Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Q2 2010 Earnings Presentation
28 slides from Hertz Global's earnings presentation, Aug 9, 2010
Slide 1: 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 uncertainties subject to inheren
Slide 2: Non-GAAP Measures
Non-GAAP Measures The following non-GAAP measures will be used in the presentation: EBITDA Corporate EBITDA Adjusted Interest Expense Adjusted DOE Adjusted Pre-Tax Income Net Income Adjusted SGA Adjusted Adjusted Diluted Earnings Per Share Adjusted Depreciation of REE Total Net Cash Flow Net Corpora
Slide 3: Today's Agenda
Today’s Agenda Industry & Strategic Overview y g Mark Frissora, Chairman and CEO Financial & Operating Results Overview El D l E ti d Elyse Douglas, Executive VP and CFO O & G Outlook Guidance Mark Frissora, Chairman and CEO Questions & Answers Session 4
Slide 4: Q2:10 Opening Remarks
Q2:10 Opening Remarks Strong results in 2Q:10 reflect success of growth and efficiency g Q g y strategies. example: Best Achieved record adjusted pre-tax earnings in largest operation, U S t l U.S. rental car. Q2:10 vs. Q2:07 U.S. rental car generated $32.5 million of higher adjusted pre-tax income
Slide 5: U.S. RAC Record 2Q:10 Adj. Pre-tax Profit
U.S. RAC Record 2Q:10 Adj. Pre-tax Profit 2Q10 vs. Q207: Successful Growth & Efficiency Strategy Peak $ in millions Q2:10 Q2:07 change Revenue $1,072.4 $1,152.6 -700bps Adjusted Pretax Margin +350bps 6
Slide 6: Q2:10 Consolidated Highlights
Q2:10 Consolidated Highlights Adjusted pre-tax income up 18.1% and margin up 50 bps, despite 1x compensation benefit last year, higher adjusted interest expense and an impact of nearly $2 million from unfavorable FX rates. Corporate EBITDA flat; but up nearly 13.3% excl. 1x ’09 compensation benefit
Slide 7: Q2:10 Consolidated Highlights: Expenses
Q2:10 Consolidated Highlights Adjusted up 10.8% g g direct operating and SG&A expenses Reversal of 1x compensation benefit from Q2:09 represented $32mm of yoy higher expenses in Q2:10 Excluding incremental costs this negative impact and advertising costs, adj. DOE and SG&A were up 7.5%, in line with
Slide 8: Efficiency Cost Savings
Efficiency Cost Savings Efficiency & cost management program continues Cost savings of $142.0 million achieved through Q2 efficiency programs Revising guidance for FY10 to $380mm from $300mm Process improvement program continues to roll out at major airports 2H:10 launching Lean Six Sigma at 7 U.S.
Slide 9: Q2:10 U.S. RAC Total Revenue +10.1% YoY
Q2:10 U.S. RAC Total Revenue +10.1% YoY On-Airport 75.4% of U.S. RAC Revenue Off-Airport 24.6% of U.S. RAC Revenue U.S. RAC Growth Drivers Q2:10 vs. Q2:09 Rev. +$98.7 million % of total increase 12.4% 303.1% 13.7% 14% ) 22.1% 8% 10% 12% Revenue Advantage $21.8 in millions) 32.1% 2% 4% 6% Change in T
Slide 10: Q2:10 U.S. Rent-A-Car RPD
Q2:10 U.S. Rent-A-Car RPD up yoy in Off Airport On Airport Commercial has annual contracted rates; competitive pricing pressure Leisure pricing weak in May/June; industry fleeting for peak season; no Easter benefit US RAC* RPD: -0.4% Trans Days: +7.0% On Airport* RPD: -1.1% Off Airport RPD: + 2.8% T
Slide 11: Q2:10 U.S. RAC Operating Performance
Q2:10 U.S. RAC Operating Performance Fleet efficiency in line with Q2:09 at 80.6% 10.8% more fleet Return of 3-4 day mid-week corporate renter Monthly depreciation per car down 13.5% yoy Used-car residual values seasonal stable at normal, levels Net Promoters Score rises 770 bps Airport market share
Slide 12: Europe Rent-A-Car
Europe Rent-A-Car Q2:10 revenue up 2.3%, excluding currency translation revenue up 9.6% 6% 2007 Revenue still below level RPD +3.9% Transaction Days +4.8% Icelandic Volcano: flight cancellations reduced volume, but walk-ins and one-way fees offset Continued weakness in market for trucks/vans Adjuste
Slide 13: Hertz Equipment Rental (HERC)
Hertz Equipment Rental (HERC) Demand improving sequentially Drivers: petro-chem in Canada; infrastructure in SE and Gulf clean up Pricing down 6.1% yoy vs. 7.4% in Q2:09 and 8% in Q1:10 Pricing stabilizing Corporate EBITDA margin 35.5% Q2:10 vs. 33.8% Q1:10 34% higher maintenance expense yoy to read
Slide 14: Growth Drivers
Growth Drivers Connect by Hertz – hourly / urban 7 new universities added in Q2, now available at 45 schools Membership now exceeds 18,000, +400% during promo campaign Advantage Rent-A-Car – spartan leisure offering ~$160 million annual run rate revenue over next 12 months (acquired 4/09) 31 airport
Slide 15: Consolidated Financial Results
Consolidated Financial Results ($ in millions, except per share calculations) GAAP Q2 10 Q2 09 $ Change Revenue $1,879.6 $1,754.5 + $125.1 Pre-Tax Income / (Loss) ($6.2) $30.7 - ($36.9) Net Income / (Loss) ($25.1) $3.9 - ($29.0) Diluted Earnings / (Loss) per Share ($0.06) $0.01 - ($0.07) Net Cash Pr
Slide 16: Rent-A-Car Metrics
Rent-A-Car Metrics % of WW Q2:10 vs. Q2 09 Total Rental Rate Revenue Per Day Trans. Revenue Per Trans Length revenue Q209:Revenue Revenue* (RPD) Days Transaction Transactions (days) 66% U.S.** 10.1% 8.8% (1.2%) 10.1% 0.3% 8.5% 1.5% 24% Europe 9.6% 8.8% 3.9% 4.8% 6.0% 2.7% 2.1% 10% Other Int’l 9.0% 8
Slide 17: Q2:10 WW Rent-A-Car Fleet Efficiency
Q2:10 WW Rent-A-Car Fleet Efficiency Worldwide RAC Fleet Efficiency More diverse revenue stream y Rental 78.7% 80.6% 75 0% 79.4% 81.2% 76.1% 100.00% Q2 10 Q2 09 length increased 1.7% • Return of corporate traveler 75.0% - shorter rental length per transaction: 3-4 days • Leisure rental 4.5 50.00% ty
Slide 18: Rent-A-Car Fleet Depreciation
Rent-A-Car Fleet Depreciation Worldwide monthly rental car net depreciation continues to improve Q2:10: 11.6% yoy p down U.S. Q2:10 monthly net depreciation per car down 13.5% yoy 2.3% below 2007 pre-recession levels Europe’s monthly net depreciation per car improved 8.1% in Q2:10 yoy Stabilizing, b
Slide 19: HERC 2-Yr Quarterly Pricing Performance
Hertz Equipment Rental ( HERC) q p ) 2-Yr Quarterly Pricing Performance ‘09-’10 Q1 Q2 Quarterly Pricing Performance 2010 YoY HERC RSC URI -4.0% -2.0% 0.0% 2 0% 4 0% -2.0% 0.0% -12.0% -10.0% -8.0% -6.0% -6.1% -8.4% -2.0% -7.4% -7.7% 10 0% -8.0% -6.0% -4.0% Q2:10 Q2:09 -12.3% -13.9% -14.0% -16.1% -18.
Slide 20: HERC Residuals at auction are stabilizing
Hertz Equipment Rental ( HERC) Residuals at auction are stabilizing q p ) g (May ‘10 OLV Rouse Data): 59.6%, +3.7pts since YE09 A fl t th 1 5 th f Q1 Average fleet age: 48 months, +1.5 month from Q1:10 Higher maintenance expenses incurred to ready fleet for recent demand Purchase new equipment selec
Slide 21: HERC Fleet Statistics
HERC Fleet Statistics WW HERC Fleet Size WW HERC Fleet Change ( net book value basis) $2,841.7 $2,833.7 $ 2,830.0 $2 780 0 $3,000.0 ($ in millions) At Actual FX Rates C eet C a ge et boo a ue bas s) ($ in millions) At Constant FX Rates Q2 10 Q2 09 , , 2,780.0 $2,703.7 $1,945.4 $1,893.1 $2,500.0 Begi
Slide 22: 2010 Financing Update
2010 FINANCING UPDATE Financing Status Comment EUR 400M France/Netherlands Closed Cl d Securitization Refinanced a portion of existing International ABS Facility EUR400M Secured Note; 80% adv. rate Closed Closed Closed Refinanced International Bridge Facility EUR220M Super Senior Secured Revolving C
Slide 23: Cash Flow
Cash Flow Cash Flow from Operations: $749.4 million, +45.8% yoy 145 7 vs 154 3) Q2:10 Levered Cash Flow: $145.7 million vs. ($154.3) million in Q2:09 – historically a cash user in Q2 Net working capital days at June 30, 2010, improved 25.7% g p y p Executed fewer acquisitions in Q2:10 vs Q2:09 Lower
Slide 24: Interest Expense | Restructuring | Taxes
Interest Expense | Restructuring | Taxes Interest expense, net of interest income, +$19.3 million Q2:10 vs. prior year Higher fleet on debt levels and full quarter impact of interest convertible FY10 now expect incremental interest expense to be only $75-$85 million yoy due to betterthan- expected t
Slide 25: Covenant Compliance
Covenant Compliance Full compliance with corporate covenants 3.54x (Max 5.25x) on consolidated leverage ratio 3.40x (Min 2.00x) on interest coverage ratio Corporate Debt Covenants 2010 - 2012 Q2 Q3 Q4 Leverage Ratio (Max) 5.25x 5.25x 4.75x Interest Coverage Ratio (Min) 2.00x 2.00x 2.25x NOTE: Covena
Slide 26: Q3:10 Outlook
Q3:10 Outlook U.S. RAC Summer price increases offset gap from last year’s peak leisure pricing Domestic, seasonal leisure demand in July / August = low double-digit expansion Expect record adjusted pre tax income pre-levels for rest of year EUROPE RAC Expect Europe rental car to capture high single-
Slide 27: Guidance Affirmation
Guidance Affirmation Total bln Revenue: $7.5 to $7.7 Adjusted pre-tax mln income: $290 to $305 WW RAC net depreciation per vehicle assumption improves to -6% -7% to EBITDA: $1.080 to $1.095 bln Corporate Adjusted EPS: $0.43 to $0.45 Based on full year adjusted diluted share count of 410 million in 2
Slide 28: 2nd Half 2010 Sensitivity to Adj. Pre-tax Income
2nd Half 2010 Sensitivity to Adj. Pre-tax Income Adjusted Pre-tax Impact ($mil) of 1.0% Change WW RAC •Pricing $ •Volume (Days) •Net Depr. Per unit 27.0 10.0 8.5 WW HERC •Pricing 4.5 •Volume 1.5 Cost Efficiencies 27.0 Total Sensitivity per 1.0% improvement $78.5 1) 1) 1.0% of total cost base excludi
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