Hertz Investor Presentationfilecache.drivetheweb.com/mr5ir_hertz/349/download/BAML+Auto... · Hertz...
-
Upload
trinhhuong -
Category
Documents
-
view
239 -
download
0
Transcript of Hertz Investor Presentationfilecache.drivetheweb.com/mr5ir_hertz/349/download/BAML+Auto... · Hertz...
Hertz Investor
Presentation
April 16, 2014
BAML Auto Summit
New York, NY
1
Forward-Looking Statements
Certain statements contained in this presentation are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements give our current expectations or forecasts of
future events and our future performance and do not relate directly to historical or current events or our
historical or current performance. Most of these statements contain words that identify them as forward looking,
such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”, “believe”, “seek”, “will”, “may”, “opportunity”,
“target” or other words that relate to future events, as opposed to past or current events.
Forward-looking statements are based on the then-current expectations, forecasts and assumptions of our
management and involve risks and uncertainties, some of which are outside of our control, that could cause
actual outcomes and results to differ materially from current expectations. For some of the factors that could
cause such differences, please see the sections of our annual report on Form 10-K for the year ended
December 31, 2013 and quarterly reports on Form 10-Q for the quarters of 2013 entitled “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements.” Copies of these reports are available from the
Securities and Exchange Commission, our website or our Investor Relations department.
We cannot assure you that the assumptions under any of the forward-looking statements will prove accurate or
that any projections will be realized. We expect that there will be differences between projected and actual
results. These forward-looking statements speak only as of the date of this presentation, and we do not
undertake any obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. We caution prospective purchasers not to place undue reliance on
forward-looking statements. All forward-looking statements attributable to us are expressly qualified in their
entirety by the cautionary statements contained herein and in our annual and quarterly reports described
above.
2
Disclosure on Financials in Presentation
Amounts shown in this presentation, unless otherwise indicated, are for Hertz Global Holdings,
Inc., (HGH), the ultimate parent company of The Hertz Corporation (THC). GAAP and non-GAAP
profitability metrics for THC, the wholly owned operating subsidiary, are different from those of
HGH.
During 2006, the results of HGH and THC varied primarily due to the $1.0 billion loan facility on
the books of HGH which was repaid with the proceeds from HGH’s initial public offering. In 2007,
THC had lower total expenses than HGH primarily due to $2.0 million of secondary offering costs
incurred at the HGH level. In 2009, 2010, 2011, 2012, and 2013 HGH also had interest expense
relating to the 5.25% Convertible Senior Notes issued in May 2009, as well as debt
extinguishment costs related to the early conversion of a portion of the Convertible Senior Notes
during the third quarter of 2013.
Other minor differences in the various profit metrics for HGH and THC, presented on both a
GAAP and non-GAAP basis, exist relating to additional audit fees and interest income relating to
additional cash on had at the HGH level.
3
Accelerating
Cash Flow
Generation
Advanced
Technology
Leader
Culture of
Operational
Excellence
Superior
Growth
Strategies
Diverse,
Global
Portfolio
TRANSFORMING HERTZInvestment Proposition
4
A Market Leader with the
Most Diversified Offering
Worldwide
Equipment Rental
Revenue
$1.5B
Off-Airport
Revenue
$2.5B
Leasing/
Fleet Mgmt
Revenue
$0.5B
FY:13 Total Revenue +19%; Adj. Pre-tax Income +29%
Construction
Revenue
$0.6B
Fragmented
Revenue
$0.5B
Industrial
Revenue
$0.4B
Diverse,
Global
Portfolio
Worldwide
Rental Car
Revenue
$9.2B
Airport
Revenue
$6.2B
Total Hertz
$10.8B
5
Tax-free separation
RAC Focus – Primarily cash generation and growth
HERC Focus – Growth and cost reduction through cycle
Distinct strategies and investment profiles
Tailored capital structures
Board replaces prior buyback authorization with new $1B plan
Rental car target leverage ratio of 2.5x-3.5x allows for potential
ongoing capital return to shareholders
Transaction Unlocks Significant Value for Shareholders
Transaction Summary
Separation
of Two
Strong
Companies
Pure Play
Valuations
$1B Share
Repurchase
Program
6
$1.54B
$667M
43%
$292M
19%
Construction
Revenue
$0.6B
Fragmented
Revenue
$0.5B
Industrial
Revenue
$0.4B
2013 Revenue
Corporate EBITDA
(% Margin)
Adj. Pre-Tax Income
(% Margin)
1. HERC Segment financials as reported. Not pro forma for incremental allocations or incremental standalone costs.
(1)
Separation Benefits - Equipment Rental
(1)
Pure play company
Increased reporting
transparency
Attract more focused investor
base
Resources aligned with growth strategies
Optimizes capital structure
Consolidation opportunities
Enhanced management focus
Financial
Overview
(2013)
Key
Segments
/ End
Markets
“New” HERC
Separation
Benefits
7
Financial
Overview
(2013)
Key
Segments
/ End
Markets
1. RAC Segment financials plus all corporate overhead and other reconciling items. Adjusted pre-tax income based on existing HTZ capital structure and does not adjust for any debt paydown post separation.
$9.24B
$1.38B
15%
$861M
9%
Hertz Rental Car “Post Separation”
2013 Revenue
Corporate EBITDA
(% Margin)
Adj. Pre-Tax Income
(% Margin)
(1)
(1)
Separation
Benefits
Off-Airport
Revenue
$2.5B
+ HCM
Leasing/
Fleet Mgmt
Revenue
$0.5B
Airport
Revenue
$6.2B
Pure play company
Increased reporting transparency
Leader in consolidated industry
More stable cash generation
Greater capacity to return cash
to shareholders
Best-in-class financial profile
(1)
Separation Benefits - Rental Car
8
Visibility Adds Value
____________________
Note: Hertz Rental Car Post-Separation financials represent RAC Segment financials plus all HGH reconciling items and unallocated corporate allocations. This data speaks
as of 03/18/2014, the date on which the estimate was originally given, and this slide does not constitute confirmation or an update of that previously issues estimate.
1. Pro forma Adj. Pre-Tax income based on existing HTZ capital structure and does not adjust for any debt paydown post separation.
BEST-IN-CLASS FINANCIAL PERFORMANCE
Should Capture Greater Valuation
Hertz RENTAL CAR Post-Separation – Financial Summary
Pro Forma Income Statement Metrics
($ in billions) 2010 2011 2012 2013 2014E
Revenue $6.5 $7.1 $7.6 $9.2 $9.9
YoY Growth 8.4% 9.2% 7.8% 20.9% 6.8%
Corporate EBITDA $0.7 $0.9 $1.1 $1.4 $1.5
Margin 10.8% 12.6% 13.8% 14.9% 15.3%
Adjusted Pre-tax Income $0.3 $0.5 $0.7 $0.9 $1.0
Margin 4.1% 7.1% 8.7% 9.3% 10.2%
(1)
9
Rental Car Strategic Revenue Drivers
Rental Car
Off Airport
Rental Car
Leisure Segment
Insurance
Replacement
Technology
Superior
Growth
Strategies
Vehicle
Leasing
10
U.S. Off Airport Rental Car
Superior
Growth
Strategies
Greatest incremental revenue growth opportunity:
Locations 2007 = 1,580 vs. FY:13 =2,875; +76%
Capture share in insurance replacement; double-digit growth over last 2 years
‒ Recession proof business
‒ 2014 elevated to primary position with top 5 national insurance company
Broaden network coverage; targeting 200+ net new locations annually
Offer 24/7 rentals “in your neighborhood”
*Auto Rental News 2012 & Company Reports
$11B off-airport rental car market*
Hertz share at only ~13% represents
significant potential growth
11
U.S. Off Airport Rental Car
Strong Margin Contribution
Superior
Growth
Strategies
Retail
49%
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 Analysis – Locations Open > 2 Years
Lower RPD
Low cost infrastructure
Longer length rental
Video kiosks drive
down labor costs;
reduce need for brick &
mortar expansion
Rapidly expanding by
co-locating
with body shops,
hotels, etc.
12
Donlen Fleet Leasing & Management
Vehicle Leasing
Vehicle acquisition
License and title
management
Vehicle remarketing
Fleet Management Services
Vehicle Maintenance
Accident management
Fuel management
Telematics
Reduces fuel use and
resulting CO2 emissions
Improves safety
Improves productivity
Equipment Financing
Syndication model
Longer term fixed financing
Class 4+ trucks, trailers and
material handling equipment
Highly
Synergistic
Businesses
Superior
Growth
Strategies
13
Similar 3-Tier Strategy in Europe
Premium Mid-Tier Value
U.S. Rental Car Leisure Segment$11B Total U.S. Airport Market
Superior
Growth
Strategies
14
Acquisition Synergies
Recognized over 3 years
$300M REVENUE Synergies $300M COST
Synergies
Leverage
Global
Partners
40%
Europe
Corporate
Expansion
37%
Other 6%
Fleet
40%
Technology
& Related
31% Other
14%
EU opened 143 corporate Thrifty
locations
Negotiated DTG agreements with 350
HTZ corporate accounts; exclusive
partners, including AAA, Marriott;
airline partners like Jet Blue, Spirit
DTG referrals to HTZ OAP underway
Fleet - procurement, 3 pts utilization,
alternative sales channels
Technology – systems integration:
fleet, pricing, counter, e-commerce,
reservations, billing, HR, finance
Non-fleet procurement – Centralize
DTG spend, leverage combined scale
15
HERC Strategic Revenue Drivers
Equipment
Rental
Non-res
Construction
Recovery
Superior
Growth
Strategies
Market
Penetration
Brand
Expansion
N.A. Rev. Mix FY:13 FY:06
Constr. 38% 52%
Industrial 26% 18%
Fragmented 36% 30%
Franchise & JV
expansion
Latin America,
Middle East, Asia
Now Positioned to Stand Alone as Best-in-Class
16
Recovery of Non-Res Construction only Beginning
U.S. industrial market leads equipment rental recovery
U.S. non-res construction industry awaiting recover
Equipment Rental Growth Drivers
$200
$220
$240
$260
$280
$300
$320
2007 2008 2009 2010 2011 2012 2013 2014F
U.S. Industrial Spending
$125
$150
$175
$200
$225
$250
2007 2008 2009 2010 2011 2012 2013 2014F
Source: McGraw-Hill
Source: IIR
U.S. Non-res Construction Starts
Superior
Growth
Strategies
17
Cash Flow Acceleration
Improved Profit
& Margin
Better Capital
Management
Revenue Growth
Fleet
Management
Lean Six Sigma
Asset Light
Technology-led
Expansion
Franchising
Improved Balance
Sheet
18
Better Fleet Management Drives Returns
$400
$1,000
Dealer Direct Retail & R2B
% of Total Hertz Vehicle Sales
Alternative Resale Channels
Accelerating
Cash Flow
Generation
Incremental Return vs. Auction
32%
12%
38%
15%
39%
15%
40%
30%
Dealer Direct Retail & Rent2Buy‘11 ‘12 ‘13 ’14E
Dealer Direct
‘11 ’12 ’13 ’14E
Retail & Rent2Buy
Licensed in 35
states
Rent2buy.com
online sales
Staff of used-car
experts
Reduces cost of sale, improves sale price, keeps cars on rent longer
19
$0
$187
$500
$1,260
$1,698
$2,156
$2,639
$2,939
$175
$193
$203
$211
$222
$226 $229
$235
2006 2007 2008 2009 2010 2011 2012 2013
* Rental Revenue per Employee
Lean Six Sigma
Productivity Improvements
Leveraging Lean Six Sigma
across operations
Corporate culture of
operational excellence
More than 430 black,
yellow and green belts
deployed worldwide
Expanding Lean Six Sigma
“Lighthouse” program to
off-airport rental car
locations
Annual gross cost savings
of ~$200M targeted to
offset inflation
Employee productivity 29 consecutive quarters of YoY improvement
Employee Efficiency* ($ in thousands)
Cumulative Cost Savings ($ in millions)
Accelerating
Cash Flow
Generation
20
Higher Return Investments
Increases productivity, enhances customer
experience and improves revenue
management
Enables rapid expansion of off-airport network
Expands hours of operation to virtually 24/7
Technology & Innovation
Reducing costs while enhancing customer experience
Video Kiosks
Virtual rental experience
24/7
Reduces brick & mortar,
labor investment
Hertz On Demand
Accelerating
Cash Flow
Generation
E-ReturnMobile Gold Alert
Express Rent
Kiosks
Hertz
24 /7
21
Consistently Improving Trends
2009 2010 2011 2012 2013 2014E1
Revenue $7,101.5 $7,562.5 $8,299.3 $9,024.9 $10,771.9 $11,550.0
YoY Growth 6.5% 9.7% 8.7% 19.4% 7.2%
Corporate EBITDA $974.0 $1,094.3 $1,370.8 $1,626.4 $2,043.7 $2,240.0
Margin 13.7% 14.5% 16.5% 18.0% 19.0% 19.4%
YoY Growth 12.4% 25.3% 18.6% 25.7% 9.6%
Adjusted Pre-tax $193.0 $340.1 $661.8 $892.3 $1,153.2 $1,320.0
Adj. PreTax Mgn 2.7% 4.5% 8.0% 10.0% 10.7% 11.4%
YoY Growth 76.2% 94.6% 34.8% 29.2% 14.5%
Adjusted EPS $0.28 $0.51 $0.94 $1.31 $1.63 $1.85
YoY Growth 82.1% 84.3% 39.4% 24.4% 13.5%
Free Cash Flow ($347) $463 $63 $155 $449 $600
1Mid-point of 3/18/14 guidance; this guidance speaks only as of that date and this slide does not constitute confirmation or an update of that
previously issued guidance.
($ in millions)
Accelerating
Cash Flow
Generation
22
Transformation Positions Businesses
for Standalone Success
Superior
Growth
Strategies
Next Step: Optimize Strategies; Maximize Profit & Cash Flow
23
Earnings and FCF generation should allow for ongoing deleveraging
Balanced Capital Focus: debt reduction; fleet investment
Prudent capital investments to promote steady base growth rate
Balanced Capital Focus: debt reduction; share repurchases
HERC proceeds fund new $1B share buyback and immediate deleveraging
Under stable market conditions, absent unique investments or new fleet
capex, target leverage ratio allows for potential ongoing returns to
shareholders
Balance Capital Allocation
HERC
Hertz
Rental
Car
Accelerating
Cash Flow
Generation
24
Accelerating
Cash Flow
Generation
Advanced
Technology
Leader
Culture of
Operational
Excellence
Superior
Growth
Strategies
Diverse,
Global
Portfolio
TRANSFORMING HERTZInvestment Proposition
25
26
27
28