Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Q3 2011 Earnings Presentation
33 slides from Hertz Global's earnings presentation, Nov 7, 2011
Slide 1: 3Q 2011 Earnings Call
3Q 2011 Earnings Call November 2, 2011 10:00 am ET Dial in: (800) 230-1074 (US) (612) 288-0329 (International) Passcode: 220468 Replay available until November 16: (800) 475-6701; (320) 365-3844 international passcode: 220468
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 (Adjuste
Slide 4: Today's Agenda
Third Quarter 2011 Results Mark Frissora, Chairman and CEO Financial 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: Third Quarter 2011 Snapshot
C Third Quarter 2011 Snapshot GAAP Q3:11 Results Q3:10 Results YoY Change Revenue $2,432.3 $2,186.3 11.3% Income before income taxes $295.7 $156.1 89.4% Diluted earnings per share $0.47 $0.36 30.6% Diluted shares outstanding 440.9 430.4 2.4% Non-GAAP* Corporate EBITDA $525.7 $435.1 20.8% Adjusted Pr
Slide 7: Q3:11 Highlights – WW HERC
Q3:11 Highlights – WW HERC Corp. EBITDA +20% YoY; margin +210 bps Revenue +14.4% = price +3.4%; volume +9.9% Time utilization +470 basis points At ~75% of planned buy for 2011 YTD Q3:11 HERC Purchases % of Total YTD Buy
Slide 8: Q3:11 Highlights
U.S. RAC adj. pre-tax income +28.4%; incr. revenue flow-through 86% Lean/Six Sigma programs in place at 6 additional airports Unit depreciation -19%: procurement, fleet rotation, mkt values, remarketing EU RAC: won new accounts & re-signed ~70 accounts, of which 90% reflected price increase (2nd con
Slide 9: Q3:11 Headwinds
EU operations under macro economic pressure Revenue +4%, excl. FX RPD affected by weak leisure demand, longer transactions, mix shift toward Advantage Excl. Advantage, RPD down 2.8% U.S. RAC industry overfleeted Due to Q3:11 fleet order uncertainty; held fleet Q2:11 ~60-90 days to de-fleet w/o dilut
Slide 10: Q3:11 U.S. RAC Total Revenue
Q3:11 U.S. RAC Total Revenue +5.3% YoY Rev. +$65.2 million Total Revenue ($ in millions) 14.6% 55.2% 30.2% % of total increase Airport Advantage Off-Airport % Change in Total Revenue On-Airport 72.3% of U.S. RAC Revenue Off-Airport 27.7% of U.S. RAC Revenue RPD * $55.74 $38.40 $38.08 Trans Days +8.9
Slide 11: U.S. Rent-A-Car RPD Incl. Ancillary Sales
U.S. Rent-A-Car RPD Incl. Ancillary Sales Tough YoY Comparison HTZ Peer A Peer B RPD* Q3:10 vs. Q3:09 +2.3% (3.7%) +0.2% *Fully loaded
Slide 12: Q3:11 Off-Airport Mix YoY
Q3:11 Off-Airport Mix YoY Volume Growth Business Leisure Insurance Replacement Avg. Rental Length Business Leisure Insurance Replacement Business/Leisure _ Insurance Replacement Adjusted PreTax Margin 2009 2010 LrMas:tt
Slide 13: U.S. RAC Monthly Depreciation p/Unit
U.S. RAC Monthly Depreciation p/Unit
Slide 14: Used-car off-lease supply expected to continue declining through 2013
Used-car market’s off-lease supply expected to continue declining through 2013 Tightens used-car supply in 1-3 year old car class Drives residual values higher In Millions of Units Source: Manheim 2011 Used Car Market Report U.S. Off-Lease Volumes 2015 estimate still 13% below 2011 level U.S. RAC Re
Slide 15: Q3:11 U.S. Remarketing Strategy
A 10% shift, wholesale to retail, reduces depreciation expense $12M Q3:11 U.S. Remarketing Strategy Reduces cost of sales, improves sale price, keeps cars on rent longer Growing into Higher-Return Resale Channels (Net Gain vs. Auction) % of Total Hertz Vehicle Sales
Slide 16: U.S. RAC Depreciation FY:2011E
U.S. RAC Depreciation FY:2011E Sources of Depreciation per Unit Savings 2011E as % of Total
Slide 17: Financial Overview
Elyse Douglas CFO Financial Results Cash Flow Review Balance Sheet Review
Slide 18: Q3:11 Consolidated Financial Results
* Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation. Q3:11 Consolidated Financial Results GAAP Q3:11 Q3:10 $ Change YTD Q3:11 YTD Q3:10 $ Change Revenue $2,432.3 $2,186.3 + $246.0 $6,284.6 $5,726.8 + $557.8 Income (loss) before income taxes $295.7
Slide 19: Q3:11 Consolidated Performance
Q3:11 Consolidated Performance ($ in millions) Q3:11 Q3:10 % chg Revenues $2,432.3 $2,186.3 11.3% Reported DOE: Fleet related $318.5 $284.3 Personnel related $378.4 $353.0 7.2% Other $550.7 $522.3 5.4% Total DOE $1,247.6 $1,159.6 % of revenue 51.2% 53.0% LTM 2011* YoY U.S RAC +2.0% EU RAC +4.5% WW H
Slide 20: Rent-A-Car Metrics: Q3:11 vs. Q3:10
Rent-A-Car Metrics: Q3:11 vs. Q3:10 % of WW RAC total revenue Q3:11 vs. Q3:10 Total Revenue Rental Rate Revenue* Revenue Per Day (RPD) Trans. Days Revenue Per Transaction Transactions Trans Length (days) 61% U.S. (Hertz + Advantage) 5.3% 4.9% -6.3% 11.9% -2.0% 7.0% 4.6% U.S. (Hertz Classic) 4.7% 4.4
Slide 21: Worldwide Rent A Car Q3:11
Worldwide Rent A Car Q3:11 WW RAC = 87% of total company revenue Q3:11 WW RAC total revenue: ~$2.1 billion Unit Fleet Mix 9/30/11 9/30/10 U.S. Risk% 70% 64% Europe Risk% 55% 51% WW Risk % 67% 62% Strategically increasing U.S. mix of risk vehicles to capitalize on more profitable resale channels As o
Slide 22: RAC Growth Drivers
U.S. Off Airport (OAP) – leisure, local business, monthly, insurance replacement Opened 54 net new locations Total locations = 2,088; +10.5% YoY Total OAP revenue +11.2%; same-store-revenue up 8.6% Low-cost infrastructure, minimum overhead, more economical vehicles, and longer-length rentals Worldwi
Slide 23: HERC Growth Initiatives
HERC Growth Initiatives Equipment rental recovery continues to be led by industrial penetration HERC N.A. industrial revenue +16.2% Q3:11 YoY Executing roll-up acquisition strategy to build position in industrial market, expand geographic coverage and develop new revenue streams Acquired WGI Rentals
Slide 24: Equipment Rental Pricing Calculations
Equipment Rental Pricing Calculations HERTZ Equipment Rental Competitor A Base fleet identified using current calendar year and prior calendar year Normalizes fleet mix & impact Average realized rates for 3 rate segments calculated separately (Month, Week, Day) Weighted average rate index created us
Slide 25: Equipment Rental Residual Values
Equipment Rental Residual Values Industry residual values improving Retail values 1,130 bps above trough; 350 bps below same-period 2007 HERC sales channels Q3:11= retail 36%; auction 30%; wholesale 22%; manufacturer buyback 12% Fair Market Value (Retail) Fair Liquidation Value (Auction) Source: Rou
Slide 26: Q3:11 HERC Fleet Statistics
Q3:11 HERC Fleet Statistics ($ in millions) WW HERC Fleet – Cash Basis ** ($ in millions) Excludes FX Q3:11 Q3:10 Fleet Expenditures $157.0 $46.7 Disposal Proceeds $52.6 $35.8 Net Capital Expenditures $104.4 $10.9 (cash basis) ** Above amounts are on a cash flow basis, consistent with our GAAP state
Slide 27: Interest | Restructuring | Taxes
Interest Expense Q3:11 of $169.3M was $32.9mil below Q3:10 Cash interest down $7.5M– positive impact of refinancing partially offset by expired benefit from ABS buydown Non-cash interest down $25.4M YoY (Q3:11=$21M) primarily due to 2010 expiration of ABS buydown FY:11 cash interest expected to be d
Slide 28: Third Quarter Cash Flow
Q3:11 Changes vs. Q3:10 $177 million Donlen acquisition $ 94 million cash outlays in HERC fleet investment $ 281 million related to RAC fleet, mostly timing of fleet receivables Cash Flow Third Quarter Cash Flow ($ in millions) Q3:11 Q3:10 $ Net Cash Provided by Operating Activities $961.6 $713.3 $2
Slide 29: 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 Needs update Working Capital Q
Slide 30: Capital Structure Improved
Capital Structure Improved Closed on European ABS Repricing / Extension (August 2011) Extended facility maturity by 1 year to July 2013 Reduced drawn margin by 87.5 bps and undrawn by 35 bps Increased advance rate by ~10 pts Established $850M 1 year conduit to finance Donlen until permanent financin
Slide 31: Liquidity at $1.2 billion
Liquidity at $1.2 billion Liquidity & Debt Corporate Liquidity @ 9/30/11 ($ in millions) ABL Availability: $ 786 Unrestricted Cash: 386 Corporate Liquidity: $1,172 Total net corporate debt $4.4 billion Total net fleet debt $7.3 billion
Slide 32: Outlook
E OUTLOOK a
Slide 33: Q4:11 Outlook
Q4:11 Outlook U.S. RAC – Holiday season demand looks strong; Upside in residual values; Deploying 150 more kiosks Europe RAC – Commercial pricing; Advantage growth; cost savings initiatives; FX HERC – New fleet capturing higher demand; pricing positive Cash interest expense now estimated down $5M to
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