Hertz Global (HTZ) 9 Aug 212021 Q2 Earnings call transcript

Welcome to Hertz Global Holdings Second Quarter 2021 Earnings Commentary.

I would now like to turn it over to our host, Tressie Rose.

Hi, everyone, and thank you for tuning in. I'm Tressie Rose, Vice President of Communications for Hertz. And I'm joined by Paul Stone, our President and CEO; and Kenny Cheung, CFO. our an contains review earnings will our can found had we press results, share you on on be that website our our issued second on an some hope highlights opportunity call, results the to release which hertz.com. On of We this Relations and Paul update Investor quarter progress. XXXX strategic for the the take then including details, will financial you through quarter. operational Kenny metrics key

as are to our Our results the Inc., our connection focus which Chapter emergence, in the were with its segment, company. remarks presentation. prior in publicly Caribbean car reportable the press with segment. and on Holdings, Differences XX included car restated refer previously will traded Global rental for Hertz to we and the disclosed conform release. In HERC, the the include revised financial company Hertz's reportable and quarter Hertz segments Americas which second its its Corporation have been Accordingly, to reportable revised international in periods rental America Canada, Latin in

reconciliation press release. our is included Our in

cause filings or second assumptions, obligation section uncertainties periodic uncertainties the assumptions These remind financial statements risks which of information, risks, that no and SEC our XXXX statements. the revise Form quarter press our subject hertz.com. as other forward-looking in XX-Q as to on and identified undertake Investor some factors including will information. other results actual performance, with differ are and release We well in we materially from update I our want such to Relations on contain to potential discuss could you future that to and matters is forward-looking and forward-looking and

over press with in it using against these like financial that otherwise use of XXXX, be measures, we'll hand and that, Stone. which unless non-GAAP performance our are recording, demonstrated GAAP reconciled We all All to to measures. will better Paul profitability our this comparisons stated. With believe is non-GAAP numbers release. I'd During

for listening everyone, you, thank and in. Tressie, Thanks,

Today's under restructuring significant we under quarter, consumer bankruptcy concluded our common of our signs company. remarks XX XX, HTZZW. as to a and Hertz had are warrants achievement for rebound new X, all an like reflecting Chapter the welcome trading from our emerged our the new June second began continued confidence July shareholders. Hertz of stock and and milestone a first symbol I on outstanding of and HTZZ our would strong travel. Effective

With fleet the managing shortage, limited demand rental resurgence in in chip our supply and remained to due our the agile vehicle meet needs. to customers' we

model our underpinned March XXXX. fleet Donlen leaner which a was cost addition, and the revenues total of sold we structure. We business, leasing revenues operating improvement efficient performance In XX% our the delivered more of billion, by sequential excluding in $X.X

improvement fleet also versus threefold The over cost and efficient of reduction. recurring a strong and We more than XXXX. $XXX from delivered revenues, million increase $XXX management strong adjusted million, global EBITDA resulted structural of

a in full still further to ahead. we accelerating the positioned While that and are quarters trends our continue well monitoring confident off, are are closely demand momentum we is recovery

across sale completing partners Donlen both our international profitability and vendors the while look growth cost long-term our reductions certain businesses, launching business our optimizing included aware location negotiating U.S. and program, the dynamics. The improvements full and footprint, subject optimizing This rightsizing $XXX and operate financial operational us and recovery, changes. remaining million to of a cash and for significant scope cost-reduction in fleet our meaningful proceeds, across process took on the XX of with throughout adjustments. and we a up success. through our necessary made are industry demand As of We we for Chapter focused made business hard set this supply-demand we at

to that partners transformed group your result, and work customers, and Hertz confidence the agile franchisees, around and to more team members shareholders an and continued new to Board thanks company, investor resilient goes our support. stronger, we've overall and world, our for the Great Hertz into a is As continuing. and

Now we the seeing as to of the the efforts refocus business. our chapter we are strategically next benefits for on Hertz, focus

financial flexibility, capital and structure Our opportunities. give on position take strengths upon resources improved our build momentum new and the us business and to

With stakeholders. this long-term in is profitability team growth, strong for and value place, focused increased foundation our on delivering enhanced our

key want brand, using our and strategic will initiatives the Hertz We advantage operating including team. I on iconic deeply of priorities experienced and the X that global are executing key to to be on. footprint fullest, touch competitive strategic leadership we

growth the we strategic business to the of sustainable by partners. relationships of power Hertz the the deliver global investment as family our brought managing are leverage we and profitable First, brands new

and are optimistic to about their as travel habits. rebound sustained travel prepandemic recovery return continue our people We

While felt control COVID over people as experience. uncertainty the variants, the more their car they among in was signs comfortable remains rental more of due industry new see where to a rental first car had the rebound to traveling

the And domestic of and international demand to that of with remain variant. customers see Delta XX,XXX corporate travel be is positioned to the though leading shape we we benefit. continue even confident to travel serve our locations travel recovery, will its we the returns, uniquely We worldwide. steady from reopens are ready network leisure whatever the And when recovery,

and upon team strong demand fleet, carefully to drawing deep experience ahead. are our managing challenges we meet of managing the Second, continued the our

valued OEM we closely that our working will XXXX. partners into expect are to We ongoing navigate the shortage continue with chip

headwinds and anticipate we higher fleet costs. continued maintenance as result, capacity such constraints a As

tailwinds, and yields we On the and industry as side, strong improved values. anticipate residual market flip sustained

life vehicles Within across environment, entire cycle. on managing this we are our focused their

will Our ensure profitable initiatives, continue minimize network available. they vehicle and maintenance our working leverage fleet to most extend the vehicles. vehicles by When diligently are sold, initiatives through life which supported preowned are are strong are to to These of purchases channels vendor acquisition the downtime. we strategic include sold the management

priority third experience. overall customer continue to Our is the enhancing

as an the leader our industry We are over service. award-winning years and proud the of received recognition Hertz's heritage for we've

building setting the and heritage on focused higher. the bar to look we are even As future, that we firmly on

say, actively the are always, priority. a to we investing Needless lives, of Keeping Hertz, changed experience initiatives. daily improving across to #X to pandemic the At we mind committed remain as many adapt range our as in safety has that, in travel. and our aspects including of continue customer

and exceptional our positioned hiring meet adjusting so customer staffing in are touch from expect best us. our We uptick our the levels across deliver customers are to travel points demand, to we service

which self-service, also has more the in travel want who we're customers added of our the speeding and benefit app For hertz.com, journey. up investing

this our skip the For the launched lot we over new is experience. offering and our and directly customers Ultimate offering gives for of that to choice. locations first-time the counter currently select summer, of successful benefit example, airport their go Customers XX Choice new top a car is to check in, even at of the app This available renters. can

us and We time, one to directly where agent They us. the they text in speak with our are on including option scaling of with when to having phone. our our need can customer messaging contact via customers real the an capabilities, allowing text agents service

We've also program. upgraded and enhanced our loyalty

members, access status every for a status existing offering Star opportunities we extended with booking. for are points to elite to share year. the their new We're members For on offered and members currently friend, giving elite double we've our expirations, Five point

in and We loyalty the Rewards continue the Hertz we that experience marketplace. Gold Hertz differentiating the Plus are continues be will to leading proud program, car rental

travel here, their and group expanded our We and is are synergies with already for new collaborating investor with network Plus and new new GBT. our extensive partnerships. Amex benefits partnerships and Hertz industry recognizing including Tripadvisor

the value partnerships accretive continue that believe customers. our and for bring in to this We our business to

opportunities we We are excited growth about see. commercial and the significant strategic

In addition we to an remain rental, as integral a part of car mobility whole.

We become relationships even lives service of as Lyft through more and who pandemic. have strengthening as with Uber a important as in are host providers the partners such delivery well our

our influx As the planning vehicles moving continues fleet. ahead electric the for we mobility, towards are of world into low-carbon

Going our back strategic to priorities.

continuing fourth our cost and manage in everything to one maintain is cost discipline we rigorous Our do. actively

Overall, million This technology will structure savings business. investments leaner to removed over as For our example, profitability quarter fixed higher strategic our of us SG&A cost across all even volumes our XXXX. by initiatives continue positions the the structural XX% we we reduced future. Underpinning $XXX recover. cost, to into versus sustained be that are drive for

example, revenue invest our in when in to to fleet place also to maximizing are helps pricing management, where our continuing improve strategy. us demand we for forecasting systems This For profit. making and in decisions about

In investor addition, our opportunities. group further synergies new with will us growth help unlock

turn work and it acknowledge their teams to I efforts. our incredible to want around hard Before world over the exceptional dedication, Kenny, for I

relentless focus comprehensive an personally the year past and also impact, our its in the have playing customers. on role key all both of and restructuring. professionally, maintaining COVID-XX these pandemic plus, business and They our did eye Over keeping the a navigated while our while on they

be shown more Hertz I entire perseverance and has resilience. not proud Our thankful. and great global team could

turn that, I With it will to over Kenny.

Thank you, Paul.

thanks our up continued adding to fantastic set by world revitalize around success. I'll us start team work for hard and all their for Hertz to my the

Before to my relevant our I I a from as GAAP release. numbers adjusted which press reconciled begin, will comments, in comments of comparing on quarter my are be XXXX more our benchmark. results, focus Throughout our the will second

refer our to to results, comparisons please our XXXX For XX-Q.

turning results. to over Now our financial

for overview share quarterly we is EBITDA, First, to corporate of company. our adjusted $XXX let provide of total record excited an delivered me which million I'm that a company. our

with mitigated the growth across quarter, of upward leisure both a Pricing and saw the generated demand second of corporate inventory, trend billion, in total the we fewer days. travel quarter, impact In we rental in $X.X coupled compared the the which down sequential revenues During reflected revenue EBITDA. quarter month-over-month fleet XXXX. to XX% strong tighter adjusted

mentioned, increased the with of from $XXX leaner corporate margins to to in demand, meaningfully our second as $XXX increased disciplined profitability. consumer strong As cost XX% structure, expanded our our to compared XXXX. I quarter adjusted management contributed operating our to X%, coupled all And million EBITDA million

market capacity to and discipline manage align demand. continued have We to our with with fleet rigor

with capacity Our transaction our XXXX, versus line XX% in which days. was fleet down was

and fleet for and management. was expense continued As residual per disciplined vehicle depreciation, by driven $XX values strength unit, monthly depreciation

International on me additional let provide some Now color RAC RAC Americas and segments.

driven $X.X XX% by XXXX, versus was days, RPD increased revenue RAC, Americas airport Within transaction across down offset off-airport. fewer by and billion,

invest the period continue in of business, up million, continue and Americas over The adjusted revenue Xx pandemic demonstrated to versus XXXX momentum our importance the van delivery in of same services margin. cargo reflects in to RAC XXXX. will see We and XXX% second $XXX Hertz EBITDA and was space. grew XX% this which versus quarter the delivery the last-mile has in

year-over-year. global In were headwinds. revenues able Adjusted our on to International to an $XXX EBITDA the and on RAC XXXX. versus execution $XXX productivity impact company's residuals were second reflected pandemic-related continued loss effects revenue Strong improvement which million, of travel was International million the XX% RAC. The segment, quarter offset million, down $X

strong our to made addition in consumer demand, mentioned, restructuring. changes improvements of and Paul quarter foundational built the this on our As the strength performance we during

a of Let during key the me highlight restructuring. our few accomplishments

across international more than better presence underperforming fleet pandemic both travel the the the and across optimized position while our footprint, and a best XX,XXX for ourselves during rightsized closing to locations. businesses us decline U.S. strong We global our We to to maintaining rebound. in our weather XXX locations our position

optimized segments We distribution yield. profitable our and go-to-market organic also network to capture better

we to difficult our necessary levels addition, XXXX. align but staffing In had in demand with decisions make market to

are Now as rebounds, actively we rehiring. volume

company estimate billion. over We sustainable would current significantly under that put fixed To cost This we reduced adjusted operating $X $XXX over total cost realize cost structure, XXXX. to structure, us perspective, the initiatives. sheet of highlighted, us been And and customer in technology, incremental the have our This allowed our invest million provides our restructuring corporate flexibility in experience, liquidity EBITDA significantly in excludes this that borrowing savings XXXX fixed to rates and in including results. under operating improve to the vehicle long-term fleet our and growth position. financing enhances impact further our which balance Paul finally, our lower our initiatives facilities, positioning

our billion senior to capital billion, in At structure credit the comprised facility. XX, $X.X available revolving unrestricted Turning position and $X June liquidity of and our liquidity. under billion cash totaled $X.X

our under liquidity had needs $XX credit of of $X.X support outstanding future credit no also and of leaving We billion to and billion RCF, $X.X letter of issuance. availability letters million borrowing

At Loan We with outstanding XX C comprised $XXX June issuance letters had of of sheet. balance billion $X.X emerged $X.X Loan significantly in that billion relative levels from corporate the corporate XX, Term lower debt, of debt to B, million support global we Chapter Term will our credit. prebankruptcy

are we position corporate unrestricted our have our XX, in and of billion corporate As debt. net maturities billion debt of $X.X exceeds June debt cash Also, XXXX. positive of no $X.X until we material

fund to we structural mark-to-market rental volatility. U.S., our a side, HVF which program, changes vehicle ABS reduce established the financing new On fleet III, to in incorporated go-forward the

book ABS into cushion at existing market and score used HVF of reduced risk was for value of value This June at as HVF a set in value. terms of volatility declines vehicles, III potential vehicles market their fair was car XX% XX. prices the June provides future III's transferred net significant against XXX% fair over In

For and build are rate. purchases, designed has rates. lower monthly actual III use value This the methodology starting is depreciation market fair vehicle cost HVF expected minimum to ABS ABS and time over depreciation cap new is exceed minimum to a X.XX% cushion rates the expected to a

evenly maturity of of split billion the drawn new funding ABS the X- variable The of of notes X-year a notes The $X.X funding X-year consists term which $X.X notes, quarter. variable between are billion maturities. program of end the and committed and was as have

are these was oversubscribed factor of market III. a with the reception pleased issuance notes We X. of HVF very by of The

of Our by rates, has the cost our decreased spread declining rate, XXXX basis blended XX rate overall is levels, ABS currently about LIBOR X%. vehicle borrowing U.S. blended excluding the in and points. to of funding impact Comparing current our MCN below VFN

for EBITDA company's Rounding at On not reduction require this X million first out is in of structure, $XX outstanding numbers. in cost capital annualized reduction contributes not structural of years. preferred billion mentioned our our rate use emergence, the does vehicle the least that which $X.X we debt part $X.X I stock have the cash of at billion improvement,

XX are an exercise warrants issued symbol of market with OTC HTZZW. million price XX-year under publicly share a on warrants term. traded in per also The the $XX.XX We the

U.S. event change according Although transaction. settlement control traded to to liability provisions these a they certain warrants, the due of are in classified publicly a are are only GAAP that as of applicable

the value recognized with other fair income will in We quarterly, adjustments warrants expense.

feel have market sheet returns. manage are balance growth to performance, and the strong and fleet as our To strongest in liquidity well in our travel our demand operating years. summarize, we with they many global been And needs operating prepared

Looking well positioned of beyond. ahead, XXXX back we are and half for the

driving above In continue trends, terms of the will positive are ongoing strong seeing fleet for high-yield RPD on factors the quarter. we XXXX expect into constraints including second And we outlook, current rebound and July, the based travel. environment in

an time. We calls are we which not macro additional in providing at consists plan live hosting the on to a exchange, earnings by which investor existing the relisting host we guidance once this re-IPO, roadshow Given uncertainties, for year-end. major and future of we anticipate

a Board business. strength are of only exciting with we base, we and Directors remarks additional investor Given a of underway, color these out our context to and provide use new to of bankruptcy, and of wanted month many new initiatives momentum

closing would I remarks. like you Now for to turn his back to Paul

Thank you, Kenny.

continue company to focus I'm to has transforming provided I great drive potential Hertz and our discussion hope confident a that long-term of our customers' and progress growth. has the experience. outstanding made innovating We've our update good momentum. sense profitable that on

is ready. the delivering we beginning our get to on people are road, As stakeholders. only value long-term This even the in greater our back

road moving are position forward an incredibly We with exciting in strong ahead. an

your Hertz. for you in Thank interest

concludes Earnings prerecorded Global Holdings XXXX Quarter This Commentary. the Second Hertz