Herc Holdings Reports 2020 Fourth Quarter and Full Year 2020 Results and Announces Full Year Guidance for 2021

Herc Holdings Inc. (NYSE: HRI) ("Herc Holdings" or the "Company") today reported financial results for the quarter ended December 31, 2020. Equipment rental revenue was $427.3 million and total revenues were $520.4 million in the fourth quarter of 2020, compared to $457.0 million and $540.1 million, respectively, for the same period last year. The Company reported net income of $35.5 million, or $1.19 per diluted share, in the fourth quarter of 2020, compared to $35.1 million, or $1.20 per diluted share, in the same 2019 period. Fourth quarter 2020 adjusted net income was $40.2 million, or $1.35 per diluted share, compared to $38.9 million, or $1.33 per diluted share, in 2019. See page A-5 for the adjusted net income and adjusted earnings per share calculations.

"We exceeded our expectations for the fourth quarter and have good momentum going into 2021," said Larry Silber, president and CEO. "During the year, we adjusted fleet to respond to the declines in volume related to the impact of COVID-19 on our customers and focused on controlling costs. The quick implementation of those initiatives led to our improved adjusted EBITDA margin and excellent free cash flow for the full year. Our commitment to customer service and consistent implementation of a strategy to diversify our customer and industry base continues to demonstrate the strength of our business model."

2020 Fourth Quarter Highlights

• Equipment rental revenue was $427.3 million compared to $457.0 million in the prior-year period. The COVID-19 business slowdown continued to impact volume and pricing.

• Total revenues were $520.4 million compared to $540.1 million in the prior-year period. The year-over-year decline of $19.7 million was related primarily to lower equipment rental revenue of $29.7 million, offset by an increase in sales of rental equipment of $10.8 million.

• Pricing declined 0.8% compared to the same period in 2019.

• Dollar utilization increased to 40.6% compared to 40.5% in the prior-year period and increased 300 basis points sequentially from the third quarter of 2020.

• Direct operating expenses (DOE) of $185.9 million decreased 5.1% compared to the prior-year period. The $9.9 million decline was primarily related to lower re-rent expense and personnel-related costs.

• Selling, general and administrative expenses (SG&A) declined 5.2% to $69.8 million compared to $73.6 million in the prior-year period. The $3.8 million decline was primarily attributed to reductions in selling and travel expenses.

• Impairment expense was $5.9 million and consisted of the impairment of certain rental equipment and capitalized software related to financial systems that was replaced during the fourth quarter of 2020.

• Interest expense decreased to $22.5 million compared to $27.1 million in the prior-year period. The decrease was primarily related to both lower interest rates and balances of the Company's ABL Credit Facility in 2020.

• The income tax provision was $9.5 million compared with $18.1 million for the prior-year period.

• The Company reported net income of $35.5 million compared to $35.1 million in the prior-year period. Adjusted net income was $40.2 million compared to $38.9 million in the prior-year period.

• Adjusted EBITDA declined 8.8% to $195.6 million compared to $214.4 million in the prior-year period. The decrease was primarily due to lower volume and pricing.

• Adjusted EBITDA margin declined 210 basis points to 37.6% compared with 39.7% in the prior-year period, primarily due to higher costs related to sales of rental equipment in the quarter.

Full Year 2020 Highlights

• Equipment rental revenue was $1,543.7 million compared to $1,701.8 million in the comparable prior-year period. The 9.3%, or $158.1 million decline, was primarily due to lower volume related to the impact of COVID-19.

• Total revenues were $1,781.3 million compared to $1,999.0 million in the prior-year period. The economic slowdown related to the COVID-19 pandemic impacted all of the Company's revenue streams in 2020. Lower equipment rental revenue and sales of rental equipment were the primary factors contributing to the 10.9%, or $217.7 million, decline compared to the prior-year period.

• Pricing increased 0.1% compared to the same period in 2019.

• Dollar utilization was 36.1% compared with 38.7% in the prior year, primarily a result of lower volume and mix.

• DOE fell 10.6%, or $81.9 million, to $689.2 million compared to the prior-year period. The decline was primarily related to lower transportation, re-rent, and maintenance expense, as well as lower personnel-related expense as a result of furloughs and lower overtime expense.

• SG&A decreased 12.7% to $257.4 million compared to $294.8 million in the prior-year period. The $37.4 million decline was primarily attributed to reductions in selling and travel expenses, as well as lower bad debt expense due to continued improvement in collections.

• The Company recorded restructuring expense of $0.7 million primarily related to personnel reductions compared with $7.7 million in the prior-year period associated with closures of underperforming branches.

• Impairment expense was $15.4 million and consisted of partial impairment of a long-term receivable related to the sale of a former joint venture, the impairment of certain rental equipment and capitalized software related to financial systems, assets related to the closure of two branch locations in 2019, and the sale of two locations in 2020. Impairment expense of $5.1 million in 2019 was primarily related to certain international assets that were deemed held for sale as of December 31, 2019.

• Interest expense decreased to $92.6 million compared to $173.5 million in the prior-year period. The decrease was primarily related to the $53.6 million debt extinguishment expense in 2019, lower average outstanding balances on the Company's ABL Credit Facility, and lower interest rates on the Company's ABL Credit Facility and 2027 Notes in 2020.

• Income tax provision was $20.4 million compared with $16.1 million in the prior-year period.

• The Company reported net income of $73.7 million, or $2.51 per diluted share, compared to $47.5 million, or $1.63 per diluted share, in the prior-year period. Adjusted net income was $88.5 million, or $3.01 per diluted share, compared to $91.6 million, or $3.15 per diluted share, in the prior-year period.

• Adjusted EBITDA declined 7.0% to $689.4 million compared to $741.0 million in the prior-year period. The decline was primarily due to lower volume.

• Adjusted EBITDA margin increased 160 basis points to 38.7% compared to 37.1% in the prior-year period.

Capital Expenditures - Fleet

• The Company reported net rental equipment capital expenditures of $151.6 million for 2020. Gross rental equipment capital expenditures were $344.1 million compared with $638.4 million in the comparable prior-year period. Proceeds from disposals were $192.5 million compared to $224.2 million last year. See page A-5 for the calculation of net rental equipment capital expenditures.

• As of December 31, 2020, the Company's total fleet was approximately $3.59 billion at OEC.

• Average fleet at OEC decreased year-over-year by 6.0% in the fourth quarter and by 2.4% for the full year compared to the prior-year periods.

• Average fleet age was 46 months as of December 31, 2020 compared to 45 months in the comparable prior-year period.

Disciplined Capital Management

• The Company generated $424.5 million in free cash flow in 2020, compared with $176.2 million in the same period in 2019.

• Cash and cash equivalents were $33.0 million and unused commitments under the ABL Credit Facility and AR Facility contributed to $1.4 billion of liquidity as of December 31, 2020. Net debt was $1.7 billion as of December 31, 2020, with net leverage of 2.4x compared to 2.8x in the same prior-year period in 2019.

• The Company also updated its targeted net leverage range to 2.0x to 3.0x from the previous range of 2.5x to 3.5x.

Outlook for 2021

The Company reported 2021 guidance ranges of:

"Our goal for 2021 adjusted EBITDA is to exceed 2019 profitability levels," said Silber. "As we announced in January, we completed our first multi-location acquisition since going public. We intend to carefully invest in fleet and add locations in high growth urban markets to accelerate our top-line growth while continuing to control expenses," he added.

Earnings Call and Webcast Information

Herc Holdings' fourth quarter 2020 earnings webcast will be held today at 8:30 a.m. U.S. Eastern Time. Interested U.S. parties may call +1-877-883-0383 and international participants should call 1-412-902-6506, using the access code: 8030644. Please dial in at least 10 minutes before the call start time to ensure that you are connected to the call and to register your name and company.

Those who wish to listen to the live conference call and view the accompanying presentation slides should visit the Events and Presentations tab of the Investor Relations section of the Company's website at IR.HercRentals.com. The press release and presentation slides for the call will be posted to this section of the website prior to the call.

A replay of the conference call will be available via webcast on the company website at IR.HercRentals.com, where it will be archived for 90 days after the call.  A telephonic replay will be available for one week.  To listen to the archived call by telephone, U.S. participants should dial +1-877-344-7529 and international participants 1-412-317-0088 and enter the conference ID number: 10149774.

About Herc Holdings Inc.

Herc Holdings Inc., which operates through its Herc Rentals Inc. subsidiary, is one of the leading equipment rental suppliers with 277 locations in North America. With over 55 years of experience, we are a full-line equipment rental supplier offering a broad portfolio of equipment for rent. Our classic fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting. Our equipment rental business is supported by ProSolutionsR, our industry-specific solutions-based services, which includes power generation, climate control, remediation and restoration, and studio and production equipment, and our ProContractor professional grade tools. Our product offerings and services are aimed at helping customers work more efficiently, effectively and safely. The Company has approximately 4,800 employees who equip our customers and communities to build a brighter future. Herc Holdings’ 2020 total revenues were approximately $1.8 billion. All references to “Herc Holdings” or the “Company” in this press release refer to Herc Holdings Inc. and its subsidiaries, unless otherwise indicated. For more information on Herc Holdings and its products and services, visit: www.HercRentals.com.

Certain Additional Information

In this release we refer to the following operating measures:

• Dollar utilization: calculated by dividing rental revenue by the average OEC of the equipment fleet for the relevant time period, based on the guidelines of the American Rental Association (ARA).

• OEC: original equipment cost based on the guidelines of the ARA, 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).

Forward-Looking Statements

This press release includes forward-looking statements as that term is defined by the federal securities laws, including statements concerning our business plans and strategy, projected profitability, performance or cash flows, future capital expenditures, our growth strategy, anticipated financing needs, business trends, the impact of and our response to COVID-19, liquidity and capital management and other information that is not historical information. Forward looking statements are generally identified by the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions. All forward-looking statements are based upon our current expectations and various assumptions and, there can be no assurance that our current expectations will be achieved. They are subject to future events, risks and uncertainties - many of which are beyond our control - as well as potentially inaccurate assumptions, that could cause actual results to differ materially from those in the forward-looking statements. Further information on the risks that may affect our business is included in filings we make with the Securities and Exchange Commission from time to time, including our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and in our other SEC filings. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

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 release that is not calculated according to GAAP (“non-GAAP”), such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per diluted common share 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 supplemental schedules that accompany this release.

(See Accompanying Tables)

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