Herc Holdings Inc. · NYSE:HRI
Herc — Q1 2023 Earnings Presentation
31 slides from Herc's earnings presentation, Apr 20, 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 Larry Silber Mark Humphrey President & Chief Senior Vice President & Executive Officer Chief Financial Officer Agenda • Safe Harbor • Q1 2023 Overview • Q1 Operations Review Aaron Birnbaum Leslie Hunziker • Q1 Financial Review Senior Vice President & Senior Vice President
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: First Quarter Financial Highlights: Accelerating Performance
First Quarter Financial Highlights: Accelerating Performance Rental Revenue Total Revenues Adjusted EBITDA¹ $ in millions $654 $ in millions $ in millions $308 $740 $527 $568 $237 24% $476 $453 30% $387 $400 $437 $184 30% $378 $142 $146 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 202
Slide 5: First Quarter 2023 Highlights
First Quarter 2023 Highlights Equipment rental market in N.A. grew 6%1 in Q1 2023 • Return to 1Q normal seasonal demand across regions, end markets • Shift from equipment ownership to rental continues • Supply chain constraints persist • Ongoing industry rate discipline contributed to positive trend
Slide 6: Q1 2023: Delivering on Growth Strategies
Q1 2023: Delivering on Growth Strategies Strategies to Accelerate ROIC and Increase Shareholder Returns: Optimize branch network for fleet / operating efficiencies at scale Grow the Core • Completed 3 acquisitions - 6 locations; opened 3 greenfield locations Enhance fleet mix Expand Specialty • Expa
Slide 7: Operations Review
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 8: Q1 2023 Focusing on Safety
Q1 2023 Focusing on Safety Herc's Safety Program integrated into all acquisitions Total Recordable Incident Rate Improved to 0.45 Continuing focus on Perfect Days • All branches reported > 97% Perfect Days • Perfect Days are those with no: ◦ OSHA reportable incidents ◦ At-fault moving vehicle accide
Slide 9: Delivering on Growth Strategies: Expanding Through Acquisitions
Delivering on Growth Strategies Expanding Through Acquisitions Adding locations though acquisitions increases density and market share in urban markets • Q1: 3 acquisitions - 6 locations; 3 greenfield locations opened • Q1 2023 acquisitions in top 50 MSAs in the U.S. Synergies through cross selling
Slide 10: Delivering on Growth Strategies
Delivering on Growth Strategies Equipment rental revenue +24%; Q1 record $654 million 1Q:23 demand in line with normal seasonal expectations Core business continues to benefit from solid operating performance across all regions ProSolutions contributing significant revenue growth YoY Pricing tools s
Slide 11: Diversifying Fleet to Enhance Utilization
Diversifying Fleet to Enhance Utilization Fleet Expenditures at OEC1 Fleet Composition $ in millions 1 $5.9 billion at OEC 2022 2023 $348 $327 $327 $311 $253 Other 23% Q1 Q2 Q3 Q4 Material Handling Fleet Disposals at OEC1 17% $ in millions 2022 2023 Specialty 24% $144 $140 Earthmoving 13% $64 $64 $5
Slide 12: Business Model Driving Growth
Business Model Driving Growth • Diverse customer mix and base of large national customers drives sales strategy Q1 Local vs. National Mix and growth opportunities ◦ 1Q:23 RFP cadence remains strong ◦ EV, semi-conductor, petrochemical, food & beverage, LNG plants, MRO National: 45% • 1Q:23 new local-
Slide 13: Financial Review
Financial Review Mark Humphrey Senior Vice President and Chief Financial Officer
Slide 14: Q1 2023 Financial Results
Q1 2023 Financial Results Three Months Ended March 31, 2023 vs 2022 % 2023 2022 $ in millions, except per share data Change Equipment Rental Revenue $654 $527 24% Total Revenues $740 $568 30% Net Income $67 $58 16% Earnings Per Diluted Share $2.28 $1.92 19% Adjusted Net Income1 $69 $59 17% Adjusted
Slide 15: Pricing and Utilization Performance
Pricing and Utilization Performance Pricing1 YoY Fleet Growth and On Rent at OEC1 2022 2023 Avg. Fleet On Rent Avg. Fleet 7.0% 6.6% 6.2% 5.5% 29.3% 4.3% 23.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $ Utilization2 Fleet growth outpaced fleet on rent as continued supply chain challenges have disrupted the optimal ca
Slide 16: Disciplined Capital Management
Disciplined Capital Management Maturities As of March 31, 2023 No near-term maturities and ample liquidity2 of $1.5 $ in millions billion provide financial flexibility Net capital expenditures outpaced cash flow from operations due to investments in growth, resulting in free ABL Credit Facility cash
Slide 17: Continued Strength in Key End Markets
Continued Strength in Key End Markets N.A. Equipment Rental Market1 Industrial Spending2 $ in billions $ in billions $397 $70 $65 $67 $386 $61 $63 $371 $372 $55 $54 $52 $50 $47 $49 $352 $45 $329 — — — $318 — — — — — — — — — — — — — $317 $310 $308 $303 $299 15 16 17 18 19 20 21 22 23E 24E 25E 26E 15
Slide 18: Affirming 2023 Guidance
Affirming 2023 Guidance Metric 2022 Actual 2023 Guidance % Change over 2022 Adjusted EBITDA $1,227 million $1.45 billion to $1.55 billion 18% to 26% Net Rental Equipment $1,047 million $1.0 billion to $1.2 billion (4)% to 15% Expenditures Key Assumptions: • Above-market revenue growth on strong proj
Slide 19: Purpose, Vision, Mission and Values
Purpose, Vision, Mission and Values We equip our customers and communities to build a brighter future NYSE: HRI 19 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 20: Appendix
NYSE: HRI 20 ©2023 Herc Rentals Inc. All Rights Reserved.
Slide 21: 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 22: Our Strategy is Delivering Results
Our Strategy is Delivering Results Equipment Rental Revenue Adjusted EBITDA1 $ in millions $2,678 $1,298 $2,552 $1,227 $1,910 $895 $1,702 $741 $1,544 $689 2019 2020 2021 2022 TTM 2023 2019 2020 2021 2022 TTM 2023 Adjusted EBITDA Margin1 Net Leverage2 2.8x 44.8% 44.6% 43.2% 2.5x 2.4x 2.4x 38.7% 37.1%
Slide 23: 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 24: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, 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 25: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, 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 March 31, 2023 2022 Net income $67 $58 Income tax provision 8 9 Interest expense, net 48 23 Depreciation of rental equipment 152 119 Non-
Slide 26: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Total Revenues $568 $639 $745 $786 $2,738 $740 Less: Sales of rental equipment 28 19 22 57 126 71 Less: Sales of new equipment, parts and supplies 8 9 10 9 36 8 Equipment rental, service and other revenues $
Slide 27: REBITDA Margin Annual Trend
REBITDA Margin Annual Trend $ in millions 2018 2019 2020 2021 2022 Total Revenues $1,978 $1,999 $1,781 $2,074 $2,738 Less: Sales of rental equipment 256 242 198 113 126 Less: Sales of new equipment, parts and supplies 49 44 28 31 36 Equipment rental, service and other revenues $1,673 $1,713 $1,555 $
Slide 28: 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 29: 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 30: Historical Fleet at OEC
Historical Fleet at OEC1 FY FY FY FY Q1 Q2 Q3 Q4 FY Q1 $ in millions 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 Beginning Balance $3,651 $3,777 $3,822 $3,589 $4,381 $4,593 $5,097 $5,421 $4,381 $5,637 Expenditures $774 $627 $349 $725 $253 $327 $311 $327 $1,218 $348 Disposals ($607) ($593) ($55
Slide 31: For additional information, please contact: Leslie Hunziker
For additional information, please contact: Leslie Hunziker SVP Investor Relations leslie.hunziker@hercrentals.com 239 301-1675 NYSE: HRI 31 ©2023 Herc Rentals Inc. All Rights Reserved.