2Q 2015 Earnings Call August 11, 2015 8:00am ET Safe Harbor - - PowerPoint PPT Presentation

2Q 2015 Earnings Call

August 11, 2015 8:00am ET

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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

• f these filings are available from the SEC, the Hertz web site or the Company’s

Investor Relations Department.

3 *Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation.

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) Total RPD

Non-GAAP Measures

Net Depreciation Per Unit Per Month Net Corporate Debt Net Fleet Debt Free Cash Flow Adjusted Interest Expense

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Today’s Agenda

John Tague President & Chief Executive Officer Hertz Global Holdings Tom Kennedy

• Sr. EVP &

Chief Financial Officer Hertz Global Holdings

Business Overview John Tague Financial Results Overview Tom Kennedy Questions & Answers Session John Tague Tom Kennedy Larry Silber

Larry Silber President & Chief Executive Officer Hertz Equipment Rental

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Positioned for Improvement

Improved fleet management, processes and systems helping to reverse performance trends in 2H:15

• Management assessing businesses

and beginning to institute improvement plans

• 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

1H:15 2H:15

• 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

• Teams now collaborating on core set of well-

defined initiatives focused on efficiency, process excellence, and service and product quality

U.S. RAC

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$200M FY:15 Cost Savings Update

Potential for additional savings from technology-enabled opportunities

Corporate/ Operations Overhead

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

Fleet Management

Reducing out-of-service cycle times through process efficiencies and increased accountability

Sales and Marketing

Areas of savings include: Disciplined return on investment practices, including reorganizing rental car sales force

Realized ~$80M of Cost Savings in 1H:15

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Tom Kennedy

CFO

• FINANCIAL RESULTS
• CASH FLOW REVIEW
• BALANCE SHEET REVIEW

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2Q:15 Results

C

* Definitions and reconciliations of these non-GAAP measures are provided at the end of the presentation.

GAAP 2Q:15 Results 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 461 465 (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%)

($ in millions, except per share amounts)

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U.S. RAC Total Revenue 2Q:15

Note: Total RPD calculated using Total Revenue less ancillary retail car sales revenue

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. 2014

Airport RPD Off Airport RPD

On Airport 76%

• f U.S. RAC Revenue

Off Airport 24%

• f U.S. RAC Revenue

Total RPD Total Total Total Total Ex Fuel Total Ex Fuel Total Ex Fuel

(0.8%) 0.1% (0.5%) 0.5% (2.0%) (1.5%)

Transaction Days: Total Airport Off Airport (2.4%) (2.4%) (2.5%)

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Cautious 2H:15 Outlook

U.S. RAC Depreciation

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

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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

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HERC Revenue 2Q:15

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

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

Volume

New accounts in construction sectors and specialty and niche markets offset weakness from upstream oil and gas

YoY % change Revenue* Rental Revenue* Volume Pricing

WW HERC 1% 1% 2% 1% N.A. 1% 1% 3% 1% U.S. 6% 5% 4% 2%

* Excludes FX impact

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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

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HERC Key Metrics

36% 37% 39% 38% 35% 36% 38% 39% 35% 35%

1Q 2Q 3Q 4Q

NA Dollar Utilization

2013 2014 2015 62% 65% 68% 66% 62% 64% 67% 68% 63% 63%

1Q 2Q 3Q 4Q

NA Time Utilization

2013 2014 2015

672 615 352 2013 2014 1H:15

WW FY Gross Purchases*

534 433 259 2013 2014 1H:15

WW FY Net Fleet Purchases* * Includes non-cash purchases and sales

FY:15E net fleet capex $410M to $430M Avg fleet age 41 mos vs. 42 mos. 2Q:14

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Interest Expense Summary

(millions)

2015 2014 2Q $156 $164 YTD 2Q $310 $320 2015 2014 2Q $140 $151 YTD 2Q $278 $295

Remained flat

as % of Rev

GAAP Interest Expense* Adjusted Interest Expense*

* Net of interest income

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Free Cash Flow

1H:15 1H:14 Chg GAAP Pretax Income $(37) $58 $(95) PP&E (non fleet) depr. exp. + amortization exp. 198 205 (7) Cash Taxes (19) (33) 14 Net Working Capital/Other (58) (221) 163 Operating Cash Flow excl. fleet

• depr. add-back

$84 $9 $75 RAC Fleet Growth (net capex + depr.

• exp. & net fleet financing)

110 (542) 652 HERC Fleet Growth (net capex +

• depr. exp.)

(101) (50) (51) PP&E Net Capital Expenditures (123) (106) (17) Net Investment $(114) $(698) $584 FREE CASH FLOW $(30) $(689) $659

($ in millions)

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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

Corporate Liquidity at June 30, 2015

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OUTLOOK

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FY:15 Financial Guidance Reaffirmed

Full Year 2015 Forecast Corporate EBITDA - Consolidated HGH $1,450M - $1,550M WW HERC Corporate EBITDA $575M - $625M U.S. RAC Monthly Depreciation per unit $295 - $305 U.S. RAC fleet capacity growth1 0.5% - 1.5% Net non-fleet capex $275M - $295M Effective tax rate 37%

1Excludes Advantage sublease and Hertz 24/7 vehicles

2H:15

U.S. RAC DEPRECIATION: Likely conservative, but MY2016 acquisition not yet completed, residual values estimated lower HERC Corporate EBITDA: Growth in new accounts and investments in fleet maintenance to drive utilization, partially offset by

• il and gas weakness

Assumes continued HERC pressure due to weak oil and gas markets; continued improvements in U.S. and International RAC businesses

Q&A