Q Investor Presentation

Transcription

1 Q Investor Presentation

2 Legal Disclaimer This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of All statements contained in this presentation that do not relate to matters of historical facts should be considered forward-looking statements, including statements regarding our expectations regarding growth of our end-markets; projected U.S. construction growth rate and spending and projected U.S. rental industry revenue growth rate; estimated exposure to the oil and gas industry; our business strategy, including our plan to identify new customers, equipment demand opportunities, greenfield opportunities, and investment and divestiture opportunities; our 2016 outlook, including without limitation, statements regarding our forecasted revenue, Adjusted EBITDA, our expected rental rates, time utilization and net capital expenditures; and guidance regarding our 2016 target leverage ratio. We use words such as "will," "expect," "believe," "continue," "estimate," "intend," "target" and other similar expressions to identify some but not all forward-looking statements. Forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained in this presentation are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, current plans, expected future developments and other important factors we believe are appropriate under the circumstances. As you read and consider this presentation, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many important factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these important factors include, but are not limited to, the important factors described under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2015 filed with the Securities and Exchange Commission ("SEC") on March 8, 2016 and similar disclosures in subsequent reports filed with the SEC, which could cause actual results to differ materially from those indicated by the forward-looking statements made in this presentation. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this presentation to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New important factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. In addition to the financial measures prepared in accordance with U.S. generally accepted accounting principles ( US GAAP ), this presentation contains the non-us GAAP financial measures EBITDA and Adjusted EBITDA. The reasons for the use of these measures, a reconciliation of these measures to the most directly comparable US GAAP measures and other information relating to these measures are included in the appendix to this presentation. 2

3 Graham Hood Chief Executive Officer

4 Company At a Glance Leading Regional Rental Equipment Provider Sunbelt Region Focus area +15,000 (1) Customers served Differentiated Emphasis on Earthmoving Equipment ~$796 million (2) Original Equipment Cost ( OEC ) ~54% (2) Of OEC focused on earthmoving category Well Positioned in Key End-Markets Key End-Markets Infrastructure, Non-Residential Construction, Oil & Gas, Municipal, and Residential Construction ~6% (3) Expected weighted average CAGR of key end-markets through 2019 Compelling Financial Performance ~20% (4) Adjusted EBITDA CAGR from 2011 to March 31, 2016 ~46% (4) Adjusted EBITDA margin Proven Management Team with Deep Roots in Rental ~1,140 full-time employees (2) Located in 68 branches and the Company headquarters ~18 years Average tenure Regional VP s have with Neff Rental Notes: (1) Company data for the last twelve months ended March 31, 2016 (2) As of March 31, 2016 (3) Includes infrastructure, non-residential construction, oil and gas, municipal and residential construction end-markets (4) For a reconciliation of net income to Adjusted EBITDA, see page 16 4

5 Business Strategy Focus on Premium Customer Service Continue to deliver best-in-class service and support to our long-standing customer base Remain focused on our technical edge with respect to earthmoving equipment Rigorous use of CRM and national account program to further penetrate our current customer base and identify new customer opportunities Emphasis on Active Asset Management Utilize real time data to improve rental rates and identify equipment demand opportunities Maintain rigorous repair and maintenance program to increase time utilization and equipment longevity Disciplined fleet investment and divestiture strategy drivenby by ROIC benchmarks and real time market dynamics demand dynamics Focus on Growing Markets Remain committed to our focused position in the Sunbelt region of the United States Continue to exploit and develop opportunitiesin in the infrastructure, non-residential construction, oil and residential gas, municipal construction, and residential and oil construction and gas end end-markets Capitalize on Operating Leverage Take advantage of our current branch network and clustering strategy to add incremental fleet to our current footprint Identify and evaluate one to three greenfield opportunities that meet our stringent return criteria and fit well within our current branch network. Ability to Generate Free Cash Flow Maintain operational flexibility to generate significant cash flow through various business cycles Rely on our disciplined growth strategy and fleet investment criteria to make capital investment decisions Divest fleet when deemed appropriate and when secondary equipment market demand is robust 5

6 U.S. Equipment Rental Market Overview Why Our Customers Choose to Rent vs. Own ABI in Perspective (1) Control expenses and conserve capital Access to the right equipment for the job 24/7 Customer care Eliminate the need for long-term maintenance Minimize need for storage and transportation Technical expertise and advice is available Expansion Contraction 70 Expansion Expansion Pent-up Demand 30 Mar-98 Mar-01 Mar-04 Mar-07 Mar-10 Mar-13 Mar-16 U.S. Construction Spending vs. U.S. Rental Industry Revenues Total U.S. Construction Spending $Bn U.S. Rental Industry Revenues $Bn $1,500 $1,250 $1,000 $750 $ ,104 1,167 1,152 1, ,267 1,339 1,214 1,160 1, A 1999A 2001A 2003A 2005A 2007A 2009A 2011A 2013A 2015A 2017E 2019E (2) Total U.S. Construction Spending (3) U.S. Rental Industry Revenues Notes: (1) Architectural Billings Index ( ABI ) data as of March 2016 (2) FMI Construction Outlook as of Q (3) Total U.S. Rental Market Revenue data from IHS Global Insights report as of February 2016 $90 $70 $50 $30 $10

7 Diversified Footprint and End-Markets Neff Regions and Forecast Rental Industry Growth Rates (1) Rental Revenues by End-Market (2) Other 15% Infrastructure 28% 9% Municipal 11% 7% 9% 10% 8% 12% 3% 6% 5% 6% 5% 8% 7% 10% Residential Construction 14% Oil & Gas 7% Non-Residential Construction 25% Sunbelt Region Overview Key attributes of the Sunbelt region include: Favorable climate conditions limit seasonality and facilitate year-round construction activity Historically, higher than average equipment rental revenue growth rates when compared to other states outside of the Sunbelt region (3) Forecasted U.S total construction growth rate for 2016 is 6.6%. Growth in construction for states with Neff branch locations is estimated at 7.6% in 2016, which exceeds the 5.3% estimated growth in construction in states where Neff does not operate (4) Branch proximity within the region allows Neff to deploy equipment seamlessly across different areas to drive rate and ROI Notes: (1) Forecasted 2016 Total U.S. Rental Industry Revenue growth rate data from IHS Global Insights report as of February 2016 (2) Company data for YTD March 31, 2016 (3) Total U.S. Rental Industry Revenue data from IHS Global Insights report as of February 2016 (4) Forecasted 2016 Total Construction Industry growth rate data from IHS Global Insights data report as of February

8 The Impact of Oil and Gas Rental Revenue Time Utilization ($MM) ($MM) $120.0 $90.0 $60.0 $ % $81.2 $ % $74.5 $63.4 $ % $ % 75.0% 70.0% 65.0% 60.0% 65.1% 65.5% 63.7% 63.4% 65.2% 61.5% $- Total Neff Excl. O&G Oil & Gas (1) 55.0% Total Neff Neff Excl. O&G Oil & Gas (1) Oil & Gas Highlights Q Q The increase in total time utilization for Non-Oil & Gas branches mitigates the year-over-year drop for Oil & Gas branches Rental revenues in non-oil & Gas branches were up by 17.5% in Q Rental revenues in Oil and Gas branches were down by 37.9% Rental rates in non-oil and Gas branches were up by 0.9% in Q Rental rates in Oil and Gas branches were down by 11.2% Adjusted EBITDA in non-oil & Gas branches was up by 17.6% in Q Adjusted EBITDA in Oil & Gas branches was down by 52.7%. Notes: (1) Total rental revenues from Oil and Gas branch locations, including non-oil and Gas end-market revenues 8

9 Fleet Overview Neff s Fleet in Focus as of March 31, 2016 Fleet Breakdown (% of OEC) as of March 31, 2016 OEC of ~$796.3 million Neff has invested ~$745 million in its fleet since 2011 (1) Average age of Neff s fleet has been reduced from ~55 months in 2011 to ~45 months as of March 31, 2016 Average age of Earthmoving fleet: ~38 months Fleet includes ~14,500 units of equipment, of which over 5,600 are earthmoving related Trucks, 5.7% Aerial, 12.0% Concrete / Compaction, 6.0% Material Handling, 17.2% Other, 5.5% Earthmoving, 53.6% Why Earthmoving? Utilized at the initial stages of the construction process, and throughout the duration of most construction projects Large and active end-markets (e.g., infrastructure, non-residential construction, residential construction, and oil & gas) and these customer segments require significant earthmoving assets Customers value and want specialized earthmoving expertise every project is different and requires the right combination of equipment, implements, and advice Earthmoving penetration is relatively low at ~51%. With aerial and material handling at ~96% and ~84% rental penetration, respectively, we believe the future growth in industry penetration will likely come from the earthmoving category (2) Earthmoving equipment retains a strong resale value and has a highly liquid secondary market Note: (1) Defined as rental fleet purchases from January 2011 to March 2016 (2) Yengst Associates Market Machinery Research Report, dated June

10 Mark Irion Chief Financial Officer

11 Q Results 3-Months Ended March 31, 2016 Year over Year Analysis Key Financial Metrics ($ in millions) 3-Months Ended March 31, Months Ended March 31, 2016 % Total Revenues $84.1 $ % Rental Revenues $74.1 $ % Adjusted EBITDA (1) $39.0 $ % Adjusted EBITDA Margin (1) 46.4% 46.2% (20 bps) Net Capital Expenditures $42.4 $36.0 (15.2%) Select Operating Metrics ($ in millions) 3-Months Ended March 31, Months Ended March 31, 2016 % Average OEC $722.2 $ % Time Utilization 63.7% 65.1% +140 bps Weighted Average Rental Rate Growth 3.8% (1.3%) Fleet Age (in months) month older Note: (1) For a reconciliation of net income to Adjusted EBITDA, see page 16 11

12 Debt and Liquidity Considerations Summary Overview Debt Profile as of March 31, 2016 Total debt of $743.8MM as of March 31, 2016 $743.8 Total debt net of $2.0MM original issue discount ( OID ) is $741.8MM Total leverage of 3.9x based on trailing twelve months ( TTM ) Q Adjusted EBITDA of $188.6MM Second Lien Term L bps (1% LIBOR Floor) Asset based loan ( ABL ) leverage: 1.4x L bps Second lien leverage: 2.5x Availability of $202.7MM on the ABL at March 31, 2016 Debt Maturity Profile No debt maturities prior to 2021 $475.0 $475.7 $202.7 Unused ABL 2nd Lien Term Loan $272.2 Used (1) Feb 2021 Jun 2021 Note: (1) Assumes $4.1 million in letters of credit obligation 12

13 Key Financial Metrics Revenues Adj. EBITDA (1) ($MM) ($MM) $400.0 $300.0 $200.0 $ $225.0 $180.0 $135.0 $90.0 $ $ TTM Q Rental Revenues Equipment Sales Parts & Service $ TTM Q Adj. EBITDA Margin (1) (%) 60.0 Net Capital Expenditures ($MM) $ $ $ $ TTM Q $ TTM Q Note: (1) For a reconciliation of net income to Adjusted EBITDA, see page 16 13

14 2016 Full Year Guidance Current Guidance Total revenue range: $390MM to $410MM Adjusted EBITDA: $190MM to $200MM Y-o-Y Rental rate increase: ~0-2% Time utilization: ~68% Net capital expenditures: $100MM to $110MM Target leverage by end of 2016: 3.0x to 3.5x 14

15 Appendix

16 Reconciliation of Net Income to Adjusted EBITDA EBITDA" is defined as net (loss) income plus interest expense, provision for (benefit from) income taxes, depreciation of rental equipment, other depreciation and amortization and amortization of debt issue costs. "Adjusted EBITDA" is defined as EBITDA further adjusted to give effect to other items that we do not consider to be indicative of our ongoing operations, including for the periods presented loss on extinguishment of debt, transaction bonus, rental split expense, equity-based compensation, adjustment to tax receivable agreement and loss on interest rate swap. EBITDA and Adjusted EBITDA are not measures of performance in accordance with US GAAP and should not be considered as an alternative to net (loss) income or operating cash flows determined in accordance with US GAAP. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of cash flow for management's discretionary use, as they exclude certain cash requirements such as interest payments, tax payments and debt service requirements. We believe that the inclusion of EBITDA and Adjusted EBITDA in this investor presentation is appropriate because securities analysts, investors and other interested parties use these non-us GAAP financial measures as important measures of assessing our operating performance across periods on a consistent basis. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. Reconciliation of Net (loss) income to Adjusted EBITDA Three Months Ended March 31, $ 000 s Net (loss) income $ 17,508 $ 40,493 $ 15,808 $ 40,185 $ 3,328 $ (420) Interest expense 23,221 24,598 40,481 43,025 10,514 10,649 Provision for (benefit from) income taxes (5,359) 3, (385) Depreciation of rental equipment 66,017 70,768 73,274 83,943 19,514 22,165 Other depreciation and amortization 9,041 8,968 9,591 10,498 2,461 2,741 Amortization of debt issue costs 1,461 1,929 3,061 1, EBITDA $ 117,407 $ 147,227 $ 136,856 $ 182,823 $ 36,433 $ 35,145 Notes: Loss on extinguishment of debt (1) , Transaction bonus (2) , Rental split expense (3) 932 2,343 3,658 2, Equity-based compensation (4) 1,478 1, , Adjustment to tax receivable agreement (2,424) Other (5) , ,654 Adjusted EBITDA $ 119,919 $ 150,794 $ 186,144 $ 186,213 $ 38,998 $ 41,428 (1) Represents expenses and realized losses that were incurred in connection with the extinguishment of debt. (2) Represents the payment of incentive bonuses earned in connection with consummation of a refinancing to management and certain members of Neff Holdings' board of managers. (3) Represents cash payments made to suppliers of equipment in connection with rental splits, which payments are credited against the purchase price of the applicable equipment if Neff Holdings elects to purchase that equipment. (4) Represents non-cash equity-based compensation expense recorded in the periods presented in accordance with US GAAP. (5) For 2012, represents (i) the adjustment of certain interest rate swaps to fair value and (ii) loss on interest rate swaps. For 2015 & 2016, represents loss on interest rate swap. 16

17 Other Financial Data and Operating Data Other Financial Data and Operating Data Three Months Ended March 31, $ in 000's Capital Expenditures Purchases of rental equipment $ 159,192 $ 144,483 $ 149,174 $ 147,483 $ 45,888 $ 36,065 Purchases of non-rental equipment 11,556 11,852 13,018 13,134 3,345 5,018 Proceeds from sales of rental equipment (41,731) (30,976) (31,620) (32,143) (6,316) (4,577) Proceeds from sales of non-rental equipment (3,097) (2,511) (2,859) (2,629) (471) (525) Net Capital Expenditures $ 125,920 $ 122,848 $ 127,713 $ 125,845 $ 42,446 $ 35,981 OEC of rental equipment sales 95,888 69,834 69,605 69,324 14,432 9,524 Growth rental equipment capex 63,304 74,649 79,569 78,159 31,456 26,541 Gross rental equipment capex $ 159,192 $ 144,483 $ 149,174 $ 147,483 $ 45,888 $ 36,065 Other Operating Data Average OEC $ 527,266 $ 606,624 $ 688,733 $ 761,855 $ 722,215 $ 778,195 Fleet age in months (as of period end) Weighted average rental rate growth 6.5% 6.4% 6.6% 1.0% 3.8% (1.3%) Time utilization 68.7% 70.9% 69.7% 66.8% 63.7% 65.1% 17

18 Glossary of Terms Net Capital Expenditures: Purchases of rental and non-rental equipment less proceeds from the sale of rental and non-rental equipment. Time Utilization: The daily average OEC of equipment on rent, divided by the OEC of all equipment in the rental fleet during the relevant period. EBITDA and Adjusted EBITDA: EBITDA is defined as net (loss) income plus interest expense, provision for (benefit from) income taxes, depreciation of rental equipment, other depreciation and amortization and amortization of debt issue costs. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to other items that Neff does not consider to be indicative of our ongoing operations, including for the periods presented loss on extinguishment of debt, transaction bonus, rental split expense, equity-based compensation, adjustment to tax receivable agreement and loss on interest rate swap. Fleet Age: The OEC weighted age of the entire fleet, excluding the benefit of refurbishments. OEC: The first cost of acquiring the equipment, or in the case of used equipment purchases and rental splits, an estimate of the first cost that would have been paid to acquire the equipment if it had been purchased new in its year of manufacture, as the daily average OEC of equipment on rent, divided by the OEC of all equipment in the rental fleet during the relevant period. Weighted Average Rental Rate Growth: The percentage change in the rate/price that is charged for equipment on rent. Overall company rental rates change based on a combination of pricing, fleet composition and term of rental. This metric is used to evaluate rate changes both year-over-year and sequentially (typically quarter-over-quarter). Rental rate changes are calculated based on the year-over-year or sequential variance in average contract rates, weighted by the prior period revenue mix. Return on invested capital (ROIC): The ROIC metric uses after-tax operating income for the trailing 12 months divided by average stockholders equity (deficit) and debt and deferred taxes, net of average cash and debt issue costs. To mitigate the volatility related to fluctuations in the Company s tax rate from period to period, a federal statutory tax rate of 35% is used to calculate after-tax operating income. 18