2Q 2015 Earnings Call. August 11, :00am ET

Transcription

1 2Q 2015 Earnings Call August 11, :00am ET

2 Safe Harbor Statement Certain statements made within this presentation contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of Forwardlooking statements are not guarantees of performance and by their nature are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed in this presentation speaks only as of August 11, 2015, and the Company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements is contained in the Company s press release regarding its Second Quarter results issued on August 10, 2015, and the Risk Factors and Forward-Looking Statements sections of the Company s 2014 Annual Report on Form 10-K and 2015 Quarterly Reports on Form 10-Q. Copies of these filings are available from the SEC, the Hertz web site or the Company s Investor Relations Department. 2

3 Non-GAAP Measures The following non-gaap* measures will be used in the presentation: Corporate EBITDA Corporate EBITDA Margin Adjusted Pre-Tax Income Adjusted Net Income Adjusted Diluted Earnings Per Share (Adjusted EPS) Net Depreciation Per Unit Per Month Net Corporate Debt Net Fleet Debt Free Cash Flow Adjusted Interest Expense Total RPD *Definitions and reconciliations of these non-gaap measures are provided at the end of the presentation. 3

4 Today s Agenda John Tague President & Chief Executive Officer Hertz Global Holdings Business Overview John Tague Tom Kennedy Sr. EVP & Chief Financial Officer Hertz Global Holdings Financial Results Overview Tom Kennedy Larry Silber President & Chief Executive Officer Hertz Equipment Rental Questions & Answers Session John Tague Tom Kennedy Larry Silber 4

5 Positioned for Improvement U.S. RAC 1H:15 2H:15 Disposing of high mileage vehicles Onboarding new vehicles Aligning fleet with profitable demand Average vehicle mileage substantially lower Capacity aligned heading into July peak Fleet efficiency improving Resolving systems instability Addressing data integrity issues Systems fully operational, more reliable data with expanded analytical capabilities Rolling out Dollar, Thrifty and Hertz integrated counter system in August; launched financial systems integration in July Management assessing businesses and beginning to institute improvement plans Teams now collaborating on core set of welldefined initiatives focused on efficiency, process excellence, and service and product quality Improved fleet management, processes and systems helping to reverse performance trends in 2H:15 5

6 $200M FY:15 Cost Savings Update Realized ~$80M of Cost Savings in 1H:15 Corporate/ Operations Overhead Fleet Management Sales and Marketing Areas of savings include: Freezing defined benefit pension plan Eliminating Navigation Solutions redundancies Closing unprofitable off-airport facilities Consolidating third-party IT spend Clearing non-value added IT projects Reducing out-of-service cycle times through process efficiencies and increased accountability Disciplined return on investment practices, including reorganizing rental car sales force Potential for additional savings from technology-enabled opportunities 6

7 Tom Kennedy CFO FINANCIAL RESULTS CASH FLOW REVIEW BALANCE SHEET REVIEW 7

8 2Q:15 Results ($ in millions, except per share amounts) GAAP 2Q:15 Results C 2Q:14 Results YoY Change Revenue $2,692 $2,830 (5%) Income before income taxes $50 $121 (59%) Net income $23 $72 (68%) Diluted earnings per share $0.05 $0.15 (67%) Diluted shares outstanding (1%) Non-GAAP* Corporate EBITDA $379 $446 (15%) Corporate EBITDA margin 14% 16% (200 bps) Adjusted Pre-tax income $153 $216 (29%) Adjusted Net income $88 $132 (33%) Adjusted EPS $0.19 $0.28 (32%) * Definitions and reconciliations of these non-gaap measures are provided at the end of the presentation. 8

9 U.S. RAC Total Revenue 2Q:15 On Airport 76% of U.S. RAC Revenue Off Airport 24% of U.S. RAC Revenue Total RPD Airport RPD Off Airport RPD Total Total Total Total Total Total Ex Fuel Ex Fuel Ex Fuel (0.8%) 0.1% Transaction Days: (0.5%) 0.5% (2.0%) Total Airport Off Airport (2.4%) (2.4%) (2.5%) (1.5%) Airport Total RPD down for Hertz brand, up for DTG brands Off-airport insurance replacement revenue as a percent of total off airport revenue increased 7 ppts YoY to 37% Average fleet increased 2% YoY, re-aligned by quarter end June 2015 airport revenue ex-fuel up, first monthly YoY increase since Sept Note: Total RPD calculated using Total Revenue less ancillary retail car sales revenue 9

10 U.S. RAC Depreciation Cautious 2H:15 Outlook Model year 2016 fleet buy not yet completed Approximately one-third of MY 2016 vehicles expected to be delivered in 2H:15 Third-party residual value forecasts are pointing to a continued moderate decline for the back half and into next year Monthly Dep. per Unit Q $ 287 $ 288 2Q $ 259 $ 259 Six Months June 30 $ 273 $ 273 Full Year $ $ 294 FY:15E monthly depreciation per vehicle of $295-$305 may be conservative depending on residual value trends 10

11 International Car Rental 2Q:15 Revenue +4% YoY, excluding FX Volume +4% RPD unchanged, excl. FX, driven by mix shift toward value brands DOE + SG&A down 80bps as a % of revenue 200 basis point improvement in fleet efficiency Monthly depreciation per unit down 4% excluding FX Corporate EBITDA declined YoY due to FX and one-time items 11

12 YoY % change Revenue* HERC Revenue 2Q:15 Rental Revenue* Volume Pricing WW HERC 1% 1% 2% 1% N.A. 1% 1% 3% 1% U.S. 6% 5% 4% 2% Volume New accounts in construction sectors and specialty and niche markets offset weakness from upstream oil and gas * Excludes FX impact Pricing N.A. national accounts 51% of revenue vs. 54% 2Q:14 due to expansion of local customer base Upstream oil and gas pricing pressure N.A. upstream oil and gas in major markets was 11% of total rental and rental-related revenue, excl. FX N.A. upstream rental and rental-related revenue down 30% YoY, excl. FX, on substantial volume weakness and 3% pricing decline N.A. all other rental and rental-related revenue up 6%, excl. FX Note: Pricing and volume data exclude Cinelease due to the nature of that business 12

13 HERC Corporate EBITDA 2Q:15 Revenue improvement is a priority Expanding and diversifying customer base with focus on local accounts Decentralizing reporting structure, reorganizing sales force Better field accountability, more focused asset management, improved customer service N.A. time utilization down 80bps; dollar utilization down 130bps Excluding energy markets, N.A. time utilization up 70bps Utilization improvement is a priority Investing to reduce out of service equipment Improving location footprint to enhance fleet sharing Increasing mix of specialty equipment for longer rental transactions WW Corporate EBITDA down $19M YoY Weakness in upstream oil and gas markets accounted for approximately $20M of decline partially offset by improvement in other categories FY:15E HERC Corporate EBITDA $575-$625M 13

14 HERC Key Metrics Avg fleet age 41 mos vs. 42 mos. 2Q:14 NA Dollar Utilization 39% 36% 37% 38% 38% 39% 35% 35% 36% 35% 672 WW FY Gross Purchases* Q 2Q 3Q 4Q H:15 FY:15E net fleet capex $410M to $430M 62% 62% NA Time Utilization 68% 65% 63% 64% 63% 67% 68% 66% 534 WW FY Net Fleet Purchases* Q 2Q 3Q 4Q H:15 * Includes non-cash purchases and sales 14

15 Interest Expense Summary GAAP Interest Expense* (millions) Q $156 $164 YTD 2Q $310 $320 Remained flat as % of Rev Adjusted Interest Expense* Q $140 $151 YTD 2Q $278 $295 * Net of interest income 15

16 Free Cash Flow ($ in millions) 1H:15 1H:14 Chg GAAP Pretax Income $(37) $58 $(95) PP&E (non fleet) depr. exp. + amortization exp (7) Cash Taxes (19) (33) 14 Net Working Capital/Other (58) (221) 163 Operating Cash Flow excl. fleet depr. add-back RAC Fleet Growth (net capex + depr. exp. & net fleet financing) HERC Fleet Growth (net capex + depr. exp.) $84 $9 $ (542) 652 (101) (50) (51) PP&E Net Capital Expenditures (123) (106) (17) Net Investment $(114) $(698) $584 FREE CASH FLOW $(30) $(689) $659 16

17 Corporate Liquidity at June 30, 2015 Liquidity and Debt ($ in millions) ABL Availability: $1,027 Unrestricted Cash: 537 Corporate Liquidity: $1,564 Total net corporate debt $6.0 billion Total net fleet debt $10.7 billion Net corporate debt / LTM corporate EBITDA ratio 4.9x 17

18 OUTLOOK 18

19 FY:15 Financial Guidance Reaffirmed Corporate EBITDA - Consolidated HGH Full Year 2015 Forecast $1,450M - $1,550M WW HERC Corporate EBITDA $575M - $625M U.S. RAC Monthly Depreciation per unit $295 - $305 U.S. RAC fleet capacity growth 1 0.5% - 1.5% Net non-fleet capex $275M - $295M Effective tax rate 37% 2H:15 HERC Corporate EBITDA: Growth in new accounts and investments in fleet maintenance to drive utilization, partially offset by oil and gas weakness U.S. RAC DEPRECIATION: Likely conservative, but MY2016 acquisition not yet completed, residual values estimated lower 1 Excludes Advantage sublease and Hertz 24/7 vehicles Assumes continued HERC pressure due to weak oil and gas markets; continued improvements in U.S. and International RAC businesses 19

20 Q&A