News Release Details

ESTERO, Fla., Oct. 28, 2021 /PRNewswire/ -- Hertz Global Holdings, Inc. (OTCPK: HTZZ; OTCPK: HTZZW) ("Hertz", "Hertz Global" or the "Company") today announced financial results for the third quarter of 2021.

For the third quarter 2021, the Company generated total revenues of $2.2 billion, reflecting the continued rebound in leisure travel and tight fleet inventory as Hertz executes against its strategic roadmap. While volume continued to be lower compared to 2019 levels, these headwinds were partially mitigated by improvements in pricing power. Adjusted Corporate EBITDA reached a record $860 million and the Company achieved a record 39% margin for the third quarter, reflecting the team's dedication to continued operational improvement since completing the restructuring. Importantly, top- and bottom-line results were not meaningfully impacted in an incremental manner by the Delta Variant.

"Hertz delivered another solid quarter, which puts us in a position of strength as we create the new Hertz and lead the future of mobility and travel," said Mark Fields, Hertz's Interim Chief Executive Officer. "We see the opportunity for profitable growth by building on our iconic brand and global fleet management expertise, and combining it with new technology and new investments in electrification, shared mobility and a digital, customer-first experience."

AMERICAS RENTAL CAR ("AMERICAS RAC") SUMMARY

Americas RAC third quarter 2021 revenues reflect upward pricing trends due to management's structural improvements, positive momentum in domestic travel and industry-wide fleet constraints. Americas RAC record Adjusted EBITDA of $830 million and record margin of 43% reflect the impact of strong pricing, disciplined fleet management and the Company's execution of cost reductions.

INTERNATIONAL RENTAL CAR ("INTERNATIONAL RAC") SUMMARY

Global travel constraints continue to impact the International RAC business. Management's structural improvements on pricing mitigated the impact of lower volume compared to the third quarter 2019. The Company's disciplined fleet management and continued execution on productivity contributed to profitability. International RAC Adjusted EBITDA was $78 million, nearly closing the gap to the third quarter 2019 level.

Q4 AND FULL YEAR 2021 GUIDANCE

The Company's guidance for the fourth quarter and full year 2021 includes Adjusted Corporate EBITDA, a non-GAAP financial measure. The Company believes it is impracticable to provide a reconciliation to the most comparable GAAP measures due to (i) the forward-looking nature of the adjusted measure, (ii) the degree of uncertainty associated with forecasting the reconciling items and amounts, and (iii) providing estimates of the amounts that would be required to reconcile the forecasted adjusted measure to its forecasted GAAP measure would imply a degree of precision that could be confusing or misleading to investors.

The Company forecasts the following:

LIQUIDITY AND CAPITAL RESOURCES

The Company completed its restructuring in June 2021 with significantly lower non-vehicle debt levels relative to its pre-restructuring balance sheet. At September 30, 2021 the Company had $1.5 billion in outstanding non-vehicle debt, comprised of a $1.3 billion Term B Loan and a $245 million Term C Loan that will support the issuance of letters of credit. In addition, the Company has a $1.3 billion first lien revolving credit facility ("First Lien RCF").  At September 30, 2021, the Company had $366 million of letters of credit outstanding and no borrowings outstanding under the First Lien RCF. The Company has no material non-vehicle debt maturities until 2026.

The Company's liquidity position totaled $3.8 billion at September 30, 2021, comprised of $2.7 billion in unrestricted cash and $1.1 billion of availability under the First Lien RCF.

The Company also refinanced its ABS program with $2.8 billion of committed funding under a 2-year, floating rate syndicated bank sponsored Variable Funding Rental Car Asset Backed Notes, of which $2.3 billion was drawn at September 30, 2021. The Company also issued $4.0 billion in Fixed Rate Rental Car Asset Backed Notes split evenly between 3- and 5-year maturities. The overall cost of the ABS funding in the United States is currently below 2.0%.

ADDITIONAL MANAGEMENT COMMENTARY

Recorded audio commentary on Hertz's third quarter 2021 results from Mark Fields, Interim CEO, and Kenny Cheung, CFO is available at the Company's IR website at https://ir.hertz.com/events-presentations. 

RESULTS OF THE HERTZ CORPORATION

The Company's operating subsidiary, The Hertz Corporation ("Hertz Corp."), posted the same revenues as the Company for the third quarter of 2021 and 2020, and for the nine months ended September 30, 2021 and 2020. Hertz Corp.'s third quarter 2021 pre-tax income was $752 million versus the Company's pre-tax income of $768 million. The difference between Hertz Corp.'s and the Company's GAAP results is due to a $16 million change in fair value of the Company's Public Warrants in the third quarter of 2021. For the nine months ended September 30, 2021, Hertz Corp.'s pre-tax income was $968 million versus the Company's pre-tax income of $820 million. The difference between Hertz Corp.'s and the Company's GAAP results is due to a $164 million backstop fee associated with a rights offering offered by the Company in the second quarter of 2021 offset by a $16 million change in fair value of the Company's Public Warrants in the third quarter of 2021. Hertz Corp. and the Company's pre-tax loss were the same for the third quarter of 2020.  For the nine months ended September 30, 2020, Hertz Corp.'s pre-tax loss was $1.8 billion versus the Company's pre-tax loss of $1.7 billion resulting primarily from Hertz Corp.'s write off in the second quarter of 2020 of $133 million due from the Company. The non-GAAP profitability metrics for Hertz Corp. are materially the same as those for Hertz for the third quarter 2021 and 2020, and for the nine months ended September 30, 2021 and 2020.

SELECTED FINANCIAL DATA, SUPPLEMENTAL SCHEDULES, NON-GAAP MEASURES AND DEFINITIONS

The selected financial data of Hertz are set forth on page 7 of this release. Also included are Supplemental Schedules, which are provided to present segment results, and reconciliations of non-GAAP measures to their most comparable GAAP measures.

In the second quarter of 2021, the Company revised its reportable segments to combine its Canada, Latin America and Caribbean operations with the U.S. and renamed its U.S. Rental Car segment Americas Rental Car ("Americas RAC"). As a result, those operations will no longer be reported in the International RAC segment. Accordingly, prior periods have been recast to conform with the revised presentation. Additionally, in the second quarter of 2021, the Company added a financial statement line item for non-vehicle depreciation and amortization to better align with current industry practice. In the third quarter of 2021, the Company revised its calculation of Total RPD and Total RPU to include ancillary retail vehicle sales revenues to better align with current industry practice. For the revisions noted above, prior periods have been restated to conform with the revised presentation. Refer also to Supplemental Schedule IV.

Following the Supplemental Schedules, the Company provides definitions for terminology used throughout this earnings release and provides the usefulness of non-GAAP measures to investors and additional purposes for which management uses such measures.

Financial data included in this release are derived from our unaudited condensed consolidated financial statements for the three months ended September 30, 2021, which are included in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the SEC and on the Hertz website, IR.Hertz.com. We have prepared the unaudited condensed consolidated financial statements on the same basis as we have prepared our audited consolidated financial statements. The unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that management considered necessary for a fair statement of our financial position, results of operations and cash flows for the quarter. The Company's historical results are not necessarily indicative of the results to be expected for any future period. Financial data included in this release are qualified by reference to and should be read in conjunction with the Company's unaudited condensed consolidated financial statements and related notes which are included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.

ABOUT HERTZ 

The Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., operates the Hertz, Dollar and Thrifty vehicle rental brands throughout North America, Europe, the Caribbean, Latin America, Africa, the Middle East, Asia, Australia and New Zealand. The Hertz Corporation is one of the largest worldwide vehicle rental companies, and the Hertz brand is one of the most recognized globally. Additionally, The Hertz Corporation operates the Firefly vehicle rental brand and Hertz 24/7 car sharing business in international markets and sells vehicles through Hertz Car Sales. For more information about The Hertz Corporation, visit www.hertz.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this release, and in related comments by the Company's management, include "forward-looking statements." Forward-looking statements include information concerning the Company's liquidity and its possible or assumed future results of operations, including descriptions of its business strategies. These statements often include words such as "believe," "expect," "project," "potential," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "would," "should," "could," "forecasts," "guidance" or similar expressions. These statements are based on certain assumptions that the Company has made in light of its experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate in these circumstances. The Company believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and that the Company's actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent reports on Form 10-K, 10-Q and 8-K filed or furnished to the SEC.

Important factors that could affect the Company's actual results and cause them to differ materially from those expressed in forward-looking statements include, among other things: the impact of the Company's recent emergence from Chapter 11 on the Company's business and relationships; levels of travel demand, particularly with respect to business and leisure travel in the U.S. and in global markets; the length and severity of COVID-19 and the impact on the Company's vehicle rental business as a result of travel restrictions and business closures or disruptions; the impact of COVID-19 and actions taken in response to the pandemic on global and regional economies and economic factors; general economic uncertainty and the pace of economic recovery, including in key global markets, when COVID-19 subsides; the Company's ability to implement its business strategy including its ability to implement plans to support a large scale electric vehicle fleet and to play a central role in the modern mobility ecosystem; the Company's ability to attract and retain key personnel following its emergence from bankruptcy; the Company's ability to utilize its net operating loss carryforwards and built-in-losses as a result of its emergence from bankruptcy; the Company's ability to remediate the material weaknesses in its internal controls over financial reporting; the Company's ability to maintain an effective employee retention and talent management strategy and resulting changes in personnel and employee relations; the recoverability of the Company's goodwill and indefinite-lived intangible assets when performing impairment analysis; the Company's ability to dispose of vehicles in the used-vehicle market, use the proceeds of such sales to acquire new vehicles and to reduce exposure to residual risk; actions creditors may take with respect to the vehicles used in the rental car operations; significant changes in the competitive environment and the effect of competition in the Company's markets on rental volume and pricing; occurrences that disrupt rental activity during the Company's peak periods; the Company's ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in the Company's rental operations accordingly; the Company's ability to retain and increase customer loyalty and market share; increased vehicle costs due to declining value of the Company's non-program vehicles; the Company's ability to maintain sufficient liquidity and the availability to it of additional or continued sources of financing for the Company's revenue earning vehicles and to refinance its existing indebtedness; risks related to the Company's indebtedness, including its present level of debt, its ability to incur substantially more debt, the fact that substantially all of the Company's consolidated assets secure certain of its outstanding indebtedness and increases in interest rates or in its borrowing margins; the Company's ability to meet the financial and other covenants contained in its First Lien Credit Agreement and certain asset-backed and asset-based arrangements; the Company's ability to access financial markets, including the financing of its vehicle fleet through the issuance of asset-backed securities; fluctuations in interest rates, foreign currency exchange rates and commodity prices; the Company's ability to sustain operations during adverse economic cycles and unfavorable external events (including war, escalation of hostilities, terrorist acts, natural disasters and epidemic disease); the Company's ability to prevent the misuse or theft of information it possesses, including as a result of cyber security breaches and other security threats; the Company's ability to adequately respond to changes in technology, customer demands and market competition; the Company's ability to successfully implement any strategic transactions; the Company's ability to achieve anticipated cost savings from on-going strategic initiatives; the impact on the value of or interest earned on, any LIBOR-based marketable securities, fleet leases, loans and derivatives as a result of changes to the LIBOR reference rate; the Company's ability to purchase adequate supplies of competitively priced vehicles at a reasonable cost as a result of the continuing global chip manufacturing shortage and other raw material supply constraints; the impact of the global chip shortage and other raw material supply constraints on asset acquisition costs, resulting depreciation expense and ultimately the residual values on the disposition of vehicles in the Company's fleet; the Company's recognition of previously deferred tax gains on the disposition of revenue earning vehicles; financial instability of the manufacturers of the Company's vehicles, which could impact their ability to fulfill obligations under repurchase or guaranteed depreciation programs; an increase in the Company's vehicle costs or disruption to the Company's rental activity, particularly during peak periods, due to safety recalls by the manufacturers of the Company's vehicles; the Company's ability to execute a business continuity plan; the Company's access to third-party distribution channels and related prices, commission structures and transaction volumes; risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anti-corruption or anti-bribery laws and the Company's ability to repatriate cash from non-U.S. affiliates without adverse tax consequences; a major disruption in the Company's communication or centralized information networks; a failure to maintain, upgrade and consolidate the Company's information technology systems; costs and risks associated with potential litigation and investigations or any failure or inability to comply with laws and regulations or any changes in the legal and regulatory environment; the Company's ability to maintain its network of leases and vehicle rental concessions at airports in the U.S. and internationally; the Company's ability to maintain favorable brand recognition and a coordinated branding and portfolio strategy; changes in the existing, or the adoption of new laws, regulations, policies or other activities of governments, agencies and similar organizations, where such actions may affect the Company's operations, the cost thereof or applicable tax rates; risks relating to the Company's deferred tax assets, including the risk of an "ownership change" under the Internal Revenue Code of 1986, as amended; the Company's exposure to uninsured claims in excess of historical levels and inability to collect on subrogation claims; risks relating to the Company's participation in multiemployer pension plans; shortages of fuel and increases or volatility in fuel costs; the Company's ability to manage its relationships with unions; changes in accounting principles, or their application or interpretation, and the Company's ability to make accurate estimates and the assumptions underlying the estimates; and other risks and uncertainties described from time to time in periodic and current reports that it files with the SEC.

Additional information concerning these and other factors can be found in the Company's filings with the SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date of this release, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

 

 

 

 

NON-GAAP MEASURES AND KEY METRICS 

The term "GAAP" refers to accounting principles generally accepted in the United States. Adjusted EBITDA is the Company's segment measure of profitability and complies with GAAP when used in that context.

NON-GAAP MEASURES

Non-GAAP measures are not recognized measurements under GAAP. When evaluating the Company's operating performance or liquidity, investors should not consider non-GAAP measures in isolation of, superior to, or as a substitute for measures of the Company's financial performance as determined in accordance with GAAP.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share ("Adjusted Diluted EPS")

Adjusted Net Income (Loss) represents income or loss attributable to the Company as adjusted to eliminate the impact of GAAP income tax, debt-related charges and losses, restructuring and restructuring related charges, intangible and tangible asset impairments and write-downs, information technology and finance transformation costs, non-cash acquisition accounting charges, reorganization items, pre-reorganization and non-debtor financing charges, gain from the sale of a business and certain other miscellaneous items on a pre-tax basis. Adjusted Net Income (Loss) includes a provision (benefit) for income taxes derived utilizing a combined statutory rate. The combined statutory rate is management's estimate of the Company's long-term tax rate. Its most comparable GAAP measure is net income (loss) attributable to the Company.

Adjusted Diluted EPS represents Adjusted Net Income (Loss) on a per diluted share basis using the weighted-average number of diluted shares outstanding for the period. Its most comparable GAAP measure is diluted earnings (loss) per share.

Adjusted Net Income (Loss) and Adjusted Diluted EPS are important operating metrics because they allow management and investors to assess operational performance of the Company's business, exclusive of the items mentioned above that are not operational in nature or comparable to those of the Company's competitors.

Adjusted Corporate EBITDA and Adjusted Corporate EBITDA Margin

Adjusted Corporate EBITDA represents income or loss attributable to the Company as adjusted to eliminate the impact of GAAP income tax, non-vehicle depreciation and amortization, net non-vehicle debt interest, vehicle debt-related charges and losses, restructuring and restructuring related charges, goodwill, intangible and tangible asset impairments and write-downs, information technology and finance transformation costs, reorganization items, pre-reorganization and non-debtor financing charges, gain from the sale of a business and certain other miscellaneous items.

Adjusted Corporate EBITDA Margin is calculated as the ratio of Adjusted Corporate EBITDA to total revenues.

Management uses these measures as operating performance metrics for internal monitoring and planning purposes, including the preparation of the Company's annual operating budget and monthly operating reviews, and analysis of investment decisions, profitability and performance trends. These measures enable management and investors to isolate the effects on profitability of operating metrics most meaningful to the business of renting and leasing vehicles. They also allow management and investors to assess the performance of the entire business on the same basis as its reportable segments. Adjusted Corporate EBITDA is also utilized in the determination of certain executive compensation. Its most comparable GAAP measure is net income (loss) attributable to the Company.

KEY METRICS

Available Car Days

Available Car Days represents Average Vehicles multiplied by the number of days in a given period.

Average Vehicles ("Fleet Capacity" or "Capacity")

Average Vehicles is determined using a simple average of the number of vehicles in the fleet whether owned or leased by the Company at the beginning and end of a given period.

Depreciation Per Unit Per Month ("Depreciation Per Unit" or "DPU")

Depreciation Per Unit Per Month represents the amount of average depreciation expense and lease charges per vehicle per month, exclusive of the impacts of foreign currency exchange rates. Management believes eliminating the effect of fluctuations in foreign currency exchange rates is appropriate so as not to affect the comparability of underlying trends. This metric is important to management and investors as it reflects how effectively the Company is managing the costs of its vehicles and facilitates comparisons with other participants in the vehicle rental industry.

Total Revenues - adjusted for foreign currency

Total Revenues - adjusted for foreign currency represents total revenues, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates. Management believes eliminating the effect of fluctuations in foreign currency exchange rates is appropriate so as not to affect the comparability of underlying trends. This metric is important to management and investors as it represents a measure that facilitates comparisons with other participants in the vehicle rental industry.

Total Revenue Per Transaction Day ("Total RPD"or "RPD"; also referred to as "pricing")

Total RPD represents the ratio of Total Revenues - adjusted for foreign currency to Transaction Days. This metric is important to management and investors as it represents a measure of changes in the underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control.

Effective during the three months ended September 30, 2021, the Company revised its calculation of Total RPD to include ancillary retail vehicle sales revenues to better align with current industry practice, where prior periods have been restated to conform with the revised definition.

Total Revenue Per Unit Per Month ("Total RPU" or "RPU")

Total RPU Per Month represents the amount of average Total Revenues - adjusted for foreign currency per vehicle per month. This metric is important to management and investors as it provides a measure of revenue productivity relative to fleet capacity, or asset efficiency.

Transaction Days ("Days"; also referred to as "volume")

Transaction Days represents the total number of 24-hour periods, with any partial period counted as one Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one Transaction Day in a 24-hour period. This metric is important to management and investors as it represents the number of revenue-generating days.

Vehicle Utilization ("Utilization")

Vehicle Utilization represents the ratio of Transaction Days to Available Car Days. This metric is important to management and investors as it measures the proportion of vehicles that are being used to generate revenues relative to fleet capacity.

 

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SOURCE Hertz Global Holdings, Inc.

Hertz Investor Relations, investorrelations@hertz.com; Hertz Media Relations, mediarelations@hertz.com