITDA flow-through and rental margins from reduced expenses We are managing fleet Our improved operating capital expenditures results and debt re- and disposals to financ
Slide 12: Q2 and Six Months Financial Summary
Q2 and Six Months Financial Summary Three Months Ended June 30, Six Months Ended June 30, $ in millions, except per share data 2019 2018 % Chg. 2019 2018 % Chg. Equipment Rental Revenue $407.6 $392.5 3.8% $785.2 $761.6 3.1% Total Revenues $475.1 $485.5 (2.1)% $950.8 $916.8 3.7% Net income (loss) $9.
Slide 13: Continuing Rate Performance and Improving Utilization
Continuing Rate Performance and Improving Utilization YOY CHANGE IN PRICING1 • YoY pricing improved 4.6% in Q2 2019, the 13th consecutive quarter of year-over-year improvement • Total OEC at quarter end was $3.86 billion, with a decrease of average fleet at OEC of 1.3% for Q2 • Average fleet on rent
Slide 14: Improving Fleet Mix to Drive Growth
Improving Fleet Mix to Drive Growth $ UTILIZATION1 • $ utilization in Q2 2019 increased 260 bps YoY to 38.0% • Average fleet age improved to 44 months in Q2 2019 from 46 months in Q2 2018 FLEET COMPOSITION AT OEC1,2 % OF SELECTED FLEET AT OEC1 VS. PRIOR YEAR $3.86 billion at OEC 1 ProSolutions™ 14.7
Slide 15: Improving Customer Mix and Diversification
Improving Customer Mix and Diversification Q2 LOCAL VS NATIONAL % MIX1 Q2 REVENUE BY CUSTOMER1,2 Q2 LOCAL VS NATIONAL YOY GROWTH1 • Local rental revenue grew 7.7% YoY in Q2 2019 and now accounts for 59% of total rental revenue • Local branch sales initiatives are driving strong growth in new custome
Slide 16: Managing Fleet at OEC to Improve Utilization
Managing Fleet at OEC1 to Improve Utilization FLEET ENDING BALANCE AT OEC • Total fleet at OEC was $3.86 billion as of June 30, $ in billions 2019 • Average fleet at OEC decreased 1.3% in Q2 2019 over the prior-year quarter and increased 0.3% for the first half • Fleet expenditures at OEC in Q2 2019
Slide 17: Disciplined Capital Management
Disciplined Capital Management NET LEVERAGE1 LIQUIDITY $ in millions June 30, 2019 ABL and AR Facility $1,925.0 Outstanding (1,137.0) Letters of Credit (24.6) Availability from ABL and AR Facility $763.4 Cash & Cash Equivalents 27.9 Q2 2018 Q4 2018 Q2 2019 Total Liquidity $791.3 • Net leverage of ~2
Slide 18: Re-Financing Extends Maturity and Reduces Interest
Re-Financing Extends Maturity and Reduces Interest • In July 2019, issued $1.2 billion aggregate principal amount of its 5.50% Senior Notes due 2027 ◦ Net proceeds were used to redeem Senior Secured Second Priority Notes due 2022 and 2024 and to partially repay indebtedness outstanding under the exi
Slide 19: Going Forward
Going Forward Our Strategy is Working Our strategic initiatives We are managing fleet We expect REBITDA Our goal is to are expected to capital expenditures flow-through of greater continue to drive continue to drive and disposals to than 60% for the rest of strong free cash flow growth in revenues a
Slide 20: Appendix
Appendix HercRentals”
Slide 21: 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 22: 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 23: Q2 and Six Months Total Revenues
Q2 and Six Months Total Revenues Q2 BRIDGE SIX MONTHS BRIDGE $ in millions $ in millions Q2 TOTAL REVENUES • Total revenues decreased 2.1%, or $10.4 million, in Q2 2019 • Equipment rental revenue increased 3.8% in Q2 2019 ◦ Continued improvements in pricing ◦ Strategic reductions in re-rent revenue
Slide 24: Q2 and Six Months Adjusted EBITDA
Q2 and Six Months Adjusted EBITDA1 Q2 BRIDGE SIX MONTHS BRIDGE $ in millions $ in millions 2 2 Q2 ADJUSTED EBITDA1 • YoY adjusted EBITDA increased $22.7 million or 14.9% in Q2 2019 • Higher equipment rental revenue of $16.6 million was the largest contributor to the improvement • DOE declined $6.1 m
Slide 25: Q2 and Six Months Net Results
Q2 and Six Months Net Results Q2 BRIDGE SIX MONTHS BRIDGE $ in millions $ in millions $0 $0 Q2 NET RESULTS • Net results improved to income of $9.7 million in Q2 2019 compared to a loss of $0.3 million in the prior year • Interest expense decreased in Q2 2019 primarily due to lower average outstandi
Slide 26: 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 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 27: 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 $ in millions Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net income (loss) $9.7 ($0.3) $3.0 ($10.4) Income tax provision (benefit) 5.3
Slide 28: REBITDA Margin Trend
REBITDA Margin Trend $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Total Revenues $431.3 $485.5 $516.2 $543.7 $1,976.7 $475.7 $475.1 Less: Sales of rental equipment 47.3 78.2 50.1 80.6 256.2 85.1 51.3 Less: Sales of new equipment, parts and supplies 11.4 10.8 14.2 12.9 49.3 1
Slide 29: 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 30: 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 31: Historical Fleet at OEC
Historical Fleet at OEC1 $ in millions Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Beginning Balance $3,651 $3,732 $3,873 $3,922 $3,651 $3,777 $3,694 Expenditures $198 $321 $171 $84 $774 $103 $289 Disposals ($109) ($179) ($126) ($193) ($607) ($193) ($123) Foreign Currency / Other ($8) ($
Slide 32: Q2 and Six Months Net Results Bridge
Q2 and Six Months Net Results Bridge Three Months Ended June 30, Elements of Net Income (Loss) Bridge Currency1 Income Spin-off Depreciation of Interest $ in millions 2019 2018 $ Change impact tax All other costs rental equip. expense Total revenues $475.1 $485.5 ($10.4) ($2.0) $— $— $— $— ($8.4) Di
Slide 33: SG&A Excluding Spin-off Costs
SG&A Excluding Spin-off Costs Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 $ in millions SG&A $74.5 $77.3 $78.4 $82.4 $312.6 $71.5 $73.5 Spin-off costs ($4.9) ($3.9) ($1.7) ($3.9) ($14.4) $— ($0.3) SG&A excluding Spin-off costs $69.6 $73.4 $76.7 $78.5 $298.2 $71.5 $73.2 % of Total Revenue
Slide 34: Fleet Mix: Driving $ Utilization
Fleet Mix: Driving $ Utilization OEC AS OF 06/30/181 OEC AS OF 06/30/191 $3.87 billion $3.86 billion 1. Original equipment cost based on ARA guidelines NYSE: HRI 34 ©2019 Herc Rentals Inc. All Rights Reserved.
Slide 35: NYSE: HRI ©2019 Herc Rentals Inc. All Rights Reserved.
NYSE: HRI 35 ©2019 Herc Rentals Inc. All Rights Reserved.