Herc (HRI) Conference summary

Strategy and cash flow

• Margin improvement and cost initiatives remained priorities through Q1; plans to close peer gaps in margin and dollar utilization may take longer during the downturn.

• Response to lower spring volumes included cost cuts, canceled fleet purchase orders, and continued focus on employee and customer safety.

• Volume was down 15%-18%; facilities continued serving customers, with some operating on reduced schedules.

• Free cash flow enhancement remained a focus as business activity recovers.

Demand and recovery

• Activity troughed around mid-April, followed by steady incremental improvement in most markets; equipment left on job sites represented ~5% of fleet overall.

• Recovery was gradual and below normal May-August seasonality; improvement was expected over the following couple of months and through summer 2020.

• Customer activity was returning at varying speeds across end markets, with entertainment the exception; construction and industrial customers remained at reduced capacity.

• Back-end 2020 activity was expected to benefit from projects already underway; 2021 new project approvals remained uncertain, partly offset by diversified end markets.

Fleet, capital spending, and pricing

• Fleet was expected to be flattish entering 2021 unless activity improved substantially in H2 2020; used-equipment sales were deferred while markets and residual values were monitored.

• Fleet inflation was expected at 1%-2% in 2020 and 2021, trending toward the lower end in 2021; ACI standards were not adding significant machine costs.

• Pricing visibility remained limited until markets reopened; improved pricing tools and industry data supported an expectation for more rational pricing than in prior downturns.

• Pricing requests were handled customer by customer; no broad-based concession trend was seen, though some customers sought individual support.