Hertz Global Holdings, Inc · NASDAQ:HTZ
Hertz Global — Investor Presentation (June 2016)
50 slides from Hertz Global's investor presentation, Jun 10, 2016
Slide 1: Herc Rentals Presentation June 2016
Herc Rentals Presentation June 2016
Slide 2: Disclaimers: Cautionary Notes on Forward-Looking Statements
Disclaimers Cautionary Notes on Forward-Looking Statements Hertz Equipment Rental Corporation (referred to herein as “the Company,” “HERC” or “Herc Rentals”) has made statements in this document that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this d
Slide 3: Accounting Methodology
Accounting Methodology Historical combined financial information included in this presentation has been derived from the consolidated financial statements and accounting records of Hertz Global Holdings, Inc. (“Hertz Holdings”) using the historical results of operations and assets and liabilities at
Slide 4: Today's Presenters
Today’s Presenters Larry Silber President and Chief Executive Officer Barbara Brasier Senior Vice President and Chief Financial Officer Bruce Dressel Chief Operating Officer Elizabeth Higashi Vice President, Investor Relations 4 Jason Oosterbeek Vice President, Pricing and Sales Strategy
Slide 5: Transaction Overview
Transaction Overview 5
Slide 6: Transaction Summary
We aspire to be the supplier, employer and investment of choice in our industry. Transaction Summary • Hertz Equipment Rental Corporation (“Herc” or “the Company”) is a leading equipment rental company in North America and operates a diversified fleet of equipment with a total OEC of $3.5 billion se
Slide 7: Herc Rentals Overview
Herc Rentals Overview 7
Slide 8: Unique Opportunity to Build Value
Unique Opportunity to Build Value Attractive long term industry fundamentals Significant opportunity for operational and financial improvement Commitment to disciplined capital management Strong asset base including $3.5 billion of OEC Strategically positioned to generate above market growth Strong
Slide 9: Highly Experienced Leadership Team
Carlo Cavecchi Paul Dickard Elizabeth Higashi Charles Miller Nancy Merola Jason Oosterbeek VP, ProSolutions VP, Communications VP, Investor Relations VP, Operations VP, Chief Accounting Officer VP, Pricing & Sales Strategy 20+ years 25 years 30+ years 30+ years 30+ years 15+ years Highly Experienced
Slide 10: Reinvigorated Organization With a Customer-Centric Culture
Reinvigorated Organization With a Customer-Centric Culture and Increased Focus on Operating Efficiency and Safety Our Vision To ensure that end users of our equipment and services achieve optimal performance safely, efficiently and effectively. Our Mission Our Values We do what’s right. We’re in thi
Slide 11: Company Overview
One of the leading North American equipment rental companies Approximately 280 locations globally 4% market share in a highly fragmented market $1.6 billion in total revenue 1 (2015) $3.5 billion in fleet (OEC) ~ 4,600+ employees Local Customer 50% National Account 50% Company Overview H
Slide 12: Market Leader with Significant Scale and Broad Footprint in North America
Market Leader with Significant Scale and Broad Footprint in North America Strong presence in growing regions 1 IHS Global Insight (April 2016) Locations are as of March 31, 2016. International operations are located in the United Kingdom, China, Saudi Arabia and Qatar. >9% 6-9% 3-6% 0-3% <0% Industr
Slide 13: Large, Diversified Rental Fleet
Large, Diversified Rental Fleet $3.5 billion total fleet efficiently deployed with focus on utilization, margins and returns Note: Dollars in millions. 1 Average fleet original equipment cost (OEC) at year end December 31, 2015. 2 45% of equipment over seven years old has been refurbished or re-manu
Slide 14: Quick Actions Result in Accelerating Profitability
Quick Actions Result in Accelerating Profitability Rapid action to strengthen organization, fleet, and sales effectiveness accelerated quarterly growth Focused on premium brands Reduced supplier count by 40% Created ProContractor Tools program Expanded ProSolutions business Fleet Optimizatio
Slide 15: Quarterly Growth: Rental Revenue and Adjusted Corporate EBITDA
Quarterly Growth: Rental Revenue and Adjusted Corporate EBITDA Excluding Upstream Oil & Gas, Improved Each Quarter Adj. Corp. EBITDA1 (YOY % Δ) Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Excl. upstream oil & gas 7% 7% 11% 21% 14% Total (7)% (8)% (3)% (0)% (4)% 1 HERC reported as a segment of Hertz Global Holding
Slide 16: Addressing Weakness in Oil & Gas Markets
(20%) (10%) 0% 10% 20% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Upstream Oil & Gas Locations Non-Upstream Oil & Gas Locations Upstream Oil & Gas Branch Markets 19% Non- Upstream Oil & Gas Branch Markets 81% Addressing Weakness in Oil & Gas Markets Quick actions taken to reduce
Slide 17: Equipment Rental Industry
Equipment Rental Industry
Slide 18: Strong Secular Equipment Rental Industry Growth
Strong Secular Equipment Rental Industry Growth Provides Unique Opportunity Strong market growth and further penetration of rental solutions expected to continue 1 IHS Global Insight, excludes Party & Event data. 2 Source: ARA. 3 Source: As reported by RER 100: Top Rental Equipment Companies of 2015
Slide 19: Construction and Industrial Outlook Positive
2.4% 2.1% 2.4% 2.3% 2.1% 2.1% 1.3% 0.4% 2.5% 2.5% 2.2% 1.9% 2015A 2016E 2017E 2018E 2019E 2020E Construction and Industrial Outlook Positive Construction and industrial markets expected to grow Non-Residential Starts 1 Construction Put in Place 2 Architecture Billings Index 3 Construction Employment
Slide 20: Rental Rate Environment
Rental Rate Environment Opportunity to Continue to Offset Pricing Differential Key Drivers for Herc Rentals Pricing and Yield Opportunity 96 98 100 102 104 106 108 J a n -1 4 F e b -1 4 M a r- 1 4 A p r- 1 4 M a y -1 4 J u n -1 4 J u l- 1 4 A u g -1 4 S e p -1 4 O c t- 1 4 No v -1 4 De c -1 4 J a n
Slide 21: Long-Tenured National Account Portfolio
Long-Tenured National Account Portfolio Provides Stable Base of Business National Accounts by Tenure (Years) Over 1,800 National Accounts • Dedicated national account managers • Stable revenue base • Longer transactions 78% of National Accounts revenue are from accounts open 20+ years 3% 3% 5% 11% 7
Slide 22: The Path Forward
The Path Forward o Broaden customer base o Expand products and services o Increase density in large urban markets o Grow branch revenues through price management and ancillary services Improve Operating Efficiencies Enhance Customer Experience Expand and Diversify Revenues o Improve vendor managemen
Slide 23: Broaden North America Customer Base and Sales Force Effectiveness
Salesforce.com rollout Utilize price guidance tool Increase “Boots on the ground” Focus on ProSolutions and ProContractor Tools Align sales initiatives with fleet strategy Focus on higher return customer mix Target new account generation Further penetrate local customer base Optimize territories Ali
Slide 24: Improve Vendor Management and Fleet Availability
Q2 2015 Q1 2016 Improve North America Vendor Management and Fleet Availability Driving operational gains through buying efficiency and increased availability Consolidate Brands and OEMs Substantially Increased Fleet Available to Rent 40% # of Suppliers Lower vendor count = better leverage Simplifica
Slide 25: Expand Products and Services to Drive Higher Revenue and Margin
ProSolutions and ProContractor Tools ~25-30% Core ~70-75% Expand Products and Services to Drive Higher Revenue and Margin 20151 ProSolutions and ProContractor Tools 15% Core 85% Target Focused on expanding ProSolutions and ProContractor Tools in N.A. 1 N.A. OEC fleet data. 2 Industry data and estima
Slide 26: Increase Density in Large Urban Markets
Market Size HERC Share HERC Locations Southern California $2.2 bn 3% 9 Atlanta $815 mm 4% 8 MI FL DE MD KY ME NY PA VT NH MA RI CT VA WV OH IN IL NCTN SC AL MS WI NJ GA NM TX OK KS NE SD NDMT WY CO UT ID AZ NV WA CA OR AR LA MO IA MN DE NJ MA BC AB SK MB ON QC Increase Density in Large Urban Markets
Slide 27: Drive Operating Performance through Higher Margin Mix and Volume
Drive Operating Performance through Higher Margin Mix and Volume 30% 40% 50% Small Medium Large Major Competitor Revenue / Branch <$2.5 Million $2.5 - $5.0 Million $5.0 - $10.0 Million Major Competitor’s Total Branches # of Branches3 81 109 80 897 Significant operating leverage in current N.A. branc
Slide 28: Supplier of Choice: Efficient, Effective and Safe
Supplier of Choice: Efficient, Effective and Safe Best in class brands combined with a comprehensive suite of services help customers work more efficiently, effectively and safely Consultive solutions Subject-matter experts Delivering Premium Products Delivering Solutions-Based Products and Services
Slide 29: Financial Overview
Financial Overview 29
Slide 30: Financial Policy – Guiding Principles
Financial Policy – Guiding Principles Capitalize on Market Growth Re-invest in Business to Grow Scale and Density Exercise Disciplined Capital Allocation Focus on Improving Margins and Returns Maintain Sufficient Liquidity and Prudent Leverage (Target 2.5x – 3.5x leverage over the cycle) Pursue Oper
Slide 31: Historical Financial Profile
Historical Financial Profile Total Revenue Adj. EBITDA (% Margin) $ in millions$ in millions $1,407 $1,456 $1,412 $1,388 $329 $315 $267 $255 $1,736 $1,771 $1,678 $1,643 '13 '14 '15 Q1'16 LTM Equipment Rental Sale of Equipment, Service and Other % Revenue Growth 8% 2% (5%) 12% 3% (3%) Total $681 $650
Slide 32: Full Year 2016 Guidance
Full Year 2016 Guidance* Adjusted EBITDA (Standalone) $560 million to $610 million Net Fleet Capital Expenditures: $375 million to $425 million 32 2016 Guidance Range Low High Segment Adjusted Corporate EBITDA $ 600 $ 650 Public Company Costs (32) (32) Gain/ (Loss) on sales of revenue earning equipm
Slide 33: Outlook: Build to 2016 Adjusted EBITDA
33 2015 Q1 Non Upstream Oil & Gas Rest of Year Upstream Oil & Gas Rest of Year Ancillary Revenue France & Spain Public Company Costs net of allocations 2016 • Revenues in non-upstream oil & gas branch markets are expected to grow approximately 11% to 13% for the rest of the year, consistent with fiv
Slide 34: Key Initiatives Fueling Profitability and ROIC
Key Initiatives Fueling Profitability and ROIC Long term, Adjusted EBITDA is targeted to meet or exceed peer metrics with ROIC expected to exceed cost of capital Improvement Opportunity Initiatives underway Shift Equipment Portfolio Mix Adding ProSolutions and ProContractor Tools equipment to flee
Slide 35: Historical Net Maintenance & Growth Fleet Capex
Historical Net Maintenance & Growth Fleet Capex 35 $ in millions 2013 2014 2015 Q1 ‘16 LTM Estimated Maintenance Capex, Net 1 $ 240 $ 288 $ 270 $ 262 Growth Capex 281 147 178 123 Net Fleet Capex $521 $435 $448 $385 1 Reflects estimated 2% inflation factor compounded over 7 year average life of OEC s
Slide 36: Substantial Flexibility Regarding Discretionary Spending
Substantial Flexibility Regarding Discretionary Spending 1 Estimated on 2% of LTM Q1 2016 Revenues. 2 Reflects estimated 2% inflation factor compounded over 7 year average life of OEC sold less proceeds from disposal. 3 The Company does not expect to be a federal cash tax payer in 2016 due to NOLs a
Slide 37: Industry Practices Enable Financial Stability Through All Economic Cycles
Industry Practices Enable Financial Stability Through All Economic Cycles Herc’s discipline in capital deployment and targeted leverage range will enable it to prosper through an economic cycle 37 • Revenue and EBITDA decline • Industry de-fleets • Cash flow from de-fleeting is applied to debt reduc
Slide 38: Maintain Prudent Capital Structure
Maintain Prudent Capital Structure Ample liquidity (~$930 million) and long-dated maturities provide financial flexibility Pro Forma Capital Structure Valuable and Diverse Asset Base Support Debt Levels 1 Total ABL facility size of $1,750 million. 2 Capitalized leases. 3 Excludes results from France
Slide 39: Our Vision
Our Vision Employer of Choice Supplier of Choice Investment of Choice 39
Slide 40: Q&A
Q&A
Slide 41: Appendix
Appendix 41
Slide 42: Glossary of Terms
Glossary of Terms OEC: Original Equipment Cost; the cost of the asset at the time it was first purchased. 1 Fleet Age: The OEC weighted age of the entire fleet. 2 Net Fleet Capex: Capital expenditures of revenue earning equipment minus the proceeds from disposal of revenue earning equipment. 3 Dolla
Slide 43: Glossary of Terms – continued
Adjusted Corporate EBITDA: Represents the Company’s performance metric as a segment of Hertz, which is defined as EBITDA plus the sum of restructuring and restructuring related charges, spin-off costs, loss on extinguishment of debt, impairment charges, gain on disposal of business and certain other
Slide 44: Adjusted EBITDA Reconciliation
44 Twelve months ended Three months ended March 31, Year ended December 31, March 31, 2016 2016 2015 2015 2014 2013 Net income $ 111.9 $ 0.2 $ 2.0 $ 113.7 $ 94.0 $ 145.2 Provision for taxes on income 42.6 0.9 5.3 47.0 57.5 84.1 Interest expense, net 24.2 4.0 8.9 29.1 35.4 35.7 Depreciation of revenu
Slide 45: Reconciliation Footnotes
(1) Represents expenses incurred under restructuring actions as defined in U.S. GAAP. (2) Represents incremental costs incurred directly supporting restructuring initiatives. (3) Represents expenses associated with the anticipated Spin-Off. (4) Represents non-cash stock-based compensation charges. (
Slide 46: Hertz Segment Reconciliation to HERC Standalone Reporting
46 Year ended Twelve months ended December 31, 2015 March 31, 2016 Segment Total Revenues $ 1,518.0 $ 1,491.0 Sales of revenue earning equipment 161.2 152.2 Other (1.0) (0.7) Total Revenues (Standalone) $ 1,678.2 $ 1,642.5 Hertz Segment Revenue & Adjusted EBITDA Reconciliation to HERC Standalone Rep
Slide 47: Executive Biographies
Executive Biographies Lawrence H. Silber President and Chief Executive Officer Mr. Silber joined HERC in May 2015. Mr. Silber most recently served as an Executive Advisor at Court Square Capital Partners, LLP. Mr. Silber led Hayward Industries, one of the world's largest swimming pool equipment manu
Slide 48: Executive Biographies – continued
Executive Biographies – continued Maryann A. Waryjas Senior Vice President , Chief Legal Officer and Secretary Ms. Waryjas joined HERC in November 2015 from Great Lakes Dredge & Dock Corporation, one of the largest providers of dredging services in the United States. At Great Lakes, Ms. Waryjas serv
Slide 49: Herc Rentals Corporate History & Key Events
Herc Rentals Corporate History & Key Events 19731968 2008 2010 20141965 2015 Introduced industry-first National Accounts program Herc Rentals Founded Rolled out new standardized locations 1979 Entered industrial equipment rental & leasing markets 1989 New HERC President named Launched Hert
Slide 50: Herc Rentals
HercRentals”
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