Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Investor Day (April 2013)
147 slides from Hertz Global's investor day presentation, Apr 5, 2013
Slide 1: Mark P. Frissora, Chairman and CEO
Mark P. Frissora Chairman of the Board and Chief Executive Officer
Slide 2: Video
VIDEO
Slide 3: Industry Overview
Industry Overview
Slide 4: U.S. GDP vs. RAC Growth 2002–2012
U.S. GDP vs. RAC Growth 2002 – 2012 Car rental industry healthy, competitive & growing faster than general economy for the past decade
Slide 5: HTZ Revenue & Profits Increase as LIBOR Increases
HTZ Revenue & Profits Increase as LIBOR Increases 0.61 Correlation Since 1986 LIBOR ppt change YoY % change Hertz Revenue
Slide 6: Global Traveler 2012
Global Traveler 2012 1 billion people traveled outside their domestic country 2012; +25% from 2006 TOTAL INBOUND MARKET ~$5B 6 2012 vs. 2006 Revenue + 45% 2012 vs. 2006 Revenue + 31% 2012 vs. 2006 Revenue + 41% N.A. EU AU/NZ
Slide 7: U.S. Inbound Passengers Increasing
U.S. Inbound Passengers Increasing International Visitors to U.S. & Projections* (2007-2014) *Source: U.S. Travel Association
Slide 8: U.S. Used Car Market Resilient
U.S. Used Car Market Resilient After 5 consecutive monthly increases, Index recovers
Slide 9: Equipment Rental Cycle on Upswing
Equipment Rental Cycle on Upswing Source: American Rental Association & McGraw Hill
Slide 10: Hertz Then and Now
2006 2012 Hertz Then and Now
Slide 11: The Hertz Corporation By The Numbers
Adj. Pre-Tax LOCATIONS OUR SERVICES ARE AVAILABLE IN PRODUCTIVITY GOLD MEMBERS WORLD WIDE AND GROWING REVENUE Corporate & Franchise The Hertz Corporation By The Numbers Then 2006 and Now 2012 Then2006 11
Slide 12: Portfolio of Game Changers
Portfolio of Game Changers Entry into Vehicle Leasing (2011) Car Sharing Technology Initiative Begins Advantage Acquisition (2009) IPO (2006) Lean / Six Sigma Initiated 11 Equipment Rental Tuck-in Acquisitions (2010-2012) Established Position Leisure RAC (2012)
Slide 13: Investments = Cash Flow
Investments = Cash Flow As Rate of Investment Slows, Profit Drives Cash Flow Expansion Acquisitions, fleet growth, non-fleet capex Note: 2013F uses mid-point of guidance $3,026
Slide 14: N.A. Equipment Rental Revenue +19%
N.A. Equipment Rental Revenue +19% FY:12 Non-Res Construction = Next Big Opportunity Source: IIR Source: McGraw-Hill Construction Total Revenue $1.5B 2012 YoY 2012 YoY Total Revenue $1.3B ($ in millions) Industrial $274.6 Fragmented $445.6 Industrial $345.3 Fragmented $452.3
Slide 15: Rental Car Revenue Growth Drivers
THEN & NOW Rental Car Revenue Growth Drivers Hertz Premium Off Airport Donlen Dollar Thrifty Value Donlen Provides presence in complementary leasing market Technology leader in fleet management Minimal overlap in HTZ / Donlen corporate customer base New products and services development for RAC & HE
Slide 16: U.S. Rental Car Market Share Then and Now
Est. 1958 Merged with Dollar 1997 “Fragmented 8” U.S. RENTAL CAR Then 2006 U.S. Airport Market Share “Consolidated 3” U.S. RENTAL CAR Now Est. 1974 Acquired by Enterprise 2007 Est. 1958 Acquired by Avis 2002 Est. 1947 Acquired by Alamo 1997; Enterprise 2007 Est. 1957 Airport Share 8% Est. 1918 Airpo
Slide 17: Acquisition Synergies
Acquisition Synergies SSOOM SEVEN $300M £5)... “ ther6%, a
Slide 18: U.S. RAC Fleet Opportunities
THEN & NOW U.S. RAC Fleet Opportunities Fleet Procurement DTG still ~65% auction Increasing mix of risk vehicles to capitalize on HTZ higher-return sales channels 2012 – avg fleet 76% risk 2013E – avg fleet 95% risk Combined dealer network More diverse vehicle mix to sell Used car market sells ~40 M
Slide 19: Shifting to Higher-Return Used Car Sales Channels
Shifting to Higher-Return Used Car Sales Channels in U.S. EARLY STAGE LATE STAGE CHANNEL SHIFT CHANNEL SHIFT
Slide 20: U.S. Used Car Market Resilient
U.S. Used Car Market Resilient Manheim Index Moody’s Forecast *5 pts of Manheim selling price = ~2-3 pts of residual value (sale price as % of cap. cost) Hertz aligned with Moody’s forecast Expect residuals (2-3%*) over next 2 yrs Source: Moody’s Feb 2013
Slide 21: No Metric Moves in Isolation
No Metric Moves in Isolation 0.81R2 0.72R2 Correlation to fleet costs (Favorable) (Favorable)
Slide 22: Driving Value Through Technology Leadership
Driving Value Through Technology Leadership 1972 - Hertz introduces the first Nationwide Emergency Road Service 1980 - With the first Express Service, #1 Club members bypass the airport counter 1989 - Hertz launches #1 Club Gold®, which allows member to go directly from airplane to their car; even t
Slide 23: Technology Advancements Drive Revenue & Efficiency
Technology Advancements Drive Revenue & Efficiency A Higher Value Proposition Gold Choice Mobile Gold Alert Express Rent Kiosks Hertz 24 /7 E-Return
Slide 24: Focused on Key Customer Preferences
Focused on Key Customer Preferences Source: Maritz Customer Experience Study Critical Issues
Slide 25: Technology
Technology Rob Moore Sr. VP, Technology
Slide 26: The Pieces of Hertz 24/7 On Demand Technology
2 The Pieces of Hertz 24/7 On Demand Technology In Car Tech & Fleet Mgmt Patented Innovation Customer Experience Mobility Travel Services Superior Web Interaction
Slide 27: In-Car Technology
3 In-Car Technology Freescale Processor - 500 mips Flash Memory store 60M members 3 axis sensors, temperature, shock CAN Bus (x3) High or Low speed 6 Ways to access the car Freescale Quad-core processor Flash Memory stores maps & POIs 5.7” 700 Nits screen with haptic feedback – meets or exceeds many
Slide 28: Mobility
4 Mobility eReturn 1800 Locations Over 5.5M receipts sent Received through email Mobile Applications Mobile downloads - 2.5M Mobile Reservations - 835,227 Mobile Booked Revenue - $152M 350% growth YOY Windows 8 Mobility Only Rent-a-Car application in Windows 8 Marketplace CarfirmationsTM & Mobile Go
Slide 29: Customer Experience
5 Customer Experience HERTZ.COM Single largest channel 9.6M reservations in 2012 29% of all reservations come through HERTZ.COM Built on HTML5 adapts to any screen size ExpressRentTM 400 units globally 2 way video / audio CC reader, bar code scanner, card dispenser, printer Approaching 10K/wk Transa
Slide 30: The Pieces of Hertz 24/7 On Demand Technology
6 In Car Tech & Fleet Mgmt Patented Innovation Customer Experience Mobility Travel Services Superior Web Interaction The Pieces of Hertz 24/7 On Demand Technology
Slide 31: Your Plane Lands… A Hertz Carfirmation Arrives
7 Your Plane Lands… A Hertz Carfirmation™ Arrives Instantly! Phase 2 now live – swap or upgrade via mobile View live inventory to change the car you drive at no charge Or, choose an upgrade including special Deal of the Day Over $500K additional revenue since December 2012 launch “I couldn't believe
Slide 32: Walk Right Up and Reserve A Car
8 And If You Don’t Have A Reservation, Walk Right Up and Reserve A Car On The Spot Hertz Express Rent™ Video Kiosks Offers live agent support Allow customers to skip the lines Expands our network virtually anywhere airports, neighborhoods, garages, retail, body shops Fast facts: Over $55M in revenue
Slide 33: New NeverLost In Car Tablet
9 New Neverlost® In Car Tablet Extends Mobile Functionality NeverLost on Demand GPS Hertz Live Agent Assist puts you in touch with a real person for immediate help Local restaurant guides, highlights of the area and recommendations all add to the experience Cellular connectivity creates potential fo
Slide 34: With Hertz Express Return, Just Park and Go
10 With Hertz Express Return, Just Park and Go On return, Park and Go Paperless eReceipt zapped to you in less than 30 minutes Straight to your inbox Perfect for the busy traveler and the conscientious Green customer Over 5.5M eReceipts have been sent so far
Slide 35: Marketing Speed and Ease to Today's Traveler
Marketing Speed and Ease to Today’s Leisure and Business Traveler Bob Stuart Executive VP Sales & Marketing
Slide 36: 3 Pronged Approach to Marketing
2 Awareness Advertising Public Relations Social Media Retention On-going Sales and Marketing Efforts 3 Pronged Approach to Marketing Technology Acquisition Gold Plus Rewards Hertz Business Rewards
Slide 37: Building Awareness Across Media
3 We Build Awareness For Our Innovative Products Across The Most Impactful and Efficient Media Touch Points Traveling at the Speed of Hertz Social: travel blogs, Twitter, FB Promotion & Experiential Print: Consumer & Business Digital: Web, tablet, mobile, direct mail TV: Intuitively fast, 15 second
Slide 38: Commercials
4 Commercials Show all commercials
Slide 39: Gold Plus Rewards
5 Gold Plus Rewards #1 Loyalty Program Free membership Global program - Earn and redeem rewards globally Real time accrual and redemption Best-in-class program Flyer talk Carfirmations, Counter Bypass, Gold Choice, eReturn, etc. Rewards towards future rentals and added value services
Slide 40: Sales Efforts: Corporate, Travel and Retail Partnerships
6 Sales Efforts Dedicated To Creating Elite, Long Term Corporate, Travel and Retail Partnerships
Slide 41: Hertz Kiosks and 24/7 Vehicles in Lowe's Stores
7 Case Study: Hertz Kiosks and 24/7 Vehicles in Lowe’s Stores Redefines “Take it Home Now”
Slide 42: Traveling At The Speed Of Hertz Wins Customers
8 Traveling At The Speed Of Hertz Wins Customers
Slide 43: So What Does The Future Hold?
9 So What Does The Future Hold?
Slide 44: Alan Kay, Computer Scientist
10 Alan Kay, Computer Scientist
Slide 45: Two facts to consider
11 Two facts to consider... We live in a 24/7 World. In the last year, half the people in the USA with a drivers license have not rented a car. That spells opportunity
Slide 46: Significant Opportunity To Grow the Car Renter Market
12 Significant Opportunity To Grow the Car Renter Market Exists 53% 34% 13% 117M People Current Renters Non-Renters
Slide 47: The Future of Car Rental is Now: Hertz 24/7
13 The Future of Car Rental is Now and Hertz 24/7 is the First to Deliver Ultimate Convenience via technology 24 Hours 7 Days/Week 365 Days Pricing By the hour By the day By the week By the month Technology Bluetooth 24/7 Concierge Choice & Quality Choose the exact car you want Smoke free For any an
Slide 48: Hertz 24/7 Marketing Launch Phases
14 3 Phase Marketing Launch Hertz 24/7 1. Late Spring: NY PR Announcement 2. Late Summer: Experiential Marketing & Retailer Partnerships 3. Fall: Mass Market / Multi-Channel Advertising - New Campaign
Slide 49: 24/7 Traveling Experiential Marketing Exhibit
15 24/7 “Traveling” Experiential Marketing Exhibit
Slide 50: Hertz 24/7 neighborhood locations
16 Hertz 24/7 neighborhood locations will alert customers that 24/7 access is available
Slide 51: 24/7 TV Ads with Shazam Activation
17 24/7 TV Ads will feature multi-platform SHAZAM ACTIVATION for demonstration...
Slide 52: ...and sign up.
18 ...and sign up.
Slide 53: Traveling at the Speed of Hertz
19 Traveling at the Speed of HertzTM
Slide 54: U.S. Rental Car
U.S. Rental Car Scott Sider Group President, The Americas Rental Car
Slide 55: U.S. Rental Car Locations and Fleet
2 Substantially Corporate Substantially Licensee Geography Locations @ 12/31/12 Approx. Licensee Mix Average Fleet Size FY:12 U.S. 5,109 10% 394K Canada 217 33% 10K Puerto Rico 30 33% 2K Latin America 518 84% 43K Total 5,874 17% 467K 1) Represents total corporate & licensee 2) With ARAC (Dec-12), wi
Slide 56: Strong Revenue Retention and Cost Management
3 Strong Revenue Retention and Cost Management has Led to Rapid Profit Growth Strategic Initiatives —Catalysts to Improved Performance 2006 2012 Variance Total Revenue $4,371M $4,901M +12.1% OAP Revenue % of Total Revenue $892M 20.4% $1,298M 26.5% +46% +610bps Adjusted Pretax Margin +10.5PP Producti
Slide 57: Airport Mix Moving to More Profitable Leisure Segment
4 Airport Mix Moving to More Profitable Leisure Segment Leisure 61% Commercial 39% Leisure 74% Commercial 26% Leisure Channel Growth Accelerated by DTG 2012 Segment RPD Length Leisure $53 4.3 Commercial $44 3.6 Leisure 57% Commercial 43%
Slide 58: Benefits of DTG Acquisition Underway
5 RAC Revenue $0.2BN $1.5BN Owned avg. fleet 20,522 111,369 Rent a car locations 62 280 (Corporate) 585 (Total NA) Employees 600 5,900 Transactions 1.3M 6.6M RPD +43% Benefits of DTG Acquisition Underway Operationalizing synergies between brands Sharing Best practices Airport operations consolidatio
Slide 59: Expanding in Off Airport Market
6 Expanding in Off Airport Market Airport 73% Off Airport 27% Off Airport Cost Structure Supports Strong Margins Airport 80% Off Airport 20%
Slide 60: Longer Rentals & Lower Cost Structure Drive Off-Airport Margins
7 Longer Rentals & Lower Cost Structure Drive Off-Airport Margins (Per Transaction Day) Mature Off Airport Location Average Airport Location Comparison Labor Costs $4.09 $4.47 8% lower DOE $18.54 $28.00 34% lower SG&A $1.63 $3.12 48% lower Utilization 84.3% 82.1% 220 bps higher Off Airport Margin An
Slide 61: New Growth Strategies Drive Off Airport Expansion
8 New Growth Strategies Drive Off Airport Expansion Replacement 33% Leisure 47% Commercial 20% Number of locations nearly doubled since 2006 Expanding position with key accounts 46% off airport revenue growth since 2006 Total Off Airport Market = $11B Hertz Market Share = 12% New opportunity with 24
Slide 62: Fast and Efficient Off Airport Growth
9 Fast and Efficient Off Airport Growth Hertz Reinventing Car Rental In 2013 Rent the car you want, when you want, where you want Thousands of new virtual locations coming in 2013 The vehicle becomes the counter and the location Will be within 5 miles of 90% of the population Gold customers by end o
Slide 63: Financial Benefits of Technology
10 Financial Benefits of Technology Customer Convenience at a Reduced Cost Attract more customers Concierge service Customer fuel level reading On demand navigation Bluetooth and wi-fi service Fleet utilization Labor efficiencies Expansion without brick and mortar
Slide 64: Emerging Markets Opportunities
11 Emerging Markets Opportunities Low market share coupled with strong economy Hertz Brazil has grown from revenue of $50M in 2006 to $92M in 2012 (+84%); 2013 Revenue projected at $110M New segment opportunities exist including insurance replacement and leasing products (Donlen model) Exploring par
Slide 65: Process Improvements Led to $1.6B Savings Since 2006
12 Process Improvements Led to $1.6B Savings Since 2006 Lighthouse – Top 50 airports completed by YE 2013 75% of all airport revenue, reduces DOE 200 bps Process Experts – 2 dedicated black belts per region; 30 dedicated green belts at top airport locations Centralized process improvement – for syst
Slide 66: Lower Fleet Cost Driven by Strategic Purchasing
13 Lower Fleet Cost Driven by Strategic Purchasing Diversification Minimizes Residual Value Risk and Appeals to Broader Customer Base Ford GM Toyota Kia Mazda Chrysler Nissan Other OEMs FY Average 39% 86% Net Depr. / Risk Unit $278 $205 95% 2013F Average RISK Fleet How we buy Fleet rotation Make and
Slide 67: Moving Toward Higher Return Car Sales Channels
14 OPTIMAL mix 60%-70% retail Channel Retail 11% 15% 18% Dealer Direct 0% 38% 44% Online Auction 8% 9% 6% Auction Wholesale 81% 38% 32% Retail Stores 6 30 100 Dealer Direct Sales Reps 10 100 150 Moving Toward Higher Return Car Sales Channels 1pp improvement: retail = =$2M Adj. Pre-tax Incremental Re
Slide 68: U.S. RAC Monthly Depreciation per Unit
15 $318 $328 $347 $332 $304 $255 $224 $175 $200 $225 $250 $275 $300 $325 $350 $375 FY:06 FY:07 FY:08 FY:09 FY:10 FY:11 FY:12 FY:13E U.S. RAC Monthly Depreciation p/Unit Annual rates FY:12 FLEET EFFICIENCY (Utilization) 80.3% Record High 2012 YoY improvement Depr/Unit 11.8%
Slide 69: U.S. RAC Key Objectives
16 U.S. RAC Key Objectives DTG Integration - $300M -3 yr cost savings run rate Increasing Ancillary Sales Rolling out 24/7 Utilizing Technology to Reduce Transactional Costs and Improve Customer Experience Process and Sales Culture Balancing COST SAVINGS and Incremental Revenue Generation
Slide 70: EMEA and Asia Pacific RAC
EMEA and Asia Pacific RAC Mark Frissora Chairman of the Board and Chief Executive Officer
Slide 71: EMEA & Asia Pacific RAC
2 EMEA & Asia Pacific RAC Countries Locations Employees Fleet Size Europe 102 838 4,570 112,580 APAC 3 92 1,161 21,844 Franchise 86 1,756 8,040 157,340 Japan1 1 1,190 undisclosed 102,800 Total 100 3,876 13,771 394,564 Note: Network revenue at actual exchange rates; franchise revenue as declared by f
Slide 72: Australia / New Zealand Overview
3 Metric 2006 2012 CAGR % Var Revenue ($m) $277.9 $382.8 +5.5% +37.7% Adj. Pre-tax Margin -1.2% 7.7% +36.7% +8.9ppt Productivity 67.4 95.4 +6.0% +41.5% Utilization 71.9 74.1 +0.5% +2.1ppt Franchise Rev ($m) $8.3 $14.1 +9.3% +70.2% Australia / New Zealand Overview Market Opportunities DTG Acquisition
Slide 73: Europe Overview
4 Europe Overview France 28% Germany 22% Italy 16% UK 13% Spain 12% Benelux 6% Switzerland 3% 2006 France 26% Germany 20% Italy 20% UK 15% Spain 10% Benelux 6% Switzerland 3% 2012 Metric 2006 2012 CAGR % Var GDP 3.25% -0.58% nm -383bps Revenue ($m) $1,530.5 $1,562.3 +0.34% +2% Ancillary RPD $5.53 $6
Slide 74: Europe Airport/Off-Airport Mix
5 Mix 2012 Airport $0.8B 53% Off-Airport $0.8B 47% Total Revenue $1.6B (2) (1) Corporate Europe, Source: Euromonitor 2012 Full year forecast Total Revenue $10.6B (2) Excludes $0.2B of Franchisee revenue in corporate countries Europe Airport/Off-Airport Mix FY2012 Commercial 40% Leisure 52% Replaceme
Slide 75: Then & Now Opportunities & Initiatives
6 Then & Now Opportunities & Initiatives Cost Efficiencies Baseline 2006 Cost Efficiencies 2012 $520M Process excellence delivered $520m benefit EU rev. per employee +37% 150 locations closed $100M revenue franchised over 18 mos. Revenue Growth $369M 2006 4 Growth Drivers 2012 $675M Multi-brand expa
Slide 76: Geographic Diversification
7 Geographic Diversification 1,100 Locations Europe/MEA 33 Locations Spain, France, Italy
Slide 77: Brand Diversification Across EU Markets
8 Brand Diversification Across EU Markets Implement 24/7 On Demand for Hertz Hertz rebranding strategy; fastest, easiest, most valued Thrifty to fill gap in mid-tier leisure segment Expand into Hertz airport locations Leverage Hertz partnerships for Thrifty growth Develop Thrifty off airport Expand
Slide 78: Improving Processes Drive Margin
9 Improving Processes Drive Margin Lighthouse Implementation 20 programs to be launched in 2013 52 locations launched to date Sustainment actions Regular performance analysis using Business Operating System metrics Senior management mentoring program Deep rooted knowledge of Lean tools Pretax Margin
Slide 79: Risk Vehicles Support Lower Depreciation Objectives
10 Risk Vehicles Support Lower Depreciation Objectives Shifting to Higher Risk Fleet Risk 29% Program 71% Risk 59% Program 41% 2006 2012
Slide 80: Selling More Used Cars into Higher Return Channels
11 Selling More Used Cars into Higher Return Channels Online +$300 and Retail +$1000 vs. Bulk Dealer Sales 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2006 2012 2013F 2014F Bulk Dealer Sales Auction Dealer Online Retail/R2B Improves residual values
Slide 81: Strategic Initiatives Deliver Long-term Profit
12 Strategic Initiatives Deliver Long-term Profit Centralize Europe and variabilize cost Reduce Seasonality Annualized Adj. PreTax Profit Growth by 2015 Procurement, planning and remarketing Fleet and Supply Chain Tools, playbook implementation and pricing yield optimization Pricing Growth from 9% t
Slide 82: Global Equipment Rental
Global Equipment Rental Lois I. Boyd Group President, Equipment Rental
Slide 83: Worldwide Equipment Rental Footprint
2 Worldwide Equipment Rental Q1 2013 Footprint US CANADA EUROPE CHINA SAUDI TOTAL Locations 20121 232 35 67 5 1 340 % Total 2012 HERC Revenue 70% 21% 7% 1% 1% $1.4B Expanded into ASIA, AMERICA and SOUTH AMERICA 1 Excludes franchisees
Slide 84: Shifting to a Balanced Portfolio
3 Shifting to a BALANCED PORTFOLIO Construction 50% Industrial 15% Fragmented 35% Industrial 25% Construction 35% Fragmented 40% 2006 Today Equipment Rental Markets Strategically increased mix of consistent industrial revenue Expanded into non-cyclical niche markets (entertainment svcs.)
Slide 85: Fleet Portfolio Mix
4 Earth Moving 22% Aerial 24% Material Handling 16% Trucks 14% Specialty 15% Other 9% Earth Moving 30% Aerial 22% Material Handling 19% Trucks 13% Fleet Portfolio 2006 Today Balancing the mix of fleet Higher $ utilization with specialty equipment U.S. FLEET AVAILABILITY improved +890 bps since 2006
Slide 86: Investments to Balance Our Portfolio
5 as a % of revenue Entertainment Petrochemical Oil & Gas Industrial Government Investments to Balance Our Portfolio Specialized sales force Specialized sales force On-Site Strategy Specialty Products
Slide 87: Peak to Trough Opportunity
6 Peak to Trough Opportunity DOLLAR Utilization 690 bps Still Room For Improvement vs 2006 380bps TIME Utilization 300 bps PRICING Metric Improvements Optimized By Efficiencies ~$60M PRODUCTIVITY improved +14.5% vs. 2006 OPPORTUNITY OPPORTUNITY OPPORTUNITY
Slide 88: Oil & Gas Outperforming the Market
7 Production Oil & Gas spending est. -6% Petroleum Refining est. -1% U.S. oil rig count +3% Transmission +37% Production growing +53% Refining growing +18.6% Transmission +8% Oil & Gas Outperforming the Market ABI >50, 7 consec. mths Nonres construction starts est. +5.6% Constr. loan pipeline up, le
Slide 89: Operational Excellence Hub & Spoke Model
8 Operational Excellence Hub & Spoke Model centralize key operational functions Maintenance Fleet & fleet logistics Customer service center This model drives: Increased productivity Fleet optimization Improved customer satisfaction Expanded career opportunities (employee retention) Efficiency throug
Slide 90: New Enhanced Capabilities Beyond Equipment Rental
9 Offering Only Equipment Rental Offering Equipment Rental New Enhanced Capabilities Offering Value from the C-Suite to Job Site On Site Services New Equipment Used Equipment Entertainment Services Environment Management Engineering Services Pump & Compressor Power Technology CORE BUSINESSES: EQUIPM
Slide 91: Increasing Field Mechanic Productivity
10 Increasing Field Mechanic Productivity Leverage Technology To Improve Efficiency 2 Year Roll Out, Expect $2M in SAVINGS for $350k Investment : THEN: call home office for data & details Wait for office to research Manual records Delayed purchases : NOW: tablets in the field allow immediate access
Slide 92: Implementing Logistics Optimization
11 Implementing Logistics Optimal Routing Automated Dept. of Transportation Compliance Improved Damage Collections Electronic Signature Capture triggers paperwork process AUTOMATING FLEET PLANNING PROCESSES 2 Year Roll Out, Expect $5M in SAVINGS for $1.5M Investment
Slide 93: Point of Sale Expansion Mobile Apps
12 Point of Sale Expansion Creating MOBILE APPS so we can “Deal in the Field” Market specific applications Speed of customer interface Signature capture Leveraging Existing Technology Investments
Slide 94: EquipmentPoint Global Telematics Solution
13 Eqipment Point EquipmentPointTM is our GLOBAL TELEMATICS SOLUTION giving customers 24/7 access to their FLEET and its UTILIZATION Hertz and Customer’s Fleet Hertz Technology Center Customer Interface 3 Year Roll Out, Expect 20%-30% Pretax Margin from REVENUE & COST SAVINGS
Slide 95: Video
14 VIDEO
Slide 96: Donlen
Donlen Tom Callahan Group President, Donlen
Slide 97: Donlen Fast Facts
2 Headquarters in Northbrook, IL Leading fleet lease and management company founded in 1965 Corporate culture built around employee and customer satisfaction More than 500 corporate customers spanning a wide variety of industries Diverse portfolio of more than 166,000 vehicles: Cars, light-duty truc
Slide 98: Global Partnerships: Local Expertise
3 Global Partnerships: Local Expertise Canada: In partnership with TLS United States Mexico: In partnership with BanRegio Europe: In partnership with Athlon and Lex Autolease: 18 countries Australia and New Zealand: In partnership with FleetPlus Latin America China and Asia Pacific
Slide 99: Complete Lifecycle Solutions
4 Complete Lifecycle Solutions Asset Integration FleetWeb® Donlen Asset ManagerTM DonlenDriver ® CARETM Fleet Financing TRAC Lease Open-End Car/Light Duty Syndication Longer-term fixed financing Class 4+ trucks, trailers, etc. Fleet Management Cost Reduction Acquisition and Remarketing Maintenance C
Slide 100: Complete Lifecycle Solutions
5 Equipment Medium/Heavy Trucks Cars/Light Trucks Asset Acquisition & Remarketing Financial Solutions Fleet Management Productivity and Safety Powered by FleetWeb® Industry-Leading Asset Management Integration Complete Lifecycle Solutions
Slide 101: Award-winning, Integrated Platform FleetWeb
6 Award-winning, integrated platform Any asset Easy data input Unlimited reporting and analysis One platform, acquisition through remarketing Complete Lifecycle Solutions Powered by FleetWeb® “I saw the enhanced FleetWeb® search function this morning and I was blown away. You can’t imagine how this
Slide 102: Valued Business Relationships
7 Valued Business Relationships We’re proud to include some of the world’s most valuable brands among our diverse portfolio of companies “Once I got a taste of Donlen’s information technology platform it became my standard of excellence. Thank you for helping me have a smarter, easier, faster way to
Slide 103: Lease and Maintenance Growth
8 Lease and Maintenance Growth Significantly increased number of vehicles leased & managed 53,890 58,618 59,047 57,914 64,576 71,309 79,969 88,250 90,404 92,442 91,250 102,530 107,151 119,483 145,610 161,000 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13F Lease Management Recessionary Period CAGR Lease: 4.
Slide 104: Revenue Growth After Hertz Acquisition
9 Revenue acceleration experienced after Hertz acquisition Revenue Growth $328,723 $360,871 $361,730 $339,699 $350,545 $407,645 $471,489 $530,000 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13F Total Revenues Recessionary Period CAGR 1.6% CAGR 14.8%
Slide 105: Competitive Landscape
10 Competitive Landscape Eight primary competitors compete for both lease and service vehicles Company Est. Vehicles Under Lease & Management Growth Trend >400K >400K >400K >250K >250K 166,000 >150K >75K Source: Donlen Management
Slide 106: Competitive Landscape
11 Competitive Landscape Eight primary competitors compete for both lease and service vehicles Company Est. Vehicles Under Lease & Management Growth Trend Market Focus by Fleet Size Small (<250) Mid (250-750) Large (>750) >400K >400K >400K >250K >250K 166,000 >150K >75K Source: Donlen Management
Slide 107: Competitive Landscape
12 Competitive Landscape Eight primary competitors compete for both lease and service vehicles Company Est. Vehicles Under Lease & Management Growth Trend Market Focus by Fleet Size Small (<250) Mid (250-750) Large (>750) >400K >400K >400K >250K >250K 166,000 >150K >75K Source: Donlen Management
Slide 108: Competitive Landscape
13 Competitive Landscape Eight primary competitors compete for both lease and service vehicles Company Est. Vehicles Under Lease & Management Growth Trend Market Focus by Fleet Size Small (<250) Mid (250-750) Large (>750) >400K >400K >400K >250K >250K 166,000 >150K >75K Source: Donlen Management
Slide 109: Changing the Landscape
14 Changing the Landscape On September 1, 2011, Donlen joined the Hertz family of global companies Industry-Changing Mobility Solutions
Slide 110: Industry-Changing Mobility Solutions
15 Providing unmatched opportunities for new products and new categories: Purchasing power, utilization, and integration Industry-Changing Mobility Solutions Leverage Strengths. Deliver Value.
Slide 111: Hertz Value Lease
16 Broader selection Lower cost Shorter lease period Alternative for new hires and startup companies Hertz Value LeaseTM The industry’s first true leasing alternative Leverage Strengths. Deliver Value.
Slide 112: HERC Ready Finance
17 Leverage Strengths. Deliver Value. The full spectrum of Hertz Equipment Rental options and the financing expertise of Donlen HERC Ready FinanceTM One-stop shopping” for purchase and finance Offer currently not available in North Dakota, Rhode Island, and California.
Slide 113: Donlen's DriverPoint Telematics: EquipmentPoint
18 Leverage Strengths. Deliver Value. Donlen’s DriverPointTM Telematics brand extension: EquipmentPointTM Version for equipment and vehicles to be utilized by HERC Help manage their extensive fleet of rental assets Improved asset utilization Graphical customer dashboard interface Exception and inter
Slide 114: Ongoing Initiatives
19 Ongoing initiatives: Additional Revenue Generation: Larger footprint due to combined Donlen and Hertz cross-selling sales teams Expanded Acquisition and Remarketing Channels: Leveraging Hertz and Dollar Thrifty resources to give us clear market differentiation Cost Savings: Bridge Rental Program;
Slide 115: 2013 Revenue Growth Strategy
20 2013 Revenue Growth Strategy Truck/Equipment Telematics Services Leasing 12% 13% 24% 80% New products; Market segments Broaden partnerships; New products Solid value proposition; Growing need Dedicated sales team; New markets and products
Slide 116: Financial Highlights
Financial Highlights Elyse Douglas Senior Executive VP & CFO
Slide 117: Financial Strategy Driven by Key Priorities
Financial Strategy Driven by 5 Key Priorities Balanced Approached To Growth And Returns
Slide 118: Steady Profitable Growth: 2013 Guidance
Steady Profitable Growth Profits to Accelerate in 2013 2013F1 YoY Improvement2 $10,850-$10,950 $1,270-$1,340 12.0%-13.0% -- -- $1.82-$1.92 1 1 Guidance as reported on 2/25/13 2 Change vs. high end of guidance
Slide 119: Revenue Growth
Revenue Growth Growth in RAC Offsets Economic Headwinds ($ in billions) HERC still $370M below 2006 RAC $1,255M above 2006 DTG Revenue Synergies, Europe and HERC Recoveries to Accelerate Growth Hertz Consolidated Revenue U.S. Leisure up $1.5B U.S. Off-Airport up $400M Int’l (ex E.U.) up $260M U.S. A
Slide 120: Focused Execution on Margin Improvement
Focused Execution on Margin Improvement ($ in millions) Adjusted Pre-tax U.S. RAC 7.4% → 17.8% Int’l (ex E.U.) 2.3% → 7.2% 6.0% Margin 10.0% Margin 87% improvement Volume growth and cost savings initiatives more than offset declines in Europe and HERC Growth, cost discipline and return on investment
Slide 121: Proven Track Record of Operational Execution
Proven Track Record of Operational Execution Leveraging Lean Six Sigma across operations Expand “Lighthouse” program Only 42% of revenue impacted to date IT Productivity Investments Updated counter system, ERP, OracleHR More than 225 black, yellow and green belts deployed worldwide Cumulative Cost S
Slide 122: Cash Flow more than triples in 2013
Cash Flow more than triples in 2013 Profit improved 85% since 2006 Economic Value Add (EVA) Improvement Working Capital as % revenue ($ in millions) Yields $250M CF Cash Flow Acceleration $500 - $600 85% CAGR Hertz Consolidated Free Cash Flow
Slide 123: New Cash Flow Format
New Cash Flow Format Clearly Highlights Drivers of Cash Flow GAAP Based Approach More Comparable to Other Companies * GAAP Pretax Income for fiscal year 2012 of $450.6 million was adjusted for this presentation to reflect $129.6 million of cash expense associated with DTG acquisition costs $M 2010 A
Slide 124: Profit Strategies Drive Cash Flow
Profit Strategies Drive Cash Flow YOY Change in Operating Cash Flow YOY Change in Net Investment Operating Cash growth to exceed Investment growth * GAAP Pretax Income for fiscal year 2012 of $450.6 million was adjusted for this presentation to reflect $129.6 million of cash expense associated with
Slide 125: Cash Flow through the Cycle
Cash Flow through the Cycle 2007 2008 2009 2010 Total Corporate Cash Flow (before acquisitions) $565* $238* ($356)** $363 US RAC cash flow before fleet growth*** $436 $289 $204 $629 US HERC cash flow before fleet growth*** $285 $244 $115 $141 US HERC cash flow after fleet growth*** $217 $588 $415 $2
Slide 126: Created a Flexible Debt Structure
Created a Flexible Debt Structure Total Debt $15.4B at YE:12 Fleet Debt $8.9B at YE:12 Corporate Debt $6.5B at YE:12 Fleet Debt Fully Collateralized Uses: HERC fleet Fleet Equity Requirement Corp. Operating Requirements Uses: Inventory (Fleet) Financing WW RAC Fleet Eligible Fleet Receivables
Slide 127: Continued De-Leveraging
Continued De-Leveraging Improved Leverage Despite Investments since 2006 2012 PF DTG Metric
Slide 128: Attractive Corporate Debt Profile
Attractive Corporate Debt Profile Weighted Average Interest Rate YE’06 YE’12 Variance 8.26% 5.51% (2.75%) Corporate Debt Maturity Schedule - Dec '12 $2,018M Fixed Floating
Slide 129: Interest Rate Risk Mitigants
Interest Rate Risk Mitigants Fixed Rate Debt - 65% of Corporate and 53% of Fleet Opportunity to term out floating rate exposure As interest increases, revenue increases 1% increase in rates equates to $31M in incremental after tax interest Can be offset by increased volume, price Investment grade sp
Slide 130: Drive Return on Invested Capital
Drive Return on Invested Capital 2012 PF with DTG Improved cost structure Improved utilization Franchising targeting white space and low return markets 1 Net of Fleet Debt Anticipate 2-3% cosolidated Improvement in ROIC in FY13 Equity Key ROIC Drivers ROIC Consolidated WW RAC 9.5% 13.5% 18.1% 30.7%
Slide 131: Investments Improve Financial Profile
Investments Improve Financial Profile Express Rent Kiosks
Slide 132: Financial Objectives
Financial Objectives Drive Cash Flow Improve capital structure Maximize portfolio returns Optimal cash flow deployment Debt repayment Reinvestment in business Return to shareholders
Slide 133: Financial Performance & Outlook
Financial Performance & Outlook Mark P. Frissora Chairman of the Board and Chief Executive Officer
Slide 134: Superior Revenue and EPS Growth
2 Superior Revenue and EPS Growth 1 Based on mid-point of 2013 guidance, as disclosed 2/25/13 2 FY:12 GAAP Pretax Income of $450.6M adjusted to reflect $129.6 million of cash expense associated with DTG acquisition costs 2009 2010 2011 2012 2013E1 CAGR ’09-‘ 13 - Revenue Growth YoY (16.7)% 6.5% 9.7%
Slide 135: Superior Revenue and EPS Growth FY 2013 to FY 2015
3 Superior Revenue and EPS Growth 1 FY 2013 to FY 2015 2 FY:12 GAAP Pretax Income of $450.6M adjusted to reflect $129.6 million of cash expense associated with DTG acquisition costs Leverage global brands, market position and technology to DRIVE REVENUE GROWTH DRIVE COST EFFICIENCIES with a culture
Slide 136: New Financial Plan Surpasses Previous Targets
4 New Financial Plan Surpasses Previous Robust Targets *As provided on 9/12/11; excludes acquisitions 2011-2014* 2013-2015 Revenue Growth 7%-8% 12.5%-13.5% Fleet Cost % of Revenue 24%-25% 24%-25% OpEx & SG&A % of Revenue 57%-59% 55%-56% Corp. Interest % of Revenue 2.3%-2.7% 2.3%-2.6% Adj. Pre-tax %
Slide 137: Valuation Multiples Comparison
5 Valuation Multiples Comparison P/NTM EPS Pre-Crisis Avg. (PCA)1 2014 Current as % of PCA Hotels 21.5x 19.4x 90.3% Online Travel Agents 19.8x 19.8x 100.3% Equipment Rental 12.5x 11.1x 88.9% Consumer Durables 13.7x 12.4x 90.5% Leisure 15.4x 11.7x 76.0% Auto Dealerships 12.4x 12.7x 102.6% HERTZ 15.4x
Slide 138: Lead-in to final video
6 Lead-in to final video
Slide 139: Traveling at the Speed of Hertz: Q&A
Traveling at the Speed of Hertz™ Q&A HTZ NYSE
Slide 140: 2013 Hertz Investor Day
2013 Hertz Investor Day April 2, 2013 New York, NY
Slide 141: Non-GAAP Measures and Terms
The following non-GAAP measures and terms were used in the presentation: Non-GAAP Measures and Terms EBITDA Corporate EBITDA Adjusted Pre-Tax Income Free Cash Flow Corporate Cash Flow Definitions, reconciliations and importance of the non-GAAP measures are provided in the slides or in the appendices
Slide 142: Key Definitions
Key Definitions EBITDA* Income (loss) before income taxes plus depreciation, amortization and other purchase accounting, interest (net of interest income) and impairment charges, less noncontrolling interest. Corporate EBITDA* EBITDA less car rental fleet interest and car rental fleet depreciation,
Slide 143: Non-GAAP Reconciliations
4 Non-GAAP Reconciliations As Revised Years Ended December 31, Years Ended December 31, 2012 2011 2010 2009 2008 2006 Income (loss) before income taxes $ 450.6 $ 324.3 $ (14.6) $ (176.9) $ (1,416.1) $ 197.2 Adjustments: Purchase accounting 109.6 87.6 90.3 90.3 101.0 90.4 Non-cash debt charges 83.6 1
Slide 144: Non-GAAP Reconciliations
5 Non-GAAP Reconciliations Years Ended December 31, 2012 2011 2010 2009 EBITDA 3,501.3 3,134.9 2,821.4 2,637.6 Adjustments: Cash paid during the period for: Interest (net of amounts capitalized) (560.0) (640.6) (533.0) (635.2) Income taxes (71.7) (49.6) (50.7) (31.3) Net change in working capital an
Slide 145: Non-GAAP Reconciliations
6 Non-GAAP Reconciliations As Revised Years Ended December 31, 2010 2009 Corporate EBITDA $ 1,100.3 $ 974.0 Non-fleet capital expenditures, net (140.3) (77.0) Changes in working capital Receivables, excluding car rental fleet receivables (32.0) 63.5 Accounts payable and capital leases 383.6 (335.3)
Slide 146: Importance of Non-GAAP Measures
7 Importance of Non-GAAP Measures EBITDA and Corporate EBITDA provide investors with supplemental measures of operating performance and liquidity. Corporate EBITDA provides supplemental information utilized in the calculation of the financial covenants under Hertz’s senior credit facilities. Managem
Slide 147: Importance of Non-GAAP Measures (Continued)
8 Importance of Non-GAAP Measures (Continued) Unlevered pre-tax cash flow is calculated as Corporate EBITDA less non-fleet capital expenditures, net of non-fleet disposals, plus changes in working capital (receivables, excluding car rental receivables, inventories, prepaid expenses, accounts payable