Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Q3 2013 Earnings Presentation
30 slides from Hertz Global's earnings presentation, Nov 6, 2013
Slide 1: 3Q 2013 Earnings Call
3Q 2013 Earnings Call November 5th, 2013 10:00 am ET Dial in: (800) 288-8975 U.S. (612) 332-0335 International Passcode: 305114 Replay available until November 18: (800) 475-6701 U.S. (320) 365-3844 International passcode: 305114
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
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: EBITDA Corporate EBITDA Adjusted Pre-Tax Income Adjusted Net Income Adjusted Diluted Earnings Per Share (Adjuste
Slide 4: Today's Agenda
Overview Mark Frissora, Chairman and CEO Financial Performance David Rosenberg, Interim CFO Outlook Mark Frissora, Chairman and CEO Questions & Answers Session Today’s Agenda
Slide 5: Q3:13 Results
* Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation. Q3:13 RESULTS Total Company Highlights: Revenue Adj. pre-tax income & margin Corporate EBITDA & margin Worldwide RAC Highlights: Revenue Adj. pre-tax income & margin Corporate EBITDA & margin Q3
Slide 6: Q3:13 Consolidated WW Revenue +22% YoY
Q3:13 Consolidated WW Revenue +22% YoY HERC Off Air port Donlen Dollar Thrifty Leisure U.S. RAC off-airport revenue 11.1% higher Opened 92 net new locations in Q3:13 Insurance replacement +14% YoY Donlen leasing and fleet management revenue increased ~10% to $133M North American equipment rental rev
Slide 7: Q3:13 Cost Savings Update
Sept. YTD cost savings $237M vs. FY:13 target of $300M $89M of cost savings achieved in Q3:13 28th consecutive quarter of YoY labor efficiency DTG Synergies are incremental to Lean/Six Sigma cost savings Q3:13 Cost Savings Update Q3:13 +34.5% vs 2006 Q3:13 includes DTG results Incremental Cumulative
Slide 8: Rent-A-Car Metrics: Q3:13 vs. Q3:12
Rent-A-Car Metrics: Q3:13 vs. Q3:12 U.S. adj. pre-tax income: Q3:13 up 23.6% YoY International adj. pre-tax income: Q3:13 up 30.2% YoY Note: Revenue excludes FX * Includes Advantage sublease revenue of $22 million Market % of WW RAC Total Rev. Total Rev. Total RPD excl sublease Trans. Days Total Rev
Slide 9: U.S. RAC Growth Drivers Q3:13 vs. Q3:12
Hertz Airport DTG / Advantage *** Off-Airport RPD ** +2.5% +32.3% +0.5% Trans Days -2.9% +389.6% +10.6% * Includes Advantage sublease revenue ** Excludes Advantage sublease revenue *** DTG acquired Nov. 2012; Advantage RAC divested Dec. 2012 Q3:13 U.S. RAC Total Revenue* +32.6% YoY Planned for ~4% d
Slide 10: Hertz RAC Depreciation Methodology
Hertz RAC Depreciation Methodology Consistent accounting policy to depreciate vehicles evenly across holding period to breakeven at disposal Quarterly review conducted based on views of present & estimated future market conditions and their effect on residual values at disposal Black Book used as a
Slide 11: Key Drivers of RAC Depreciation Shifts
Key Drivers of RAC Depreciation Shifts Q3:12 $225 Higher Lower Shorter More program Auction More premium Purchase price Residual Value Holding Period Risk/Program Mix Resale Channels Fleet Mix Other Factors* Q3:13$221 Lower Higher Longer More risk Wholesale More economy * Other factors can include,
Slide 12: Q3:13 US RAC Car Sales and Fleet Costs
Q3:13 US RAC Car Sales Other Factors Impacting Fleet Costs 78% more units sold through retail locations YoY; holding period ~30 days Increased mix of risk vs. program vehicles Fleet purchased YTD 9/30/13 = 93% risk vs. 86% risk YTD 9/30/12 Mix shift to lower-cost vehicles Risk holding period ~20 mon
Slide 13: Q3:13 Int'l Rental Car Improving
Q3:13 Int’l Rental Car Improving Revenue +9.3% YoY, excluding FX Trans. days +6.4%; RPD +2.7% Inbound revenue +7.7% YoY Opened 143 corporate co-branded & 15 Thrifty licensee locations Target 4 more corporate locations by YE:13 Firefly revenue +49% Open 3 more locations by YE:13 Operational improveme
Slide 14: DTG Integration Update
Majority of fleet synergies to be realized in 2014 & 2015 from purchasing power & consolidated counter systems DTG Integration Update $300 million of REVENUE synergies worldwide realized 2013-2015 2013E target = $120M YTD:13 realized ~$100M incremental revenue worldwide ~50%: added Dollar Thrifty to
Slide 15: Q3:13 Equipment Rental (HERC)
Revenue growth driven by expansion in industrial, oil & gas, specialty markets and the beginnings of the construction recovery N.A. nat’l accounts represents 51% of rental revenue N.A. Corporate EBITDA margin 46.5% Q3:13 Equipment Rental (HERC) * Excludes FX impact ** Pricing and volume data exclude
Slide 16: David Rosenberg, Interim CFO
David Rosenberg Interim CFO FINANCIAL RESULTS CASH FLOW REVIEW BALANCE SHEET REVIEW
Slide 17: Q3:13 GAAP EPS
Q3:13 GAAP EPS GAAP EPS $0.47 on diluted shares of 465.0M One-time expenses $39M charge associated with exchanging 82% of convertible senior notes to shares DTG integrations expenses, incl. HQ move to Fla. $44M charge associated with Advantage liquidity issues Loss on vehicle sales Transportation an
Slide 18: HERC Key Metrics
HERC Key Metrics N.A. time utilization +210 bps with 10.3% more fleet WW HERC Corporate EBITDA up 10.5% Q3:13 Corporate EBITDA flow-through 45%, reflecting activity to make fleet available for rent and improved utilization Full year Corporate EBITDA flow-though expected 60% - 65% WW Pricing YoY 0.2%
Slide 19: Interest Expense Summary
Interest Expense Summary GAAP interest expense decreased by 30 bps as a % of revenue Cash interest expense increased $27.4M due to acquisition financing and fleet growth 2013E: cash interest expense now expected to increase ~$90M, down from ~$100M * Net of interest income 2013 2012 2013 2012 Q3 178.
Slide 20: Tax Rate
Tax Rate Q3:13 GAAP effective income tax rate 34.6% equal to Q3:12 Q3:13 cash taxes paid: $13.4M vs. $5.3M in Q3:12 FY:13 cash taxes estimated to be ~ $80M to $85M 2013 adjusted tax rate normalized = 35% NOL balance as of Dec. 31, 2012 = $3.9 billion; estimated Dec. 31, 2013 balance ~$3.8 billion
Slide 21: Strong Operating Performance Drives Positive Cash Flow
Strong Operating Performance Drives Positive Cash Flow Operating Cash Flow Improved pre-tax earnings and working capital Net investments U.S. RAC fleet growth primarily for incr. DTG fleet purchases Higher non-fleet capex: technology initiatives & RAC facility updates FY:13 FCF guidance $500 - 600M
Slide 22: Q3:13 Fleet Statistics and CapEx
Q3:13 average WW fleet age 41 months vs. 44 months in Q3:12 * Includes non-cash purchases and sales. ** Above amounts are on a cash flow basis, consistent with our GAAP statement of cash flows. YTD Q3:13 WWHERC Fleet Statistics WW HERC Fleet CapEx – Cash Basis** YTD Gross Purchases* YTD Disposals Fi
Slide 23: Liquidity & Debt
Liquidity & Debt Corporate Liquidity as of 9/30/13 ($ in millions) ABL Availability: $750 Unrestricted Cash: 549 Corporate Liquidity: $1,299 Total net corporate debt $6.3 billion Total net fleet debt $9.8 billion Net corporate debt / corporate EBITDA ratio 3.0x With full run-rate synergies and DTG f
Slide 24: Outlook
OUTLOOK
Slide 25: Q4:13 Outlook
Q4:13 Outlook HERC price & volume strong Q4 volume comp tougher due to additional fleet buys last year driving share and slower non-res construction recovery EU RAC volume and pricing trends positive US RAC volume improving; Oct. pricing positive, tough Dec. comps. US RAC fleet remains high 26,000 v
Slide 26: U.S. RAC Monthly Depreciation Per Vehicle
U.S. RAC Monthly Depreciation Per Vehicle US RAC Depreciation Rising on Early Disposal of Vehicles FY:13E U.S. monthly depreciation per unit now up 1-2% Previously expected metric down 2-3% NOTE: All figures except 2013 exclude Dollar Thrifty fleet Annual rates Quarterly rates $328 $347 $332 $304 $2
Slide 27: Transition Period for Hertz
Transition Period for Hertz 2013 Integrating DTG acquisition Managing largest risk fleet ever Introducing new brands globally Continuing to develop retail sales network Launching game-changing in-car technology Expanding off-airport footprint 2014 U.S. RAC monthly depreciation estimated between $250
Slide 28: Confident in long term fundamentals and future prospects
Confident in long term fundamentals and future prospects Share Repurchase Plan Approved Board has approved share repurchase program of up to $300M of total shares outstanding Long-term fundamentals remain unchanged Off airport, Donlen, HERC all generating double-digit revenue growth Dollar Thrifty i
Slide 29: FY:13 Financial Guidance
RISKS: U.S. sequester, OEM vehicle recalls, residual values FY:13 Financial Guidance Published 9/26/13 Cost savings target of $300M to offset inflation (incl. depreciation savings) Tax rate of 35% Cash interest expense ~$90M higher YoY % ? YoY High end of forecast Revenue $10.80 to $10.90 bil 21% Co
Slide 30: Q & A / Condensed Consolidated Statements of Operations
Q & A Table 1 HERTZ GLOBAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Unaudited Three Months Ended As a Percentage September 30, of Total Revenues 2013 2012 2013 2012 Total revenues $ 3,069.4 $ 2,516.2 100.0 % 100.0 % Expenses: Direct opera
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