Herc Holdings Inc.

Good day, and welcome to the HERC Holdings Fourth Quarter 2021 Earnings Conference Call. 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. Please note this event is being recorded. I would now like to turn the conference over to Elizabeth Higashi. Please go ahead.

Thank you, Jason, and thank you all for joining us this morning. Welcome, everyone, to our fourth quarter and full year 2021 earnings conference call. Earlier today, our press release, presentation slides, and 10-K 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 Silberg, 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 our fourth quarter and full year results with comments on operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks will be followed by an open Q&A. Before we begin our formal remarks, I'd like to remind you to review our safe harbor statement on slide three. Today's 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. You should also refer to the risk factors section of our annual report on the Form 10-K for the year ended December 31, 2021. In addition to the financial results presented on a GAAP basis, we will be presenting non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found at 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. Please turn to slide number four. 2021 turned out to be a pivotal time for the equipment rental industry and an outstanding year for Herc Rentals. The excellent performance of our operations and field support teams, combined with tight supplies of equipment and steady demand, have created an optimal environment for us. Our strong fourth quarter contributed to a record year. We increased our utilization year over year by 400 basis points to 44.6% in the fourth quarter, reflecting improved volume, mix, and rate. In the fourth quarter, we added another seven acquisitions. Since December 30th, 2020, we have completed 12 acquisitions for a cumulative total net cash outlay of approximately $477 million. Yesterday, we were also pleased to announce a 15% increase in our quarterly dividend to 57.5 cents per share, which was initiated in the fourth quarter of 2021. Our strong 2021 performance is clearly providing the momentum and growth that we expect going forward into 2022. And we raised the 2022 guidance for adjusted EBITDA from what we presented at our investor day last September. Please turn to slide number five. Our fourth quarter results continue to demonstrate outstanding operational execution and reflect new records in many of our financial metrics. Slide five shows the fourth quarter results over the last three years Given the unusual performance in 2020 due to the impact of COVID-19, we share a comparison not only with 2020, but 2019 as well. As you can see, our performance in 2021 clearly accelerated our growth trajectory. Equipment rental revenue was $542.4 million in the fourth quarter, an increase of 26.9%, or $115.1 million compared to the prior year, and 18.7% over 2019. This increase was driven by solid performance in our core business and growing market share from our specialty businesses, both of which continue to outpace our pre-pandemic performance in 2019. Adjusted EBITDA grew by 31.1% over prior year and 19.6% over 2019. Our focus on operating leverage improved year-over-year adjusted EBITDA margin 680 basis points to 44.4% in the fourth quarter of 21, another record. We reported net income of $71.8 million or $2.36 per diluted share in the fourth quarter compared with $35.5 million or $1.19 per diluted share last year. Our industry-leading rate management delivered strong results in a favorable operating environment, which benefited from tight equipment supply and steady rental demand. This is an exciting time for Team HERC, as you likely inferred from the growth goals we presented at our investor day last fall. Our team is committed to providing excellent customer service and expanding our rental solutions to a broad array of customers and industries to achieve even greater success. Now on slide six, with over 56 years of history in the equipment rental industry, Our 5,600 team members work hard to ensure our customers achieve optimal performance safely, efficiently, and effectively every day. We welcome all of the employees that joined us from locations acquired since December 2020. Everything we do is built on our promise and commitment to help our customers and communities build a brighter future. As of today, We are now operating 312 locations across the United States and Canada in 40 states and five Canadian provinces. The addressable North American market size is estimated to be $57 billion in 2022, a year-over-year increase of about 10%, according to the American Rental Association. We expect to continue our momentum by addressing the opportunities in the market and continuing to outperform the overall industry as we grow both organically and through M&A. Now please turn to slide number seven. We intend to capitalize on opportunities we have in an expanding addressable equipment rental market and a truly fragmented industry. Our team is experienced and have what I call fire in the belly to take advantage of an exceptional opportunity before us. As you can see from this slide, that we introduced at our investor day, our major strategic pillars are focused on growing the core business, expanding our specialty business, elevating technology, integrating ESG, and maximizing our allocation of capital. Before I hand off to Aaron, let me share with you just how our strategy has been delivering results. On slide number eight, you'll see that 2021 proved just how well we can pivot from a tough 2020. Our dollar utilization reached a record 43% for the year. Adjusted EBITDA margin jumped to an all-time high of 43%, even as we reach for a higher goal. And net leverage has dropped from 4.1 times in 2016 to 2.1 times at the end of 21. Now, for more about the details of our operations in the quarter, And our outlook, here's Aaron Birnbaum, our Chief Operating Officer.