Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HERTZ GLOBAL HOLDINGS, INC | q32017earnings8-k.htm |
| EX-99.1 - EXHIBIT 99.1 - HERTZ GLOBAL HOLDINGS, INC | q32017pressrelease.htm |
1
3Q 2017 Earnings Call
November 10, 2017
8:00am 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 November 10, 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 Third Quarter 2017 results issued on November 9, 2017, and the Risk Factors and
Forward-Looking Statements sections of the Company’s 2016 Form 10-K filed on March 6, 2017,
and Third Quarter 2017 Quarterly Report on Form 10-Q filed on November 9, 2017. Copies of these
filings are available from the SEC, the Hertz website or the Company’s Investor Relations
Department.
3Q
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 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
Definitions and reconciliations of key metrics and non-GAAP measures are provided in the Company’s third quarter 2017
press release issued on November 9, 2017 and in the Company’s Form 8-K filed on November 9, 2017.
3Q
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.
3Q
5
Progress on Track 3Q
Focus on strategic priorities beginning to pay off, evidence of right path
• Rebalancing fleet capacity, car-class mix and enhancing trim packages has improved product quality
• Rolling out Ultimate Choice program to 47 U.S. locations to-date has resulted in NPS improvement
− Allows customers to choose their preferred vehicle, on site, with no wait
• Enhancing revenue management capabilities has allowed for better rate segmentation and faster
response time
• Building our Global Continuous Improvement program is re-energizing the operations to support
efficiency and customer service
• Bolstering leadership to complement existing talent and ensure breadth of knowledge and expertise
More investment, more work to do to optimize outcomes
6
Quarterly Overview
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
7
3Q:17 Consolidated Results
GAAP
3Q:17
Results
3Q:16
Results
YoY
Change
Revenue $2,572M $2,542M 1%
Income (loss) from continuing operations
before income taxes
$143M $108M 32%
Net Income (loss) from continuing operations $93M $44M 111%
Diluted earnings (loss) per share from
continuing operations
$1.12 $0.52 115%
Weighted Average Shares outstanding: Diluted 83M 85M
Non-GAAP
Adjusted corporate EBITDA $321M $329M (2)%
Adjusted corporate EBITDA margin 12% 13% (46 bps)
Adjusted pre-tax income (loss) $188M $212M (11)%
Adjusted net income (loss) $118M $134M (12)%
Adjusted diluted EPS $1.42 $1.58 (10)%
3Q
8
3Q:17 U.S. RAC Revenue Performance
Revenue Days Total RPD
Vehicle Utilization (bps) Capacity Total RPU
0%
(2%) (2%)(4%)
1%
(4%)
(1%)
1%
(3%)
2%
(1%)
(60) (130)(100)
2%
(2%)
3%
(4%)
1%
(3%)
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.
3Q:17 Performance Drivers
(3%)
(310)
4%
(8%)
(5%) (3%)
(2%)
(1%)
(4%)
(130)
• Revenue negatively impacted by ~$15M from
hurricane business disruption
• Rate
− Ex-ride hailing rentals, total RPD increased 4%
YoY, driven by strategic pricing actions supported
by new revenue management tools and improved
mix of customers and fleet
• Transaction Days
− Volume declined 4% on a tough YoY off-airport
comparison, early cancellations due to hurricane
activity and company strategy to balance service
quality and fleet availability
3Q
9
3Q:17 U.S. RAC Vehicle Utilization
Balancing Customer Service and
Fleet Availability
3Q
• Total Vehicle Utilization was 81% vs. 82% 3Q:16
• Adjusting fleet planning and reservation
management to support both customer service
and utilization
• Completing Ultimate Choice program rollout will
support utilization improvement
10
3Q:17 U.S. RAC Monthly Depreciation Per Unit
$304
$321
$306
$267 $269
$303
$278
$304
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
Current Year Prior Year
+19%
+27%
+14%
+15%
3Q
$348
YEAR OVER YEAR TREND IMPROVING
• Lower Model Year 2017 vehicle purchase prices (like-for-like vs.
MY’16)
• Stabilizing residual values - FY17E core residuals now (2.8%)
YoY vs. previous forecast (3.5%)
• Increased sales through higher return re-marketing channels
• Partially offset by continued transition to a richer, more preferred
vehicle mix
SEQUENTIAL QUARTERLY IMPROVEMENT
• Completion of accelerated fleet dispositions in 2Q:17
• More used car sales through alternative channels: 81% of total
sales 3Q:17 vs. 60% 2Q:17
• Stabilization of market residual values
• Slightly longer hold period to support off-airport and ride-hailing
business, $9 million depreciation impact 2H:17
$353 +1%
11
3Q:17 U.S. RAC Fleet Sales Initiative
28%
39%
33%
3Q:173Q:16
Non-Program Vehicle
Disposition Channel Mix
3Q
Focused on Driving More Sales
Through Alternative Channels
• Used car sales through alternative channels:
− 81% of mix 3Q:17 versus 72% of mix in 3Q:16
• Absolute sales through highest-return retail channel
grew 19% in 3Q:17 YoY
• 10th largest used car operation nationally
• 79 retail used-car lots across the country
• Richer fleet mix supports better rental and residual
return
19%
40%
41%
Auction Retail Dealer Direct
12
3Q:17 U.S. Residual Value Trends 3Q
-3.0%
-3.5% -3.5%
-2.8%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
4Q:16 1Q:17 2Q:17 3Q:17
2017 YoY Residual Value Forecast Trend
-3.8% -3.8%
-3.1%
-2.2%
-2.5%
-4.4%
-2.3%
1.3%
4.4% 4.4%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
2017 Manheim Rental Risk YoY Index Change
Source: Manheim Source: Black Book & Company Data
13
3Q:17 International RAC 3Q
• Revenue increased 7%, or 2% YoY excluding foreign exchange
− Transaction days increased 5%
− Total RPD declined 2%, driven by increase in leisure value brands
• Vehicle utilization was 82%, 90 bps higher YoY as a result of improved efficiencies in fleet management
• Monthly depreciation per unit decreased 1% YoY driven by higher proportion of lower cost program cars
• Direct vehicle and operating expense increased by 4% YoY, flat excluding foreign exchange
• Adjusted corporate EBITDA margin decreased 40 bps YoY
14
LIQUIDITY / BALANCE SHEET OVERVIEW
TOM KENNEDY
CHIEF FINANCIAL OFFICER
Hertz Global Holdings, Inc.
15
Senior RCF Facility Size $1,550
Letters of Credit (786)
Borrowings (120)
Available under Senior RCF 644
Unrestricted Cash 748
Corporate Liquidity $1,392
Liquidity Overview
Corporate Liquidity at September 30, 2017
$ in millions
16
November 2nd Debt Management Actions
• Extended maturities of approximately $5.3 billion1 of global vehicle financing facilities to March 2020
• Issued unconditional redemption notice for $450 million of Senior Notes due 2019
• Amended Senior RCF to permit incremental debt capacity of up to $942 million; new debt must be junior
to first lien debt
− $542 million of capacity immediately available
− Up to incremental $400 million of capacity available if newly executed Letter of Credit Facility for
ordinary course letters of credit is utilized
• Availability under the Letter of Credit Facility requires offsetting termination of Senior RCF
commitments
− Proceeds of new debt may be used for general corporate purposes
• Terminated $383 million of commitments under Senior RCF
− Creating additional headroom on first lien leverage test
− Liquidity neutral as the commitment reduction freed up the equivalent of $383 million of proceeds
from the Senior Second Priority Notes offering for general corporate purposes
1FX Rates as of October 31st, 2017.
17
Maturity of Global Vehicle Financings Successfully Extended
($ in millions) Facility Size1
Commitments
Extended to 3/20201
Vehicle Debt
HVF II Series 2013-A and HVF II Series 2013-B $3,415 $3,415
HFLF Series 2013-2 500 500
European Revolving Credit Facility2 274 178
European Securitization2 536 402
Canadian Securitization 272 272
Australian Securitization 191 191
New Zealand RCF 41 41
U.K. Leveraged Financing 332 282
Total Vehicle Debt $5,561 $5,281
1 Commitments as of November 2, 2017. FX rates as of October 31, 2017.
2 $96 million of the European Revolving Facility, $134 million of the European Securitization and $50 million of the U.K. Leveraged Financing were
not extended but remain committed through January 2019, October 2018 and January 2019, respectively.
18
Corporate Debt Maturity Profile is Well Laddered
Pro Forma September 30, 2017 Hertz Global Non-Vehicle Debt Maturity Profile1,2
1 Pro Forma for pending redemption of $450 million Senior Notes due 2019. Excludes $27 million of Promissory Notes due 2028 and $9 million of
capital leases.
2 Senior RCF is pro forma for reduction of $383 million in commitments effective as of 11/2/17.
$ in millions
$700
$500 $500
$800
$1,250
$4 $14 $14
$618
$1,167
2017 2018 2019 2020 2021 2022 2023 2024
Senior Notes Senior Second Priority Secured Notes Term Loan Senior RCF
$14
$14
$14
19
First Lien Financial Maintenance Covenant
Consolidated First Lien Leverage Ratio as of September 30, 2017 was 2.58x1
Our Consolidated First Lien Leverage Ratio is tested each quarter and must not exceed the
thresholds outlined below:
1 TTM Adjusted Corporate EBITDA defined as $258M Reported LTM Adjusted Corporate EBIDTA + $112 million Other Adjustments as
per Credit Agreement.
2 Pro forma for the reduction in Senior RCF commitments of $383 million as of November 2, 2017.
3Q’17 4Q’17+
3.25X 3.00X
9/30/2017
Commitment
Reduction Pro-Forma2
Senior RCF Facility Size $1,550 M ($383) M $1,167 M
Outstanding Letters of Credit - 786 - 786
Term Loan Outstanding + 691 - 691
Unrestricted Cash - 500 - 500
First Lien Secure Net Debt $955 M - $572 M
TTM Adjusted Corporate EBITDA / 370 - 370
First Lien Leverage Ratio 2.58X 1.55X
20
Q&A