Herc Holdings Inc.

Good day, ladies and gentlemen, and welcome to the Herc Holdings second quarter 2020 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchstone phone. To withdraw your question, please press star, then do. Please note, this event is being recorded. I would now like to turn the conference over to Elizabeth Higashi. Thank you, and over to you.

Thank you, Stanford. Thank you all for joining us this morning, and welcome to our second quarter and first half 2020 earnings conference call. Earlier today, our press release, presentation slides, and 10Q were filed with the SEC. and are all posted on the events page of our IR website at ir.herkrentals.com. This morning, I'm joined by Larry Silber, President and Chief Executive Officer, Aaron Birnbaum, Senior Vice President and Chief Operating Officer, and Mark Erion, Senior Vice President and Chief Financial Officer. We'll review the quarter, our view of the industry, and our strategic outlook. The prepared remarks will be followed by an open Q&A. Before I turn the call over to Larry, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from the forward-looking statements made on this call. Please refer to slide two of the presentation for our complete safe harbor statement, as well as the risk factors section of our annual report on Form 10-K, for the year ended December 31, 2019, and our quarterly reports on Form 10-Q. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures, the closest GAAP equivalent, can be found in the conference call materials. Finally, a replay of this call can be accessed via dial-in or through a webcast on our website. Replay instructions were included in our earnings release this morning. We have not given permission for any other recording of this call and do not approve or sanction any transcribing of the call. I'll now turn the call over to Larry.

Thank you, Elizabeth, and good morning, everyone. Our business, like all businesses in North America, had to deal with the impact to economic activity in the second quarter resulting from the mandated shutdowns to mitigate the impact of the COVID-19 pandemic. The immediacy of the impact on our business as most major metropolitan areas were shut down was unlike any downturn any of us have previously experienced. We had to react quickly to put in place the recession playbook over two weeks instead of the one or two years that it usually takes a recession to play out. The experience of our management team at both the senior level and in the field has proven that maturity and experience really matter. Our regional vice presidents averaged 25 years of industry experience and were able to rapidly roll out cost control initiatives and implement new operating procedures following the Centers for Disease Control and Prevention Guidelines for Safety. As an essential service provider, our locations remained open for business, and we were able to provide our customers with rental equipment as and where needed. We are proud of how our team responded to the sudden and unprecedented challenges that we overcame together. In the top tier, we are the third largest rental company serving North America with the scale and capital resources to provide a broad range of equipment that supports a wide variety of customers and industries. We've made strategic investments in terms of time and resources to build out our specialty rentals over the last four years, and these investments were well-placed in terms of the pandemic response. Our specialty fleet grew 4% year over year to nearly $850 million of OEC, representing approximately 23% of our total rental fleet. Our strategic customer and fleet diversification has helped to offset the business slowdown we have seen in other parts of the business. Our national account customers are also weighted towards essential services, and many have remained active during the shutdowns. Our national accounts represents 46% of our rental revenues. These customers are a strategic advantage for HERC with an average relationship of over 25 years. We are committed to providing excellent customer service and providing stability and consistency to a significant portion of our revenue base. Our customer-centered culture and high priority for safety also provides a strong foundation as we serve our customers and keep our team and community safe. Our operations began to see the effect of the shutdown in mid-March. April was the month with the biggest impact to our rental revenues, and we have seen a slow and steady improvement in May and June. As we adjust to this new and challenging operating environment, the strength of our organization and our business has been more evident than ever. We have prudently managed our balance sheet and are well positioned with ample liquidity and modest leverage to sustain our operations even in the most difficult environments. Now, please turn to slide number four. We continue to follow the CDC guidelines across all of our operations and reinforce hand washing, social distancing, and infection control in frequent communications and in contact with our customers and communities. We restricted nonessential travel, and for the most part, field support and office staff continue to work remotely during the second quarter. And while we enhanced our operational and safety procedures to operate in this challenging environment, all of our regions continue to report at least 89% perfect days and an average of 94% perfect days for the six months here today. Our team members have demonstrated resilience and professionalism throughout this pandemic crisis. And I want to thank each and every one of the Herc Reynolds team for supporting this critical and essential work of our customers and communities. We're proud of what we have accomplished together as we've been adjusting to the new operating environment. The health and safety of our team, customers, and communities remains our highest priority while we continue to provide the equipment and services required by our customers. Now, please turn to slide number five. Our weekly fleet on rent and equipment rental revenue increased sequentially from the trough in mid-April through the end of June. We maintained rental rates during the quarter, and results were about flat compared to the prior year. Our focus on many of the cost-saving initiatives that were introduced last year intensified in the second quarter, and we successfully improved our transportation recovery, controlled employee costs, and reduced professional services and consulting fees. We also generated approximately $179 million in free cash flow year to date and increased our liquidity to $1.3 billion by the end of the second quarter. Now on slide number six is a brief overview of our second quarter financial results. Equipment rental revenue declined 19.6% or $80 million to $327.6 million as a result of the impact of COVID-19 on business activity in the quarter. Total revenues were $368 million, 22.5% or $107.1 million lower than the prior year, primarily due to the lower rental revenue and lower sales of used equipment. We reported net income of $2 million or 7 cents per diluted share in the second quarter of 2020, compared to $9.7 million or 33 cents per diluted share in 2019. Adjusted EBITDA declined 14.6% to $149.4 million in the second quarter of 2020 compared to the prior year. And the successful management of costs, despite the decline in revenue, contributed to an adjusted EBITDA margin of 40.6% for the second quarter, and improvement of 380 basis points over the prior year's 36.8% margin. Now I'm going to ask Aaron Birnbaum to pick up from here to discuss our second quarter operating performance and the current environment. Aaron?