Herc (HRI) Baird 2024 Global Industrials Conference summary

Business Overview and Growth Strategy

• Operates nearly 450 branches with about 7,700 employees in an $84 billion North American market.

• Pursues a five-part strategy: grow core business, expand specialty offerings, elevate technology, allocate capital efficiently, and execute at the highest level using standardized processes.

• Aggressively expanded through 51 bolt-on acquisitions and 63 greenfield locations between September 2020 and September 2024, consolidating market position and targeting top 100 metropolitan markets.

• Diversification across products, customers, and geographies supports future growth and above-market performance.

• Technology and digital transformation have enhanced customer relationships, operational efficiency, and customer experience.

Market Trends and Regional Performance

• Local commercial market growth is low single-digit, impacted by interest rates and inflation.

• Stronger activity in Texas, the South, Eastern Seaboard, and Ohio due to mega projects like chip, battery, and LNG plants.

• West Coast markets, including Puget Sound, Portland, Bay Area, and Southern California, are weaker.

• Mega projects require a mix of core (75-80%) and specialty (20-25%) fleet, supporting incremental organic growth.

Capital Allocation and Specialty Business

• CapEx for 2024 is at the high end of guidance, with additional investment in growth gear for mega projects.

• Specialty business, launched in 2016, now includes power generation, pumps, climate control, flooring, trench, and industrial tools.

• Specialty segment aims to grow from 20-22% to 25-30% of business, driving higher margins.

• Growth in specialty achieved through both organic expansion and targeted M&A.

• Targeting net leverage of 2.0x to 3.0x to support investments in fleet growth, M&A, and shareholder returns.