Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Q4 2010 Earnings Presentation
53 slides from Hertz Global's earnings presentation, Feb 25, 2011
Slide 1: 4Q and 2010 Earnings Call
4Q and 2010 Earnings Call February 23, 2011 10:00 am ET Dial in: (866) 233-3843 (US) (651) 224-7472 (International) Passcode: 190758
Slide 2: Safe Harbor Statement
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 uncertaintie
Slide 3: Non-GAAP Measures
Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation. The following non-GAAP measures will be used in the presentation: Non-GAAP Measures EBITDA Corporate EBITDA Adjusted Pre-Tax Income Adjusted Net Income Adjusted Diluted Earnings Per Share Net Corp
Slide 4: Today's Agenda
2 Year Trend 2008-2010 2010 Review Mark Frissora, Chairman and CEO Financial & Operating Results Overview Elyse Douglas, Executive VP and CFO Outlook & Guidance Mark Frissora, Chairman and CEO Questions & Answers Session Today’s Agenda
Slide 5: Opening Comments
Opening Comments
Slide 6: 2008-2010 Milestones Toward Recovery
2008-2010 Milestones Toward Recovery Consolidated revenue +6.5% in 2010 vs decline of 16.7% in 2009 US RAC -1.5% over the two-year period from -10.0% 2009 vs. 2008 Consolidated adjusted direct operating and SG&A expenses down 11% each US RAC fleet efficiency +177 basis points vs. 2008 Consolidated a
Slide 7: 2010 Review
Outperformed all guidance metrics for adjusted earnings 2010 revenue in line with guidance, +6.5% YoY Increased Efficiency and Productivity Lean/Six Sigma “Lighthouse” major airport locations & HERC branches 2010 completed = NA RAC:13, Europe RAC: 2, HERC: 3 2011 planned = NA RAC: 20, International
Slide 8: 2010 Cost Savings
2010 COST SAVINGS $438mm total cost savings through multiple initiatives, i.e. Lean/Six Sigma Consolidated revenue per employee +6.6% over 2009; +28.6% vs. 2006 WW RAC fleet efficiency +23 basis points WW RAC depreciation per month per vehicle decreased 8.2% Improved consolidated adjusted pre-tax in
Slide 9: Capital Structure
CAPITAL STRUCTURE Successfully refinanced U.S. fleet debt Blended interest rate on fixed-rate notes ~50 bps lower Blended interest margin on floating-rate notes ~1.6% lower European fleet debt new funding in place Successfully completed refinancing, despite volatile credit markets in E.U. last summe
Slide 10: 2010 RAC Growth Initiatives
Worldwide Advantage brand revenue +$90 million YoY to $140 million 21 locations added in 2010; Total: 46 locations and 14 affiliates worldwide U.S. Off Airport (OAP) – leisure, local business, monthly, insurance replacement Opened 230 net new locations; Total locations =1,928 Total OAP revenue +13.0
Slide 11: 2010 U.S. RAC Performance
2010 U.S. RAC Performance Cost Savings Driving Profit Growth Over 2007 2010 Peak 2007 change Revenue $4,292.4 $4,566.2 -6.0% $ in millions Revenue +9.4% vs. 2009, but still down from 2007 peak 2010 adj. pre-tax profit margin 230 basis points higher than 2007 pre-recession high of 9.3% Adjusted pre-t
Slide 12: 2010 HERC Growth Initiatives
2010 HERC Growth Initiatives Equipment rental recovery jump started by new and resurrected industrial projects Q3:10 marked turnaround; 1st time revenue and volume up YoY since down cycle began Executing roll-up acquisition strategy to build position in industrial market, expand geographic coverage
Slide 13: 2010 Performance
2010 Performance
Slide 14: FY:10 Consolidated Financial Results
Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation. FY:10 Consolidated Financial Results GAAP FY 10 FY 09 $ Change Revenue $7,562.5 $7,101.5 + $461.0 Loss before income taxes ($13.6) ($171.0) + $157.4 Net loss attributable to HGH ($48.0) ($126.0) +
Slide 15: U.S. Rent-A-Car FY RPD Incl. Ancillary Sales
U.S. Rent-A-Car* FY RPD Incl. Ancillary Sales Revenue Per Day (RPD) Reported RPD — time, mileage, insurance products Ancillary product/services - roadside SVC, Neverlost, parking, tolls, etc. Fuel Services Fully Loaded RPD FY:10 FY:09 %∆ $42.64 $42.36 +0.7% $5.29 $5.04 $2.27 $2.04 $50.20 $49.44 +1.5
Slide 16: FY:10 U.S. RAC Operating Performance
FY:10 U.S. RAC Operating Performance Fleet efficiency in line with 2009 at 79.5% 8.7% more fleet Monthly depreciation per car down 8.9% YoY Used-car residual values strong Net Promoter Score increased 490 bps to 51.1 YoY Adjusted pre-tax income improved 30.2% YoY Adjusted pre-tax margin +190bps Corp
Slide 17: FY:10 Europe RAC Performance
FY:10 Europe RAC Performance Total revenue increased 1.8%, but up 7.1% excl. FX driven by: 4.1% higher volumes and 3.3% longer average rental length Improved revenue per day 1.4% vs. FY:09 9.4% YoY improvement in monthly fleet depreciation per unit Increased revenue per employee by 8.7% Adjusted pre
Slide 18: FY:10 Rental Car Fleet Mix
FY:10 Rental Car Fleet Mix 2010 2009 U.S. Risk % 72% 67% Europe Risk % 61% 65% Worldwide Risk % 72% 68% As of December 31,
Slide 19: FY:10 Remarketing Strategy
Increasing use of non-auction sales channels U.S. auction sales 58% of total FY:10 down from 85% in FY07 Dealer-direct now 20% of all U.S. risk car sales, up from 2% in FY07 Retail / online auction/ Rent2buy - cars on rent up until the day purchased Plan to be licensed in 37 states by September 2011
Slide 20: HERC FY:10 – Turnaround Begins
HERC FY:10 – Turnaround Begins Revenue down 3.7% FY:10 1.7% decrease in volume YoY 4.2% decrease in pricing YoY Time utilization* +210 bps to 59.3% vs. FY:09 Adjusted pre-tax income +2.1% YoY; margin improvement 40 bps Corporate EBITDA margin of 37.5% FY:10 *Time utilization: Calculated on unit aver
Slide 21: FY:10 HERC Peer Comparison
FY:10 HERC Peer Comparison 3-Yr Pricing Performance ‘07-’10 YoY Pricing Performance
Slide 22: Q4:10 Results, Balance Sheet and Cash Flow Review
Elyse Douglas CFO Q4:10 Results Balance Sheet Review Cash Flow Review
Slide 23: Q4:10 Consolidated Financial Results
Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation. Q4:10 Consolidated Financial Results GAAP Q4 10 Q4 09 $ Change Revenue $1,835.8 $1,740.7 + $95.1 Loss before income taxes ($7.8) ($67.4) + $59.6 Net loss attributable to HGH ($29.2) ($30.9) + $1.7
Slide 24: Rent-A-Car Metrics: Q4:10 vs. Q4:09
Rent-A-Car Metrics: Q4:10 vs. Q4:09 % of WW RAC total revenue Q4:10 vs. Q4:09 Total Revenue Rental Rate Revenue* Revenue Per Day (RPD) Trans. Days Revenue Per Transaction Transactions Trans Length (days) 66% U.S. (Hertz + Advantage) 6.1% 5.1% -1.5% 6.7% 1.2% 3.9% 2.7% U.S. (Hertz Classic) 4.5% 3.7%
Slide 25: U.S. Rent-A-Car Q4 RPD Incl. Ancillary Sales
U.S. Rent-A-Car* Q4 RPD Incl. Ancillary Sales *Excludes impact of Advantage
Slide 26: Q4:10 U.S. RAC Operating Performance
Q4:10 U.S. RAC Operating Performance Total expenses down YoY as % of revenues Monthly depreciation per vehicle down 6.4% vs. Q4:07 Used-car residual values remain strong Q4 improved over Q3:10 due to seasonal decline in more expensive vehicles Adjusted pre-tax income improved 36.9% YoY Adjusted pre-
Slide 27: Worldwide RAC Fleet Efficiency
Worldwide RAC Fleet Efficiency Fleet efficiency: % of days car is rented compared with avg. number vehicles available to rent. Formula: ((Annualized Transaction Days / 365) / Average Fleet)) Rebound in commercial travel Demand peaks mid-week; rental length typically only 3-4 days Leisure rentals avg
Slide 28: Q4:10 Europe RAC Operating Performance
Q4:10 Europe RAC Operating Performance Total revenue increased 0.2%, but up 7.3% excl. FX driven by: Volumes 6.1% higher, supported by 6.5% longer avg. rental length Revenue per day up slightly vs. Q4:09 at $46.10 6.8% improvement in monthly fleet depreciation per unit Increased revenue per employee
Slide 29: Q4:10 HERC Operating Performance
Q4:10 HERC Operating Performance Revenue increased 4.4% in Q4:10 Sequentially Q4:10 revenue up 1.7% vs. Q3:10 revenue Rental and rental related revenue +5.5% 10.0% increase in volume Q4:10 YoY Volume momentum: Sep +5.4%; Oct +10.2%, Nov +9.6%, Dec +10.5% Depreciation of REE down 3.2% Time utilizatio
Slide 30: Q4:10 HERC Peer Comparison
Q4:10 HERC Peer Comparison 3-Yr Pricing Performance ‘07-’10 YoY Quarterly Pricing Performance
Slide 31: Q4:10 HERC Fleet Statistics
Q4:10 HERC Fleet Statistics WW HERC Fleet Size ($ in millions) WW HERC Fleet ($ in millions) Excludes FX Q4:10 Q4:09 Purchases $114.4 $35.9 Disposals $28.5 $30.9 Disposals $121.0 $53.5 (1st cost basis) FY:10 FY:09 Purchases $302.5 $85.9 Disposals $155.4 $171.5 Disposals $393.2 $397.2 (1st cost basis
Slide 32: 2009-2010 Interest Expense and 2011 Guidance
($ in millions) 2009 2010 2010 Cash Interest Expense Drivers Total Net Cash Interest $492.4 $578.5 Increased Higher fleet debt due to REE growth High yield pre-funding Lower ABS rate buydown benefit Full year impact of convertible debt Decreased Lower overall fleet rates Non-Cash Interest 171.9 182.
Slide 33: Restructuring and Taxes
Restructuring & restructuring-related charges Q4:10 was $14.4mm and $13.6mm in cash vs. Q4:09 $34.5mm and $26.1mm in cash FY:10 was $67.9mm with $47.3mm in cash vs. FY:09 of $153.3mm and $129.1mm in cash Taxes FY:10 GAAP tax expense of $17.0mm vs. benefit of $59.7mm last year Annual adjusted tax rat
Slide 34: Capital Expenditures
Capital Expenditures Estimated 2011 purchases: $200 to $215 million 2011 projects include: Information Technology Legacy systems for back office and operating functions, ERP, Global Planning System, Data Warehouse, and Ariba procurement roll-out (Efficiency) CRM and Rate engine upgrades (Growth) Rep
Slide 35: Q4:10 and Full Year Cash Flow
Improved earnings and working capital Increased fleet purchases for both RAC & HERC Q4:10 & Full Year Cash Flow Fourth Quarter Cash Flow ($ in millions) 2010 2009 $Δ Levered Cash Flow Before Fleet Growth ($30.3) ($45.2) $14.9 Levered Cash Flow After Fleet Growth $410.7 $5.3 $405.4 Full Year Cash Flo
Slide 36: Working Capital Days
Working Capital Days Note: Net working capital days includes non-fleet receivables, HERC fleet receivables, fleet/other payables, inventories, prepaid and accrued liabilities. Receivables include customer receivables, subro receivables, warranty, and other misc. Better Improved performance under dif
Slide 37: Fleet Financing Status
Fleet Financing Status Comment €400M Securitization €220M Revolving Credit Facility €400M Secured Note Refinanced European facilities $184M Series 2009-2 Subordinated ABS Incremental liquidity from existing collateral Hertz’s first ever subordinated rental car ABS $750M Series 2010-1 Senior & Subord
Slide 38: Pro Forma Debt Maturity Profile
Pro Forma Debt Maturity Profile Corporate Debt Fleet Debt Assumes corporate ABL and Term Loan maturing in 2012 are refinanced to 2016 and 2018, respectively. 2016 reflects unfunded ABL amount of $1,800 million. Unfunded ABL Term Loan 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2028 Fleet Debt
Slide 39: Corporate Liquidity
Liquidity would be $1,984 mil when adjusted for the $1,144 mil of high yield notes called in January plus the call premium Liquidity Corporate Liquidity @ 12/31/10 ($ in millions) Actual Pro Forma ABL Availability: $ 796 $796 Unrestricted Cash: 2,374 1,188 Corporate Liquidity: $ 3,170 $1,984 Total n
Slide 40: Covenant Compliance
Full compliance with corporate covenants 4.42x (Max 4.75x) on consolidated leverage ratio 3.50x (Min 2.25x) on interest coverage ratio Leverage ratio of 3.38x, if adjusted for the $1,144 mil of high yield notes called in January Covenant Compliance NOTE: Covenant calculations do not include Converti
Slide 41: 2011 Outlook
2011 Outlook
Slide 42: Risks: Economic Volatility
Risks: Economic Volatility Year Mar Jun Sep Dec 2010 3.70 1.70 2.00 3.20 2009 -4.90 -0.70 1.60 5.00 2008 -0.70 0.60 -4.00 -6.80
Slide 43: Q4:10 Macro Economic Uncertainty
Optimistic 2011 another step closer to 2007 peak Experiencing a multi-year bull stock market Corporations enjoying healthy profit margins Recent tax measures positive Individuals reducing debt burden Cautious view driven by risks in advanced economies Growth remains subdued Household income weak Une
Slide 44: Global Network
Corporate Locations Avg. Fleet YTD 12/31/10 Revenue ($mm ) U.S. 3,696 297,944 $4,292 Canada 127 8,498 $142 Puerto Rico & US VI 20 1,899 $25 Latin America 48 6,955 $86 Europe 957 109,542 $1,605 AU & NZ & China 94 20,363 $336 Sub-total Corporate 4,942 445,201 $6,486 Franchise Locations Avg. Fleet YTD
Slide 45: 3 Year Goals: 2010 – 2013
3 Year Goals: 2010 – 2013 Leverage global brands, market position and investment to drive revenue growth Drive cost efficiencies to leverage earnings growth Utilize cash flow to deleverage 3 Year Goals Revenue Growth 7%-8% Fleet Cost % of Revenue 25%-26% OpEx & SG&A % of Revenue 60%-61% Corp. Intere
Slide 46: Revenue Guidance
Total Revenue: $7.95 to $8.1 bln RAC expectation is for: Advantage / off-airport grow through broader network, higher market share Expansion on-airport: more trans. days, longer rentals Industry est. another 6% increase inbound travel demand to the U.S. HERC expectation is for: 10% volume growth wit
Slide 47: 2011 Adjusted Pre-Tax Guidance
Adj. pre-tax income of $525 million to $565 million Higher revenue and better cost mgmt will spur 62% increase YoY Cost management expectation: Global advertising costs +22%, as a percent of revenue is roughly 2.1% compared with 2010’s 1.8% level and 2009’s 1.6% ratio $25 - $35 million of higher inc
Slide 48: 2011 Sensitivity to Adjusted Pre-tax Income
2011 Sensitivity to Adjusted Pre-tax Income 1 Percent change over FY:10 21.0% of total cost base excluding net depreciation Upside in volume and pricing in WW RAC and in global cost efficiencies Approximate Guidance Assumptions 2011 Pre-Tax Opportunity with 1% Improvement1 WWRAC Pricing -1% to 0% $5
Slide 49: 2011 Corporate EBITDA Guidance
Expect to generate 15-18% higher Corporate EBITDA of $1.265 billion to $1.305 billion For equipment rental specifically: Expect 42% Corporate EBITDA margin FY:11, weighted to back-half Double-digit revenue growth Scheduled return to normalized maintenance costs 2011 Corporate EBITDA Guidance
Slide 50: 2011 Adjusted Net Income Guidance
Forecast adjusted net income of $330mm - $355mm Quarterly share count will vary Volatility results from standard accounting rule: When GAAP net income is positive, potential exercise of options and impact of convertible debt is included in fully diluted share count If GAAP net loss, rule does not ap
Slide 51: Example Share Count Calculation
Example Share Count Calculation Q1 Q2 Q3 Q4 2011 Basic Shares at Dec. 31, 2010 413.5 413.5 413.5 413.5 413.5 Dilutive Shares: Convertible Debt 0.0 25.6 25.6 25.6 19.2 Options, RSU, PSU 0.0 9.6 9.6 9.6 7.2 Total Diluted Shares 413.5 448.7 448.7 448.7 439.9 Assumptions: stock price at $15 per share; Q
Slide 52: FY 2011 Financial Guidance
Total Revenue: $7.95 to $8.1 bln 7% Adjusted pre-tax income: $525 to $565mln 62% Reduction in WW monthly depreciation per car -4% Corporate EBITDA: $1.265 to $1.305 bln 19% Adjusted Net Income: $330 to $355 million 67% FY 2011 Financial Guidance YoY Increase* *Based on high end of range
Slide 53: Q1:11 Outlook
U.S. & Europe RAC In U.S. RAC: Higher fleet capacity from addressing typical peak demand during week between Christmas and New Year’s -- Timing issue Impacted by winter storms across country, resulting in reservation cancellations and pricing pressure Now seeing demand bounce back as customers reboo
Hertz Global Holdings — Q4 2010 Earnings Presentation on 6ix