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EX-99.1 - EXHIBIT 99.1 - HERC HOLDINGS INC | herc2017q3pressrelease.htm |
8-K - 8-K - HERC HOLDINGS INC | herc2017q38-kearnings.htm |
© 2017 Herc Rentals Inc.
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Herc Holdings Inc.
Third Quarter Earnings Conference Call
for the period ending September 30, 2017
November 8, 2017
© 2017 Herc Rentals Inc.
Agenda
2NYSE: HRI
Welcome and Introductions Elizabeth Higashi
Vice President, Investor Relations
Strategic Update and Industry
Outlook
Larry Silber
President and Chief Executive Officer
Q3 and Nine Months Financial
Review
Barbara Brasier
Senior Vice President and Chief Financial Officer
Q&A
Larry Silber
Barbara Brasier
Bruce Dressel
Senior Vice President and Chief Operating Officer
© 2017 Herc Rentals Inc.
Safe Harbor Statements
3NYSE: HRI
Basis of Presentation
The financial information included in this presentation is based upon the condensed consolidated financial statements of the Company which are presented in
accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). These financial statements and financial information represent
only those operations, assets, liabilities and equity that form Herc Holdings Inc. on a stand-alone basis. As the spin-off occurred on June 30, 2016, amounts for the
first half of 2016 represent carve-out financial results.
Forward-Looking Statements
This presentation contains statements, including those related to 2017 guidance, that are not statements of historical fact, but instead are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers not to place undue reliance on these statements, which speak only as
of the date hereof. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested
by our forward-looking statements, including:
• Risks related to material weaknesses in our internal control over financial reporting and the restatement of financial statements previously issued by Hertz Global
Holdings, Inc. (in its form prior to the spin-off, “Hertz Holdings”), including that: we have identified material weaknesses in our internal control over financial reporting
that may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor
and lender confidence in us and, as a result, the value of our common stock and our ability to obtain future financing on acceptable terms, and we may identify
additional material weaknesses as we continue to assess our processes and controls as a stand-alone company with lower levels of materiality; our efforts to design
and implement an effective control environment may not be sufficient to remediate the material weaknesses, or to prevent future material weaknesses; such
material weaknesses could result in a material misstatement of our consolidated financial statements that would not be prevented or detected; we receive certain
transition services from Hertz Rental Car Holding Company, Inc. ("New Hertz") pursuant to the transition services agreement covering information technology ("IT")
services and other areas, which impact our control environment and, therefore, our internal control over financial reporting; we continue to expend significant costs
and devote management time and attention and other resources to matters related to our internal control over financial reporting; our material weaknesses and
Hertz Holdings' restatement could expose us to additional risks that could materially adversely affect our ability to execute our strategic plan and our financial
position, results of operations and cash flows, including as a result of events of default under the agreements governing our indebtedness and/or government
investigations, regulatory inquiries and private actions; we may experience difficulties implementing new IT systems, including the migration of systems from New
Hertz; we could experience disruptions to our control environment in connection with the relocation of our Shared Services Center, including as a result of the failure
to retain key employees who possess specific knowledge or expertise necessary for the timely preparation of our financial statements; and Hertz Holdings'
restatement has resulted in government investigations, books and records demands, and private litigation and could result in government enforcement actions and
private litigation that could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows;
© 2017 Herc Rentals Inc.
Safe Harbor Statements - Continued
4NYSE: HRI
• Risks related to the spin-off, which effected our separation from New Hertz, such as: we have limited operating history as a stand-alone public company, and our
historical financial information for periods prior to July 1, 2016, is not necessarily representative of the results that we would have achieved as a separate, publicly
traded company, and may not be a reliable indicator of our future results; the liabilities we have assumed and will share with New Hertz in connection with the spin-
off could have a material adverse effect on our business, financial condition and results of operations; if there is a determination that any portion of the spin-off
transaction is taxable for U.S. federal income tax purposes, including for reasons outside of our control, then we and our stockholders could incur significant tax
liabilities, and we could also incur indemnification liability if we are determined to have caused the spin-off to become taxable; if New Hertz fails to pay its tax
liabilities under the tax matters agreement or to perform its obligations under the separation and distribution agreement, we could incur significant tax and other
liability; our ability to engage in financings, acquisitions and other strategic transactions using equity securities is limited due to the tax treatment of the spin-off; the
loss of the Hertz brand and reputation could materially adversely affect our ability to attract and retain customers; the spin-off may be challenged by creditors as a
fraudulent transfer or conveyance; and if the spin-off is not a legal dividend, it could be held invalid by a court and have a material adverse effect on our business,
financial condition and results of operations;
• Business risks could have a material adverse effect on our business, results of operations, financial condition and/or liquidity, including:
o the cyclicality of our business, a slowdown in economic conditions or adverse changes in the economic factors specific to the industries in which we operate,
in particular industrial and construction;
o the dependence of our business on the levels of capital investment and maintenance expenditures by our customers, which in turn are affected by numerous
factors, including the level of economic activity in their industries, the state of domestic and global economies, global energy demand, the cyclical nature of their
markets, expectations regarding government spending on infrastructure improvements or expansions, their liquidity and the condition of global credit and capital
markets;
o we may experience significant difficulties, delay and/or significant costs from a number of IT systems projects, including the movement of our point of sale
system from the New Hertz system to our own and the migration of our financial system from the New Hertz system to a stand-alone system, each of which
will continue to require significant investment of human and financial resources, and any significant disruption from either migration could materially adversely
affect our business, results of operations, financial condition, cash flows, ability to report accurate financial results and our control environment;
o we may have difficulty obtaining the resources that we need to operate, or our costs to do so could increase significantly;
o intense competition in the industry, including from our own suppliers, that may lead to downward pricing or an inability to increase prices;
o any occurrence that disrupts rental activity during our peak periods given the seasonality of the business, especially in the construction industry;
o doing business in foreign countries exposes us to additional risks, including under laws and regulations that may conflict with U.S. laws and those under
anticorruption, competition, economic sanctions and anti-boycott regulations;
o our success as an independent company will depend on our new senior management team, the ability of other new employees to learn their new roles, and
our ability to attract and retain key management and other key personnel;
o some or all of our deferred tax assets could expire if we experience an “ownership change” as defined in the Internal Revenue Code;
o changes in the legal and regulatory environment that affect our operations, including with respect to taxes, consumer rights, privacy, data security and
employment matters, could disrupt our business and increase our expenses;
o an impairment of our goodwill or our indefinite lived intangible assets could have a material non-cash adverse impact;
© 2017 Herc Rentals Inc.
Safe Harbor Statements - Continued
5NYSE: HRI
o other operational risks such as: any decline in our relations with our key national account customers or the amount of equipment they rent from us; our
equipment rental fleet is subject to residual value risk upon disposition, and may not sell at the prices we expect; we may be unable to protect our trade secrets
and other intellectual property rights; we may fail to respond adequately to changes in technology and customer demands; our business is heavily reliant upon
communications networks and centralized IT systems and the concentration of our systems creates or increases risks for us, including the risk of the misuse or
theft of information we possess, including as a result of cyber security breaches or otherwise, which could harm our brand, reputation or competitive position
and give rise to material liabilities; failure to maintain, upgrade and consolidate our IT networks could materially adversely affect us; we may face issues with our
union employees; we are exposed to a variety of claims and losses arising from our operations, and our insurance may not cover all or any portion of such
claims; environmental, health and safety laws and regulations and the costs of complying with them, or any change to them impacting our customers’markets
could materially adversely affect us; decreases in government spending could materially adversely affect us and a lack of or delay in additional infrastructure
spending may have a material adverse effect on our share price; maintenance and repair costs associated with our equipment rental fleet could materially
adversely affect us; and strategic acquisitions could be difficult to identify and implement and could disrupt our business or change our business profile
significantly;
• Risks related to our substantial indebtedness, such as: our substantial level of indebtedness exposes us or makes us more vulnerable to a number of risks that
could materially adversely affect our financial condition, results of operations, cash flows, liquidity and ability to compete; the secured nature of our indebtedness,
which is secured by substantially all of our consolidated assets, could materially adversely affect our business and holders of our debt and equity; an increase in
interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability; and any additional debt we incur could
further exacerbate these risks;
• Risks related to the securities market and ownership of our stock, including that: the market price of our common stock may fluctuate significantly; the market
price of our common stock could decline as a result of the sale or distribution of a large number of our shares or the perception that a sale or distribution could
occur and these factors could make it more difficult for us to raise funds through future stock offerings; and provisions of our governing documents could
discourage potential acquisition proposals and could deter or prevent a change in control; and
• Other risks and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2016, under Item 1A "Risk Factors" and in our other
filings with the Securities and Exchange Commission (“SEC”).
All forward-looking statements are expressly qualified in their entirety by such cautionary statements. We do not undertake any obligation to release publicly any
update or revision to any of the forward-looking statements.
© 2017 Herc Rentals Inc.
Information Regarding Non-GAAP Financial Measures
In addition to results calculated according to accounting principles generally accepted in the United States (“GAAP”), the Company has provided certain
information in this presentation which is not calculated according to GAAP (“non-GAAP”), such as adjusted EBITDA, adjusted EBITDA margin and free cash
flow. Management uses these non-GAAP measures to evaluate operating performance and period-over-period performance of our core business without regard
to potential distortions, and believes that investors will likewise find these non-GAAP measures useful in evaluating the Company’s performance. These
measures are frequently used by security analysts, institutional investors and other interested parties in the evaluation of companies in our industry.
Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may
not be comparable to similarly titled measures of other companies. For the definitions of these terms, further information about management’s use of these
measures as well as a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures, please see the Appendix to this
presentation.
6NYSE: HRI
© 2017 Herc Rentals Inc.NYSE: HRI 7
Our strategy is
driving revenue
growth across all of
our regions
Fleet and customer
diversification are
driving
improvements in
volume, price
and mix
We are increasing
fleet spend to meet
demand
We are raising the
lower end of
adjusted EBITDA
guidance
Our strategy is working
Q3 Key Takeaways
© 2017 Herc Rentals Inc.
Highlights – Q3 2017
8NYSE: HRI
1. Fleet at original equipment cost based on ARA guidelines
2. For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 30
Equipment Rental Revenues
$413.1 million
+14.7% YoY
Average Fleet1 Growth +3.2% YoY
Pricing + 1.7% YoY
Net Income $12.8 million
Adjusted EBITDA2
$176.7 million
38.6% margin
Dollar Utilization
38.7%
+350 bps YoY
Our strategy is working
© 2017 Herc Rentals Inc.
Updated Guidance
Prior Guidance New Guidance
Adjusted EBITDA1 $550 to $590 million $560 to $590 million
Net Fleet Capital Expenditures2 $275 to $325 million $355 to $365 million
9NYSE: HRI
1. Herc Holdings does not provide forward-looking guidance for certain financial measures on a GAAP basis or a reconciliation of forward-looking non-GAAP
financial measures to the most directly comparable GAAP reported financial measures on a forward-looking basis because it is unable to predict certain items
contained in the GAAP measures without unreasonable efforts. Certain items that impact net income (loss) cannot be predicted with reasonable certainty, such
as restructuring and restructuring related charges, special tax items, borrowing levels (which affect interest expense), gains and losses from asset sales, the
ultimate outcome of pending litigation and spin-related costs.
2. For a calculation of net fleet capital expenditures, see the Appendix beginning on slide 30.
Guidance updated to reflect strong performance in the quarter and higher demand
© 2017 Herc Rentals Inc.
Committed to Our Strategic Direction
Disciplined
Capital
Management
Expand and
Diversify
Revenues
Improve
Operating
Effectiveness
Enhance
Customer
Experience
On the Path Forward
• Broaden
customer base
• Expand
products and
services
• Increase
density
• Grow ancillary
revenues
• Focus on safety
and labor
productivity
• Improve vendor
management
and fleet
availability
• Drive operating
performance
through mix and
volume
• Provide
premium
products and
services
• Introduce
innovative
technology
solutions
• Drive EBITDA
margin growth
• Emphasize
fleet
management
• Improve key
financial
metrics
10NYSE: HRI
© 2017 Herc Rentals Inc.
Expand and Diversify Revenues:
Strong Q3 Revenue Growth
• Overall rental revenue growth accelerated
each month of the third quarter
• Strong broad-based performance across
North America
• Pricing continued to strengthen in both
national and local accounts
• ProSolutionsTM and ProContractor delivered
outstanding year-over-year rental growth
• Number of new account signings reached a
record high during the quarter2
• Ancillary revenue increased 19.6% in the
quarter over the prior-year period
11NYSE: HRI
1. Excludes operations in France & Spain sold in Q4 2015
2. Although management considers the number of new account signings as an indicator
of the momentum of our business and effectiveness of our sales organization, the
number of new account signings is not indicative of future revenues
Year-Over-Year Price Change by Quarter
Year-Over-Year Rental Revenue Growth
1.3% 1.1%
4.2%
7.0%
14.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
0.5% 0.5%
1.1%
1.4%
1.7%
0.0%
0.5%
1.0%
1.5%
2.0%
Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
1 1
© 2017 Herc Rentals Inc.
Expand and Diversify Revenues:
Growing and Improving Fleet Mix
12NYSE: HRI
$3.75 Billion of OEC as of September 30, 2017 1• Continued to broaden fleet mix with fleet
purchases in targeted categories to drive
customer diversification and improve
Dollar Utilization
• Improved Dollar Utilization by 350 basis
points versus the prior year to 38.7% in
the third quarter
• Grew average fleet1 3.2% in the third
quarter and 4.4% year-to-date over the
prior year
• Grew ProSolutionsTM and ProContractor
to over 20% of our fleet
1. Fleet at original equipment cost based on ARA guidelines. Complete YoY
fleet mix comparisons are included in the Appendix beginning on slide 30
4.8%
13.0%
6.4%
3.2%
7.4%
6.5%
13.7%
7.3%
3.4%
7.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
ProContractor ProSolutions Aerial-Scissors
& Other
Material
Handling -
Industrial
Earthmoving -
Compact
Growing Higher Dollar Utilization Categories
as a % of Total Fleet
Q3-16 Q3-17
© 2017 Herc Rentals Inc.
Improve Operating Effectiveness:
Improving Profitability
• Focused on operating leverage in high
growth urban markets
• Improved branch efficiencies through
training in standard operating procedures
and expansion of the Herc Operating Model
throughout the organization
• Continued to reduce FUR: 12.9% in
September 2017 compared to 13.1% in
September 2016
• Focused on improving logistics capabilities
and other significant operational cost
categories
13NYSE: HRI
© 2017 Herc Rentals Inc.
Improve Operating Effectiveness:
Focus on Safety
• Safety performance remains a major focus
• Year to date total recordable incident rate
(TRIR) declined 11% versus the same
period in 2016
• Our ultimate goal is for zero incidents and
safety performance remains our number
one priority
• We believe training is an important
ongoing investment for new and seasoned
personnel
14NYSE: HRI
© 2017 Herc Rentals Inc.
Enhance Customer Experience: Q3 2017 Highlights
• ProContractor campaign on implementation of OSHA requirements for controlling silica
dust off to a great start
• ProContractor equipment is now in nearly 75% of our locations across North America
• ProSolutionsTM performance continued to improve in the third quarter compared to the
prior year and now in 34 locations
15NYSE: HRI
© 2017 Herc Rentals Inc.
Enhance Customer Experience: Investing in Technology
16NYSE: HRI
Herc On the Go Optimus Mobile App
• Covers the entire life cycle of equipment
pickup & delivery
• Captures customer electronic signature
and equipment images
• Tracks the delivery of equipment and
provides estimated time of arrival
• Provides real-time price quotations to our
customers
• Sales staff can leverage quick quote
capability by equipment categories
• Quotes can be emailed, texted, saved or
printed, improving response time
© 2017 Herc Rentals Inc.
$250
$275 $282
$287
200
220
240
260
280
300
320
2016 2017E 2018E 2019E
J
a
n
-9
6
J
a
n
-0
0
J
a
n
-0
4
J
a
n
-0
8
J
a
n
-1
2
J
a
n
-1
6
$299.2
$307.9
2016 2017E
Strong Industry Outlook Supports Our Growth Proposition
Positive market growth and further penetration of rental solutions expected to continue
1. The American Institute of Architects (AIA).
2. ARA / IHS Global Insight as of October 2017, excludes Party & Event data.
3. Dodge Analytics.
4. Industrial information resources.
($ in billions)
as of October 2017
N.A. Equipment Rental Market 2
Non-Residential Starts 3
Architecture Billings Index 1
Industrial Spending 4
$
($ in billions)
a$3s5 0 of November 2017
17NYSE: HRI
($ in billions)
as of November 2017
• Key industry metrics
remain positive – non-
residential construction
growth of 4.7% projected
through 2019
• American Rental
Association (ARA)
forecasts North
American equipment
rental growth of 4.5%
through 2021
• Industrial spending is
expected to grow 2.9%
in 2017
• Continuing shift from
ownership to rental will
fuel growth
$38
$31 $32
$35
$38
$41
$44
$47 $49
$51 $53
$56 $59
$61
08 09 10 11 12 13 14 15 16 17E 18E 19E 20E 21E
Sept
49.1
as of September 2017
50
© 2017 Herc Rentals Inc.
Transformation in Process – Our Strategy is Working
• Executing our strategy and driving
improvements in operating performance
• Successfully diversifying fleet mix to higher
Dollar Utilization equipment categories
• Achieving above-market growth in major urban
locations
• Growing local rental revenues faster than
national accounts
• Broadening Herc Rentals Operating Model to
improve branch efficiency
• Reducing equipment, parts and service costs
through better vendor management
• Enhancing customer service through key
initiatives such as premium brands and new
technologies
18NYSE: HRI
© 2017 Herc Rentals Inc.
Financial Overview
© 2017 Herc Rentals Inc.NYSE: HRI 20
Our strategy is
driving revenue
growth across all of
our regions
Fleet and customer
diversification are
driving
improvements in
volume, price
and mix
We are increasing
fleet spend to meet
demand
We are raising the
lower end of
adjusted EBITDA
guidance
Our strategy is working
Q3 Key Takeaways
© 2017 Herc Rentals Inc.
Q3 and Nine Months Financial Summary
21NYSE: HRI
1. For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 30
$ in millions, except EPS
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Equipment Rental Revenues $ 413.1 $ 360.3 $ 1,084.5 $ 996.0
Total Revenues 457.6 403.6 1,262.8 1,149.6
Net Income (Loss) 12.8 3.0 (54.0) (6.5)
Diluted Earnings (Loss) Per Share 0.45 0.11 (1.91) (0.23)
Adjusted EBITDA1 $ 176.7 $ 152.1 $ 407.6 $ 390.5
© 2017 Herc Rentals Inc.
Q3 and Nine Months Equipment Rental Revenues
$ in millions
Q3 Equipment Rental Revenue Bridge Q3 and Nine Months Summary
22NYSE: HRI
Nine Months Equipment Rental Revenue Bridge
$413.1
$1.6
$51.2
$360.3
250
270
290
310
330
350
370
390
410
430
2016 Currency translation Overall growth 2017
$1,084.5
$0.7
$87.8
$996.0
850
900
950
1,000
1,050
1,100
2016 Currency translation Overall growth 2017
• Equipment rental revenues increased
14.7% in the third quarter, and 8.9% for
the nine months, achieving above-
market growth
o Growth across all of our regions in
Q3
o Improvements in volume, price and
mix
• Equipment rental revenue growth
attributable to:
o Substantial YoY growth from
ProSolutionsTM and ProContractor
o Expansion and diversification of
customer base
o Stabilization of upstream oil and gas
markets
o Traction of urban market strategy
• Q3 pricing increased 1.7% YoY
o Sixth consecutive quarter of
improvement in YoY gains
© 2017 Herc Rentals Inc.
$1,262.8
$9.9$87.8
$1,149.6 $1.0
$34.3
1,000
1,050
1,100
1,150
1,200
1,250
1,300
2016 Currency
translation
Equipment rental
revenue
Sales of revenue
earning equipment
Sales of new
equipment and
other
2017
• Total revenues increased 13.4% for the
third quarter YoY, and 9.8% for the nine
months
• Sales of revenue earning equipment
increased 11.2% in the third quarter,
and 36.7% for the nine months versus
the prior-year period
• Continued aggressive fleet mix
management to achieve our strategic
goals
• Decrease in new equipment sales was
driven by the implementation of
changes to de-emphasize new
equipment sales programs
Q3 and Nine Months Total Revenues
23NYSE: HRI
Q3 Total Revenue Bridge
$ in millions
Nine Months Total Revenue Bridge
Q3 and Nine Months Summary
$457.6
$1.7
$51.2
$403.6 $1.9
$2.6
300
320
340
360
380
400
420
440
460
480
2016 Currency
translation
Equipment rental
revenue
Sales of revenue
earning equipment
Sales of new
equipment and
other
2017
© 2017 Herc Rentals Inc.
$12.8
$6.7 $0.1
$18.2
$2.1
$0.5
$3.0
(10)
(5)
0
5
10
15
20
2016 Income tax Spin-off costs Depreciation
of REE
Impairment Interest
Expense
All Other 2017
$ in millions
Q3 and Nine Months Net Income (Loss)
Q3 Net Income (Loss) Bridge
24NYSE: HRI
1. Excludes the impact of currency translation.
Q3 and Nine Months Summary
1
1
$(54.0)
$49.7
$29.3
$8.4
$40.5
$28.1
($6.5)
$10.7
(70)
(50)
(30)
(10)
10
30
50
70
2016 Income tax Spin-off costs Depreciation
of REE
Impairment Interest
Expense
All Other 2017
1
1
1
• For the quarter and the nine months,
while we reduced overall spin-off costs,
we incurred higher information
technology costs related to the
separation from Hertz
• Fleet depreciation increased in Q3 and
the nine months due to fleet growth and
carryover effect of ordinary course rate
adjustments made in 2016
• For the nine months, net loss included a
$29 million impairment charge recorded
in Q2
• Interest expense in the quarter was flat
and increased in the nine months due to
debt on a stand-alone basis
• All Other includes the impact of our
improved operating results (See slide 36
in the Appendix for additional details)
Nine Months Net Income (Loss) Bridge
1
$0.0
© 2017 Herc Rentals Inc.
• Adjusted EBITDA increased 16.2% for
the quarter and 4.4% for the nine months
compared to the prior-year periods
• Strong equipment rental revenue growth
in Q3
o 47% flow-through on equipment
rental revenues in Q3
• Improved results from sales of revenue
earning equipment
• DOE increased due to costs related to
higher rental activity such as
transportation and personnel
• SG&A increased in Q3 2017 driven by
variable costs associated with higher
revenues, including provision for bad
debt and additional sales personnel and
commissions
0
20
40
60
100
140
$ in millions
Q3 Adjusted EBITDA Bridge
Q3 and Nine Months Adjusted EBITDA1
1. For a reconciliation to the most comparable GAAP financial measure, see
the Appendix beginning on slide 30
2. DOE increase for the nine months also includes expenses related to
business transformation such as investment in facilities to support
ProSolutionsTM and ProContractor and deferred maintenance costs
3. SG&A increase for the nine months includes first half stand-alone public
company costs and first quarter expenses related to business
transformation, year-end reporting, and charges related to the bankruptcy
filing of a large customer
25NYSE: HRI
140
Nine Months Adjusted EBITDA Bridge
Q3 and Nine Months Summary
$176.7$14.5
$15.2
$0.6
$51.2 $1.7
$0.8
$152.1
50
7
90
110
130
150
170
190
210
230
2016 Currency
translation
Equipment
Rental
Revenue
Loss on sales
of revenue
earning
equipment
Direct
operating
expenses
SG&A All Other 2017
$407.6$36.4
$45.6 $0.1
$0.2
$87.8 $11.2
$390.5
100
150
200
250
300
350
400
450
500
550
2016 Currency
translation
Equipment
Rental
Revenue
Loss on sales
of revenue
earning
equipment
Direct
operating
expenses
SG&A All Other 20173
2
© 2017 Herc Rentals Inc.NYSE: HRI 26
1. Original equipment cost based on ARA guidelines.
Fleet at Original Equipment Cost1
• Average fleet at OEC1 for the period ended September 30, 2017
o Increased 3.2% in Q3 2017 versus the prior-year period
o Increased 4.4% in the nine months 2017 versus the prior-year period
• Average age of fleet was 49 months as of September 30, 2017
• Dollar utilization was 38.7% for the third quarter 2017, up 350 bps from the prior year period
$ in millions
Q1 2017 Q2 2017 Q3 2017 Nine Months
2017
Beginning Balance – Fleet at OEC $3,556 $3,556 $3,653 $3,556
Expenditures – Fleet at OEC $119 $217 $126 $ 462
Disposals – Fleet at OEC ($120) ($111) ($66) ($297)
Foreign Currency / Other $1 ($9) $39 $31
Ending Balance – Fleet at OEC $ 3,556 $ 3,653 $3,752 $ 3,752
© 2017 Herc Rentals Inc.NYSE: HRI 27
Debt and Liquidity
Debt Liquidity
$ in millions, as of 09/30/17
• Stable debt totaling $2.2 billion as of September 30, 2017 provides financial flexibility
• Maintained ample liquidity during the quarter with $672 million as of September 30, 2017
• For the nine months, net cash from operating activities totaled $250 million, with net fleet capital
expenditures of $235 million1 and free cash flow of ($39) million1
1. For a reconciliation to the most comparable GAAP financial measure, see the Appendix beginning on slide 30
ABL Facility
Outstanding
Letters of Credit
1,750.0
(1,075.0)
(22.5)
Availability from ABL
Cash and Cash Equivalents
652.5
19.1
Total Liquidity $ 671.6
$1,075.0
$549.0 $562.5
'17 '18 '19 '20 '21 '22 '23 '24
ABL Credit
Facility
Senior Secured
Second Priority Notes
Capital Leases and
Other borrowings
$60.0
© 2017 Herc Rentals Inc.NYSE: HRI 28
Disciplined Capital Management: Subsequent Events
Sale-Leaseback transaction
• In October 2017, we completed a sale-leaseback
transaction
• 42 US properties were sold with gross proceeds of
$119.5 million
• Sale of properties does not qualify for sale-
leaseback accounting. Book value of the buildings
and land will remain on the Company’s balance
sheet
Notes Redemption
• In October 2017, we redeemed $123.5 million of the
outstanding senior notes at a redemption price of
103% of the aggregate principal amount
© 2017 Herc Rentals Inc.
Long-Tenured National Account Portfolio Provides Stable
Base of Business
National Accounts by Tenure (Years)
Over 1,800 National Accounts
• Dedicated national account managers
• Stable revenue base
• Longer transactions
78% of National Accounts revenue
are from accounts open 20+ years
3% 3%
5%
11%
78%
0-5
5-10
10-15
15-20
20+
National accounts provide a firm foundation upon which to build
2015 Sales by Account Type 2015
Local
50%
National Accounts
50%
29
Questions and Answers
© 2017 Herc Rentals Inc.
Appendix
30
© 2017 Herc Rentals Inc. 31NYSE: HRI
1 OEC: Original Equipment Cost which is an operating measure based on the guidelines of the American Rental
Association, which is calculated as the cost of the asset at the time it was first purchased plus additional capitalized
refurbishment costs (with the basis of refurbished assets reset at the refurbishment date).
2
Fleet Age: The OEC weighted age of the entire fleet.
Net Fleet Capital Expenditures: Capital expenditures of revenue earning equipment minus the proceeds from
disposal of revenue earning equipment.
3
Dollar Utilization ($ Ute): Dollar utilization is an operating measure calculated by dividing rental revenue by the
average OEC of the equipment fleet for the relevant time period.
4
Pricing: Change in pure pricing achieved in one period versus another period. This is applied both to year-over-year
and sequential comparisons. Rental rates are calculated based on the category class rate variance achieved either
year-over-year or sequentially for any fleet that qualifies for the fleet base and weighted by the prior year revenue mix.
5
FUR: Fleet unavailable for rent.
6
Glossary of Terms Commonly Used in the Industry
© 2017 Herc Rentals Inc. 32NYSE: HRI
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are not recognized terms 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 of these
measures may not be comparable to similarly titled measures reported by other companies.
EBITDA and Adjusted EBITDA - EBITDA represents the sum of net income (loss), provision for
income taxes, interest expense, net, depreciation of revenue earning equipment and non-rental
depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of merger and
acquisition related costs, restructuring and restructuring related charges, spin-off costs, non-cash stock
based compensation charges, loss on extinguishment of debt (which is included in interest expense,
net), impairment charges, gain on disposal of a business and certain other items. Management uses
EBITDA and Adjusted EBITDA to evaluate operating performance and period-over-period performance
of our core business without regard to potential distortions, and believes that investors will likewise find
these non-GAAP measures useful in evaluating the Company’s performance. These measures are
frequently used by security analysts, institutional investors and other interested parties in the
evaluation of companies in our industry. However, EBITDA and Adjusted EBITDA do not purport to be
alternatives to net earnings as an indicator of operating performance. Additionally, neither measure
purports to be an alternative to cash flows from operating activities as a measure of liquidity, as they do
not consider certain cash requirements such as interest payments and tax payments.
© 2017 Herc Rentals Inc.
$ in millions Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Net income (loss) $ 12.8 $ 3.0 $ (54.0) $ (6.5)
Provision for income taxes 5.8 3.7 (31.5) 9.0
Interest expense, net 32.4 32.3 101.8 52.1
Depreciation of revenue earning equipment 96.3 89.1 283.5 255.1
Non-rental depreciation and amortization 13.4 11.8 37.7 32.9
EBITDA 160.7 139.9 337.5 342.6
Restructuring charges 0.4 0.1 1.4 3.5
Restructuring related charges 2.3 0.2 4.1 2.9
Spin-off costs 10.3 10.8 27.0 37.7
Non-cash stock-based compensation charges 3.0 1.1 7.5 3.8
Impairment - - 29.3 -
Other - - 0.8 -
Adjusted EBITDA $ 176.7 $ 152.1 $ 407.6 $ 390.5
Total Revenues $ 457.6 $ 403.6 $ 1,262.8 $ 1,149.6
Adjusted EBITDA $ 176.7 $ 152.1 $ 407.6 $ 390.5
Adjusted EBITDA Margin 38.6% 37.7% 32.3% 34.0%
33NYSE: HRI
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
© 2017 Herc Rentals Inc. 34NYSE: HRI
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 of this measure may
not be comparable to similarly titled measures reported by other companies.
Free cash flow represents net cash provided by (used in) operating activities less revenue
earning equipment expenditures, proceeds from disposal of revenue earning equipment, property
and equipment expenditures, proceeds from disposal of property and equipment and other
investing activities. Free cash flow is used by management in analyzing the Company’s ability to
service and repay its debt and to forecast future periods. However, this measure does not
represent funds available for investment or other discretionary uses since it does not deduct cash
used to service debt or for other non-discretionary expenditures.
© 2017 Herc Rentals Inc. 35NYSE: HRI
Reconciliation of Free Cash Flow
$ in millions Nine Months Ended September 30,
2017 2016
Net cash provided by operating activities $ 249.9 $ 370.9
Revenue earning equipment expenditures (356.3) (325.7)
Proceeds from disposal of revenue earning equipment 121.6 99.0
Net Fleet Capital Expenditures (234.7) (226.7)
Non-rental capital expenditures (57.1) (29.2)
Proceeds from disposal of property and equipment 2.8 4.1
Other investing activities (0.1) 3.7
Free Cash Flow $ (39.2) $122.8
© 2017 Herc Rentals Inc.
Three Months Ended September 30, Elements of Net Income (Loss) Bridge
$ in millions
2017 2016 $ Change
Currency
translation
Income tax
Spin-off
costs
Depreciation
of REE
Impairment
Interest
Expense
All Other
Total revenues $ 457.6 $ 403.6 $ 54.0 $ 1.9 $ - $ - $ - $ - $ - $ 52.1
Direct operating 188.2 169.9 18.3 1.0 - - - - - 17.3
Depreciation of revenue earning equipment 96.3 89.1 7.2 0.5 - - 6.7 - - -
Cost of sales of revenue earning equipment 28.6 27.5 1.1 0.2 -- - - - - 0.9
Cost of sales of new equipment, parts and supplies 10.8 12.1 (1.3) 0.1 - - - - - (1.4)
Selling, general and administrative 84.6 66.8 17.8 0.2 - (0.5) - - - 18.1
Impairment - - - - - - - - - -
Interest expense, net 32.4 32.3 0.1 - - - - - 0.1 -
Other expense (income), net (1.9) (0.8) (1.1) (0.1) - - - - - (1.0)
Income (loss) before income taxes 18.6 6.7 11.9 - - 0.5 (6.7) - (0.1) 18.2
Income tax benefit (provision) (5.8) (3.7) (2.1) - (2.1) - - - - -
Net income (loss) $ 12.8 $ 3.0 $ 9.8 $ - $ (2.1) $ 0.5 $ (6.7) $ - $ (0.1) $ 18.2
36NYSE: HRI
Net Income (Loss) Bridge
Nine Months Ended September 30, Elements of Net Income (Loss) Bridge
$ in millions
2017 2016 $ Change
Currency
translation
Income tax
Spin-off
costs
Depreciation of REE Impairment
Interest
Expense
All Other
Total revenues $ 1,262.8 $ 1,149.6 $ 113.2 $ 1.0 $ - $ - $ - $ - $ - $ 112.2
Direct operating 526.2 487.8 38.4 0.6 - - - - - 37.8
Depreciation of revenue earning equipment 283.5 255.1 28.4 0.3 - - 28.1 - - -
Cost of sales of revenue earning equipment 134.9 111.6 23.3 0.2 -- - - - - 23.1
Cost of sales of new equipment, parts and supplies 30.3 39.2 (8.9) - - - - - - (8.9)
Selling, general and administrative 244.6 203.5 41.1 - - (10.7) - - - 51.8
Impairment 29.3 - 29.3 - - - - 29.3 - -
Interest expense, net 101.8 52.1 49.7 - - - - - 49.7 -
Other expense (income), net (2.3) (2.2) (0.1) (0.1) - - - - - -
Income (loss) before income taxes (85.5) $ 2.5 (88.0) - - 10.7 (28.1) (29.3) (49.7) 8.4
Income tax benefit (provision) 31.5 (9.0) 40.5 - 40.5 - - - - -
Net income (loss) $ (54.0) $ (6.5) $ (47.5) $ - $ 40.5 $ 10.7 $ (28.1) $ (29.3) $ (49.7) $ 8.4
© 2017 Herc Rentals Inc.
2017 SG&A excluding Spin-off costs
37NYSE: HRI
$0.11 EPS
$ in millions
Q1 2017 Q2 2017 Q3 2017 Nine Months
2017
SG&A $81.2 $78.8 $84.6 $244.6
Spin-off costs ($7.6) ($9.1) ($10.3) ($27.0)
SG&A excluding Spin-off costs $73.6 $69.7 $74.3 $217.6
% of Total Revenue 18.9% 16.8% 16.2% 17.2%
© 2017 Herc Rentals Inc.NYSE: HRI 38
1. Original equipment cost based on ARA guidelines
Historic Fleet at Original Equipment Cost1
$ in millions
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Full Year
2016
Q1 2017 Q2 2017 Q3 2017 Nine
Months
2017
Beginning Balance – Fleet at
OEC
$3,384 $3,391 $3,537 $3,616 $3,384 $3,556 $3,556 $3,653 $3,556
Expenditures – Fleet at OEC $90 $220 $142 $43 $495 $119 $217 $126 $ 462
Disposals – Fleet at OEC ($96) ($85) ($57) ($90) ($328) ($120) ($111) ($66) ($297)
Foreign Currency / Other $13 $11 ($6) ($13) $5 $1 ($9) $39 $31
Ending Balance – Fleet at
OEC
$3,391 $3,537 $3,616 $3,556 $3,556 $ 3,556 $ 3,653 $3,752 $ 3,752
© 2017 Herc Rentals Inc.
Expand and Diversify Revenues: Driving $ Utilization
39NYSE: HRI
Aerial - Booms
19.6%
Aerial -
Scissors &
Other
6.4%
Earthmoving -
Heavy
11.1%
Earthmoving -
Compact
7.4%
Material Handling-
Telehandlers
13.4%
Material
Handling -
Industrial
3.2%
Trucks and
Trailers
12.8%
ProSolutions
13.0%
ProContractor
4.8%
Air Compressors
3.0%
Other
1.9%
Lighting
1.7% Compaction
1.7% Aerial - Booms
18.7%
Aerial -
Scissors &
Other
7.3%
Earthmoving -
Heavy
8.9%
Earthmoving -
Compact
7.7%
Material Handling-
Telehandlers
13.3%
Material
Handling -
Industrial
3.4%
Trucks and
Trailers
12.6%
ProSolutions
13.7%
ProContractor
6.5%
Air Compressors
2.7%
Other
1.9%
Lighting
1.7% Compaction
1.6%
OEC as of 09/30/2016 1 OEC as of 09/30/2017 1
Increased
• Aerial – Scissor Lifts
• Material Handling - Industrial
• ProContractorTM and ProSolutionsTM
Reduced
• Aerial – Booms
• Earthmoving - Heavy
• Air Compressors
1. Original equipment cost based on ARA guidelines
$3.62 billion OEC fleet $3.75 billion OEC fleet
© 2017 Herc Rentals Inc. 40NYSE: HRI