Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - HERTZ GLOBAL HOLDINGS, INC | q22017pressrelease.htm |
| 8-K - 8-K - HERTZ GLOBAL HOLDINGS, INC | q22017earnings8-k.htm |
1
2Q 2017 Earnings Call
August 8, 2017
5:00pm ET
2
Safe Harbor Statement
Certain statements made within this presentation contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are
not guarantees of performance and by their nature are subject to inherent uncertainties. Actual
results may differ materially. Any forward-looking information relayed in this presentation speaks
only as of August 8, 2017 and Hertz Global Holdings, Inc. (the “Company”) undertakes no
obligation to update that information to reflect changed circumstances.
Additional information concerning these statements is contained in the Company’s press release
regarding its Second Quarter 2017 results issued on August 8, 2017, and the Risk Factors and
Forward-Looking Statements sections of the Company’s 2016 Form 10-K filed on March 6, 2017,
and Second Quarter 2017 Quarterly Report on Form 10-Q filed on August 8, 2017. Copies of these
filings are available from the SEC, the Hertz website or the Company’s Investor Relations
Department.
2Q
3
Key Metrics and Non-GAAP Measures
THE FOLLOWING KEY METRICS AND NON-GAAP MEASURES WILL BE USED IN THE PRESENTATION:
Adjusted corporate EBITDA
Adjusted corporate EBITDA margin
Adjusted free cash flow
Adjusted pre-tax income (loss)
Adjusted net income (loss)
Adjusted diluted earnings (loss) per share
(Adjusted diluted EPS)
Total RPD
Total RPU
Net depreciation per unit per month
Vehicle utilization
Transaction Days
Rentable Utilization
Definitions and reconciliations of key metrics and non-GAAP measures are provided in the Company’s
second quarter 2017 press release issued on August 8, 2017 and in the Company’s Form 8-K filed on
August 8, 2017. The calculation for Rentable Utilization is defined on page 11 of this presentation.
2Q
4
Agenda
BUSINESS
OVERVIEW
Kathryn Marinello
President & Chief Executive Officer
Hertz Global Holdings, Inc.
FINANCIAL RESULTS
OVERVIEW
Tom Kennedy
Chief Financial Officer
Hertz Global Holdings, Inc.
2Q
5
Continued Focus on U.S. RAC Operational Turnaround
• FLEET………………. Enriched Fleet and Optimal Capacity
• SERVICE…………… Significant focus on service quality and addressing customer preference through Ultimate Choice
• MARKETING……….. Enhanced digital platform for Dollar/Thrifty and Hertz brands
• TECHNOLOGY…….. Continued focus on upgrading technology leading to greater agility and modernization
Key Investments Supporting Product Quality and Service Excellence
2017 Earnings Impacted by Investment Strategy to Drive Long-Term Growth
• Approximately $300 million of expense to Adjusted Corporate EBITDA, which is a $180 million incremental
increase over 2016 improvement spending
• Approximately $200 million of non-vehicle capital expenditures in 2017 for technology and facility upgrades
2018 Positioned to Benefit from Early Returns
2Q
6
Progress on Track 2Q
FLEET
Reduced avg. core1 fleet by 3% YoY in
2Q:17; period-end core fleet down 5% YoY
Rebalanced car classes to optimal mix –
compact cars now 16% of total vs. 21%
2Q:16
Cars that rental customers prefer = Cars
that resale customers prefer; supports
better rental and residual returns
SERVICE
New management tools and resources
New leaders – training, recruiting, quality and
customer experience
37 Hertz Ultimate Choice locations now open
MARKETING
1Core fleet excludes the dedicated ride hailing rental fleet
Digital revamp – North America Hertz
website and mobile apps by YE17
New brand agency to refresh
strategy and redefine proposition
Digital campaigns launched
Corporate win-back program
underway
TECHNOLOGY
Enhanced Revenue Management modules
fully deployed
New financial Chart of Accounts system in
place
Global Rental, Reservations, Fleet Asset
systems in build/testing phase – 2018
deployment
7
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
Quarterly Overview
8
2Q:17 Consolidated Results
GAAP
2Q:17
Results
2Q:16
Results
YoY
Change
Revenue $2,224M $2,270M (2)%
Income (loss) from continuing operations
before income taxes
$(245)M $(35)M (600)%
Net Income (loss) from continuing operations $(158)M $(28)M (464)%
Diluted earnings (loss) per share from
continuing operations
$(1.90) $(0.33) (476)%
Weighted Average Shares outstanding: Diluted 83M 85M
Non-GAAP
Adjusted corporate EBITDA $35M $184M (81)%
Adjusted corporate EBITDA margin 2% 8% (650 bps)
Adjusted pre-tax income (loss) $(82)M $55M (249)%
Adjusted net income (loss) $(52)M $35M (249)%
Adjusted diluted EPS $(0.63) $0.41 (254)%
2Q
9
2Q:17 U.S. RAC Revenue Performance
Revenue Days Total RPD
Vehicle Utilization (bps) Capacity Total RPU
(2%)(2%)
(5%)
0%
6%
(3%)
1%1%
(8%)
(2%)(3%)
660
(130)(60) (2%) (1%)
2%
0%
(4%)(4%)
U.S. RAC (YoY quarterly results1)
1Revenue is defined as total revenue excluding ancillary retail car sales. Capacity is average fleet. Vehicle utilization is
calculated as transaction days divided by capacity. Total RPU is calculated as total revenue divided by average fleet.
2Q:17 Performance Drivers
(1%)
(100)
3%
(3%)
(4%)
(1%) (3%)
4%
(8%)
(310)
• Rate
• Total RPD declined 2% YoY, impacted by
customer mix and weaker ancillary revenue
• Volume
• Volume declined 3% on tough YoY comparison
as 2Q:16 benefitted from strong replacement
rentals due to significant customer recall
activity
• Off-Airport volume declined 4% YoY
• Airport volume declined 2% YoY
2Q
10
2Q:17 U.S. RAC Fleet Sales Initiative
45%
25%
30%
40%
24%
36%
Auction Retail Dealer Direct
2Q:17
2Q:16
Non-Program Vehicle
Disposition Channel Mix
2Q
Alternative Sales Channels Support
Fleet Rebalancing/Right Sizing
• Sold 35% more risk vehicles 2Q:17 YoY on top of the
21% increase in 1Q:17 YoY
• Used car sales through alternative channels:
• 60% of mix 2Q:17 versus 55% of mix in 2Q:16
• Absolute sales through highest-return retail channel
grew 30% in 2Q:17
11
2Q:17 U.S. RAC Vehicle Utilization
Vehicle Utilization YoY bps Inc/(Dec) Capacity Level Improved by
Quarter End
Q2’16 Q3’16 Q4’16 Q1’17 Q2’17
Vehicle UTE Rentable UTE
660
(310)
(170)
380
(60) (60)
(100)
(50)
1Rentable Utilization is calculated by dividing transaction days by available car days, excluding fleet unavailable for rent
e.g.; recalled, out of service, and vehicle in onboarding and remarketing channels
2Q
(130)
20
• Total Vehicle Utilization for the quarter was down
130 bps, primarily driven by cars in resale
channels (unavailable for rent)
• Rentable Utilization1 slightly increased vs prior
year, an improvement relative to the prior three
quarters
• Reduced fleet capacity goals were achieved at
quarter-end June 30th
12
2Q:17 U.S. RAC Monthly Depreciation Per Unit
$278
$304
$321
$248
$267 $269
$303
$278
Q2'16 Q3'16 Q4'16 Q1'17 Q2'17
Current Year Prior Year
$353
+19% +27%
+12%
+14%
+15%
2Q
$348
• Accelerated risk car sales, to rebalance and reduce fleet
• YoY transition to a richer, more preferred vehicle mix drives fleet costs
higher
• Outlook for FY17 core residual decline remains at 3.5% YoY
• Greater volume through higher return retail sales channels and lower
model year 2017 vehicle purchase prices (like for like vs. model year
2016) provide partial offset
• Significant industry residual weakness continued in 2Q:17
32
38
$278
Q2’16 Q2’17
$353
13
8Wholesale/
Rebalancing/Other
Richer Fleet Mix
Core Residual
Fleet Acquisition
Cost
13
2Q:17 Worldwide Adjusted Corporate EBITDA Bridge 2Q
39
124
20
2Q’172Q’16
$184
6 $35
U.S. RAC Revenue
Contribution
U.S. RAC Vehicle
Carrying Cost
Contribution
All Other
83% of 2Q:17 year-over-
year adjusted corporate
EBITDA decline
$ in millions
2016 Adverse
Public Liability
and Property
Damage
Fleet Transformation Predicated on Optimizing Fleet Mix and Capacity
14
2Q:17 International RAC 2Q
• 2Q:17 revenue increased 1%, or 4% YoY excluding foreign exchange
- Transaction days increased 6% benefitting from Easter calendar shift and strong leisure performance in
Europe
- Total RPD declined 1% due to the continuing growth of our value brands
• Vehicle utilization was 78%, 120 bps higher YoY
• Monthly depreciation per unit increased 2% YoY
• Direct vehicle and operating decreased by 6% YoY, 2% excluding foreign exchange
• Adjusted corporate EBITDA margin improved 380 bps YoY primarily related to an unanticipated charge to
insurance reserves for $20 million in 2Q:16 that did not reoccur due to actions taken to reduce risk profile
15
LIQUIDITY / BALANCE SHEET
OVERVIEW
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
16
Senior RCF Facility Size $1,550
Letters of Credit (791)
Borrowings (750)
Available under Senior RCF 9
Unrestricted Cash 1,141
Corporate Liquidity $1,150
Liquidity and Debt Overview
Corporate Liquidity at June 30, 2017
• Extended maturity structure during 2Q:17
− 2nd lien bond issued in June totaling $1.25 billion with 2022 maturity
− Redeemed $250 million 4.25% Notes due 2018
• Terminated $150 million of commitments under Senior RCF
• $834 million of 2nd lien bond proceeds remain to repay corporate debt
• Non- Vehicle debt maturities through YE 2018 limited to $11 million
$ in millions
17
Corporate Debt Maturity Profile Is Well Laddered
June 30, 2017 Hertz Global Non-Vehicle Debt maturity Profile1,2
1Excludes $27 million of Promissory Notes due 2028 and $9 million of capital leases.
2$791 million of letters of credit outstanding under the Senior RCF resulting in approximately $9 million of available borrowing
capacity
$750
$4 $7
$655
$1,250
$450
$700
$500
$500
$800
2017 2018 2019 2020 2021 2022 2023 2024
Senior RCF Term Loan Senior Second Priority Secured Notes Senior Notes
$7
$7
$7
$7
$ in millions
18
First Lien Financial Maintenance Covenant
Consolidated First Lien Leverage Ratio as of June 30, 2017 was 2.56x and was calculated as follows:
• Unrestricted cash is capped at $500 million; cap falls away post December 31, 2017 once Gross Corporate Leverage is equal to
or less than 6.0x for two consecutive quarters
• Restricted ability to undertake share repurchases or pay dividends until net corporate debt leverage ratio is below 4.0x for two
consecutive quarters
• Other adjustments per credit agreement include derivative gains/losses, unrealized gains/losses on intercompany loan
revaluation and equity method income and other one time or unusual items
Our Consolidated First Lien Leverage Ratio is tested each quarter and must not exceed the
thresholds outlined below:
Senior RCF Facility Size $1,550M
Outstanding Letters of Credit - 791
Term Loan Outstanding + 693
Unrestricted Cash - 500
First Lien Secured Net Debt 952
TTM Adjusted Corporate EBITDA1 / 372
First Lien Leverage Ratio 2.56X
1 TTM Adjusted Corporate EBITDA defined as $266M Reported LTM Adjusted Corporate EBIDTA + $106 million
Other Adjustments as per Credit Agreement
2Q’17-3Q’17 4Q’17+
3.25X 3.0X
19
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
3rd QUARTER OUTLOOK
20
3Q:17 OUTLOOK 3Q
U.S. RAC Trends Encouraging
• Fleet – capacity optimal, less pressure on fleet costs
− Reduced number of units sold wholesale
− Lower model year 2017 vehicle purchase prices (like for like vs. model year 2016)
• July total RPD expected to increase approximately 3% YoY
• July transaction days estimated to decrease by approximately 4% to capture higher quality revenue
• August early indications suggest trends similar to July, but with only approximately 55% of reservations booked,
less clear
• September is expected to be seasonally weaker
International RAC Stable
• Recent terrorist events do not seem to have impacted European reservation trends
21
Q&A