Herc Holdings Inc. · NYSE:HRI
Herc — Q2 2022 Earnings Presentation
35 slides from Herc's earnings presentation, Jul 21, 2022
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 Irion Agenda President & Chief Senior Vice President & Executive Officer Chief Financial Officer • Introductions • Safe Harbor • Overview • Operations Review Aaron Birnbaum Elizabeth Higashi Senior Vice President & Vice President, Chief Operating Officer
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: Key Takeaways - Steady Demand and Delivering on Growth Strategy
Key Takeaways - Steady Demand and Delivering on Growth Strategy Operating environment remains positive with steady demand Outstanding performance by our sales, operations and field support teams • Q2 rental revenue increased 35% • Increased Q2 dollar utilization YoY by 40 bps to 42.5% • Increased ad
Slide 5: Second Quarter Financial Highlights: Accelerating Performance
Second Quarter Financial Highlights: Accelerating Performance Rental Revenues Total Revenues Adjusted EBITDA¹ $ in millions $605.4 $ in millions $640.4 $ in millions $284.2 $448.0 $485.5 $475.1 $490.9 $407.6 $207.7 $392.5 +35% +30% $368.0 +37% $174.9 $327.6 $152.2 $149.4 2018 2019 2020 2021 2022 201
Slide 6: Herc Rentals Today
Herc Rentals Today 57 Years serving customers ~3,100 Equipment categories 333 Locations in 42 states and five Canadian provinces 1 6,100 Employees serving North America $60 billion addressable market 2 (1) Location count as of June 30, 2022 (2) ARA estimate of the 2022 North American addressable mar
Slide 7: Operations Review
Operations Review Aaron Birnbaum Senior Vice President and Chief Operating Officer
Slide 8: Delivering on Growth Strategy
Delivering on Growth Strategy Average fleet at OEC increased 32% in Q2 2022 Equipment rental revenue increased 35% to a record $605.4 million Business activity is strong and all of our end markets are showing positive momentum Our core business continues to benefit from solid operating performance i
Slide 9: Diversifying Fleet to Enhance Utilization
Diversifying Fleet to Enhance Utilization Fleet Composition Fleet Expenditures at OEC1 $ in millions $5.1 billion at OEC1 2021 2022 $327 $253 $188 $210 $210 Other 21.9% $117 Material Q1 Q2 Q3 Q4 Handling 17.4% Fleet Disposals at OEC1 $ in millions Specialty 2021 2022 Earthmoving 23.5% 13.2% $111 $64
Slide 10: Expanding Specialty
Expanding Specialty Specialty Fleet • Specialty equipment typically averages 14% to 16% % of OEC at Year End higher $ utilization than core equipment 30% • Growing specialty branch network enables rapid response to meet customer demand 23% 24% 24% 25% • Able to surge fleet to market in need of speci
Slide 11: Business Model Driving Growth
Business Model Driving Growth Q2 Revenue by Customer1 Other 25% Contractors 32% Our diverse customer mix and base of large national customers drives sales strategy and growth opportunities Infrastructure and Expansion through acquisitions and greenfields in fast- Government 15% growing urban markets
Slide 12: Focusing on Safety
Focusing on Safety Improving Total Recordable Incident Rate (TRIR) Continuing focus on Perfect Days • All of our branches reported at least 98% Perfect Days year to date. • Perfect Days are those with no: ◦ OSHA reportable incidents ◦ At-fault moving vehicle accidents ◦ DOT violations Continuing to
Slide 13: $550 Billion in Federally-Funded Infrastructure
Growth Opportunities in 2023 and Beyond Infrastructure Projects • Highways and bridges • High-speed rail $550 Billion in • Port renovation and waterway expansion Federally-Funded • Airports Infrastructure • Flood control • EV charging stations Package • LNG investments • Renewables • Power grid mode
Slide 14: Financial Review
Financial Review Mark Irion Senior Vice President and Chief Financial Officer
Slide 15: Q2 2022 Results
Q2 2022 Results Three Months Ended June 30, Six Months Ended June 30, 2022 vs 2021 % 2022 vs 2021 2022 2021 2022 2021 $ in millions, except per share data Change % Change Equipment Rental Revenue $605.4 $448.0 35.1% $1,132.2 $848.4 33.5% Total Revenues $640.4 $490.9 30.5% $1,207.7 $944.7 27.8% Net I
Slide 16: Pricing and Utilization Performance
Pricing and Utilization Performance Pricing1 Average Fleet at OEC1 2021 2022 2021 2022 5.5% 32.1% 4.3% 23.4% 3.5% 2.8% 14.9% 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% 44.6% 29.0% 42.1% 42.5% 41.4% 19.7% 21.0% 3
Slide 17: Expanding through M&A in 2022
Expanding through M&A in 2022 M&A Rationale and Benefits ◦ Revenue synergies through increased density and cross selling ◦ Acquired talented workforce and local customer relationships - quicker than greenfields February February March ◦ Estimated opportunity for $500 million+ of M&A per year EV/EBIT
Slide 18: Disciplined Capital Management
Disciplined Capital Management Maturities As of June 30, 2022 Amended ABL to double size of credit facility to $ in millions $3.5 billion and extend maturity to July 2027 Senior Unsecured No near-term maturities and ample liquidity2 of: Notes • $0.7 billion as of June 30, 2022 ABL Credit • $1.75 bil
Slide 19: Our Capital Allocation Plan
Our Capital Allocation Plan We are committed to delivering long-term sustainable value for shareholders with a balanced, disciplined and opportunistic approach to capital deployment 1 Invest for Organic Growth 2 Strategic M&A 3 Dividend 4 Surplus Capital Committed to organic Pursue strategic Initiat
Slide 20: A New Cycle in the Making
A New Cycle in the Making N.A. Equipment Rental Market1 Select Market Forecasts2 ~6% $ in billions GR: E CA ’2 1-'26 $71 U.S. Nonresidental Building Starts $66 $68 $64 Actual Forecast $60 $55 $52 $50 $52 $47 $49 2021 2022 2023 2024 2025 $44 $45 $41 $38 $38 YOY Growth 14% 14% 8% 4% 4% $35 $31 $32 Sec
Slide 21: Raising Guidance
Raising Guidance • Record first half 2022 adjusted EBITDA of $521 million was up 33% compared with 2021 • Raised bottom end of guidance range • Affirmed net fleet capital expenditures guidance range Metric 2021 Actual Prior Guidance Current Guidance % Chg. over 2021 Adjusted EBITDA $894.7 million $1
Slide 22: Our Strategy is Delivering Results
Our Strategy is Delivering Results Equipment Rental Revenue $ Utilization1 $ in millions $2,194 43.0% 43.3% $1,910 38.7% 37.4% $1,702 36.0% 36.1% $1,658 $1,544 $1,499 2017 2018 2019 2020 2021 TTM 2022 2017 2018 2019 2020 2021 TTM 2022 Adjusted EBITDA Margin1 Net Leverage2 43.8% 3.6x 43.2% 3.1x 38.7%
Slide 23: Purpose, Vision, Mission and Values
Purpose, Vision, Mission and Values We equip our customers and communities to build a brighter future NYSE: HRI 23 ©2022 Herc Rentals Inc. All Rights Reserved.
Slide 24: NYSE: HRI
NYSE: HRI 24 ©2022 Herc Rentals Inc. All Rights Reserved.
Slide 25: Shifting Into High Gear
Shifting Into High Gear Grow the Expand Elevate Integrate Allocate Core Specialty Technology ESG Capital Increasing fleet and Accelerating secular Ongoing investment in New sustainability Ability to retain low locations in urban shift from ownership to technology to improve goals for 2030 versus lev
Slide 26: 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 27: 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 (loss), restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, impairment
Slide 28: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA
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 (loss), provision (benefit) for income taxes, interest expense, net, depreciation of rental
Slide 29: Reconciliation of Net Income to Adj. EBITDA and Adj. EBITDA Margin, Rental Adj. EBITDA
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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net income $72.2 $47.1 $130.7 $80.0 Income tax provision 25.3 14.7 33.9 22.9 Inter
Slide 30: REBITDA Margin Quarterly Trend
REBITDA Margin Quarterly Trend $ in millions Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Total Revenues $453.8 $490.9 $550.4 $578.0 $2,073.1 $567.3 $640.4 Less: Sales of rental equipment 44.2 30.3 16.6 22.0 113.1 27.7 19.3 Less: Sales of new equipment, parts and supplies 6.1 7.8 8.6 7.6
Slide 31: REBITDA Margin Annual Trend
REBITDA Margin Annual Trend $ in millions 2017 2018 2019 2020 2021 Total Revenues $1,754.5 $1,976.7 $1,999.0 $1,781.3 $2,073.1 Less: Sales of rental equipment 190.8 256.2 242.8 198.5 113.1 Less: Sales of new equipment, parts and supplies 52.3 49.3 44.0 28.2 30.1 Equipment rental, service and other r
Slide 32: 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 33: 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 34: Historical Fleet at OEC
Historical Fleet at OEC1 FY 2017 FY 2018 FY 2019 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 $ in millions Beginning Balance $3,556 $3,651 $3,777 $3,822 $3,589 $3,626 $3,763 $4,075 $3,589 $4,381 $4,593 Expenditures $524 $774 $627 $349 $117 $188 $210 $210 $725 $253 $327 Disposals
Slide 35: For additional information, please contact
For additional information, please contact: Elizabeth M. Higashi, CFA Vice President, Investor Relations & Sustainability elizabeth.higashi@hercrentals.com 239 301-1024 NYSE: HRI 35 ©2022 Herc Rentals Inc. All Rights Reserved.