2Q 2015 Earnings Call August 11, 2015 8:00am ET
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 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
Non-GAAP Measures The following non-GAAP* measures will be used in the presentation: Corporate EBITDA Net Depreciation Per Unit Per Month Corporate EBITDA Margin Net Corporate Debt Adjusted Pre-Tax Income Net Fleet Debt Adjusted Net Income Free Cash Flow Adjusted Interest Expense Adjusted Diluted Earnings Per Share (Adjusted EPS) Total RPD *Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation. 3
Today’s Agenda John Tague Business John Tague President & Chief Executive Officer Overview Hertz Global Holdings Tom Kennedy Financial Tom Kennedy Sr. EVP & Results Chief Financial Officer Hertz Global Holdings Overview Questions & John Tague Larry Silber Answers Tom Kennedy President & Chief Executive Officer Session Larry Silber Hertz Equipment Rental 4
Positioned for Improvement U.S. RAC 2H:15 1H:15 • • Disposing of high mileage vehicles Average vehicle mileage substantially lower • Onboarding new vehicles • Capacity aligned heading into July peak • Aligning fleet with profitable demand • Fleet efficiency improving • Systems fully operational, more reliable data with expanded analytical capabilities • Resolving systems instability • Rolling out Dollar, Thrifty and Hertz integrated • Addressing data integrity issues counter system in August; launched financial systems integration in July • Teams now collaborating on core set of well- • Management assessing businesses defined initiatives focused on efficiency, and beginning to institute improvement process excellence, and service and product plans quality Improved fleet management, processes and systems helping to reverse performance trends in 2H:15 5
$200M FY:15 Cost Savings Update Realized ~$80M of Cost Savings in 1H:15 Areas of savings include: Freezing defined benefit pension plan Eliminating Navigation Solutions Corporate/ redundancies Operations Closing unprofitable off-airport facilities Overhead Consolidating third-party IT spend Clearing non-value added IT projects Reducing out-of-service cycle times Fleet through process efficiencies and Management increased accountability Disciplined return on investment Sales and practices, including reorganizing Marketing rental car sales force Potential for additional savings from technology-enabled opportunities 6
Tom Kennedy CFO • FINANCIAL RESULTS • CASH FLOW REVIEW • BALANCE SHEET REVIEW 7
2Q:15 Results ($ in millions, except per share amounts) 2Q:15 2Q:14 YoY GAAP Results Results 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 461 465 (1%) C 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%) 8 * Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation.
U.S. RAC Total Revenue 2Q:15 Off Airport 24% On Airport 76% of U.S. RAC Revenue of U.S. RAC Revenue Airport Total RPD down for Hertz brand, up for DTG Airport RPD Off Airport RPD Total RPD brands Total Total Total Total Total Total Ex Fuel Ex Fuel Off-airport insurance Ex Fuel replacement revenue as a 0.5% percent of total off airport 0.1% revenue increased 7 ppts YoY to 37% (0.5%) (0.8%) Average fleet increased 2% YoY, re-aligned by (1.5%) quarter end (2.0%) June 2015 airport revenue Transaction Days: ex-fuel up, first monthly Total Airport Off Airport YoY increase since Sept. (2.4%) (2.4%) (2.5%) 2014 Note: Total RPD calculated using Total Revenue less ancillary retail car sales revenue 9
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 2015 2014 1Q $ 287 $ 288 2Q $ 259 $ 259 Six Months June 30 $ 273 $ 273 Full Year $ 295-305 $ 294 FY:15E monthly depreciation per vehicle of $295-$305 may be conservative depending on residual value trends 10
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
HERC Revenue 2Q:15 Rental YoY % change Revenue* Revenue* Volume Pricing WW HERC 1% 1% 2% 1% N.A. 1% 1% 3% 1% U.S. 6% 5% 4% 2% Volume Pricing New accounts in construction sectors and N.A. national accounts 51% of revenue vs. specialty and niche markets offset 54% 2Q:14 due to expansion of local weakness from upstream oil and gas customer base Upstream oil and gas pricing pressure * Excludes FX impact 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
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
HERC Key Metrics Avg fleet age 41 mos vs. 42 mos. 2Q:14 NA Dollar Utilization WW FY Gross Purchases* 672 39% 615 39% 38% 38% 37% 36% 36% 35% 35% 35% 352 1Q 2Q 3Q 4Q 2013 2014 1H:15 2013 2014 2015 FY:15E net fleet capex $410M to $430M WW FY Net Fleet Purchases* NA Time Utilization 534 68% 68% 67% 433 66% 65% 64% 63% 63% 62% 62% 259 1Q 2Q 3Q 4Q 2013 2014 1H:15 2013 2014 2015 * Includes non-cash purchases and sales 14
Interest Expense Summary GAAP Interest Expense* 2015 2014 (millions) Remained flat 2Q $156 $164 as % of Rev YTD 2Q $310 $320 Adjusted Interest Expense* 2015 2014 2Q $140 $151 YTD 2Q $278 $295 * Net of interest income 15
Free Cash Flow 1H:15 1H:14 Chg ($ in millions) GAAP Pretax Income $(37) $58 $(95) PP&E (non fleet) depr. exp. + 198 205 (7) amortization exp. Cash Taxes (19) (33) 14 Net Working Capital/Other (58) (221) 163 Operating Cash Flow excl. fleet $84 $9 $75 depr. add-back RAC Fleet Growth (net capex + depr. 110 (542) 652 exp. & net fleet financing) HERC Fleet Growth (net capex + (101) (50) (51) depr. exp.) PP&E Net Capital Expenditures (123) (106) (17) Net Investment $(114) $(698) $584 FREE CASH FLOW $(30) $(689) $659 16
Liquidity and Debt Corporate Liquidity at June 30, 2015 ($ 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
OUTLOOK 18
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