Hertz revenues were strong, says it plans to ‘re-IPO’

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Hertz Global Holdings

reported strong second-quarter results on Monday on the basis of a major financial move. The company benefited from robust rental car prices amid a car shortage and strong consumer demand.

Hertz (ticker: HTZZ), which emerged from bankruptcy on June 30, said adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, totaled $639 million in the second quarter, a record for the company.

Adjusted Ebitda more than tripled from the same period of 2019, which Hertz says is a better comparison than the pandemic depressed results in 2020, when it had an Ebitda loss of $587 million. Hertz’s net loss was $168 million in the second quarter, reflecting $633 million in restructuring charges.

Due to Hertzs’ recent emergence from bankruptcy, there appears to have been no consensus estimate for the second quarter.

Hertz shares rose 56 cents to $17 in early trading Monday.

Hertz’s adjusted EBITDA in the second quarter was in line with the $624 million recently reported by

Avis Budget Group

(CAR), one of Hertz’s two main rivals, along with privately held Enterprise.

Our improved financial position and capital structure gives us the flexibility and resources to build on our strengths and take advantage of accelerating momentum in the coming quarters, Hertz CEO Paul Stone said in a statement.

The company said it plans to go public again by the end of 2021, hold an investor roadshow and relist its shares on a major exchange. The company’s stock and warrants (HTZZW) are now trading on the Pink Sheets and are expected to be listed on the New York Stock Exchange or Nasdaq by the end of the year.

The results of Hertz and Avis, which were also a quarterly record, demonstrate the much-improved lot of the car rental industry. The big problem for investors is whether the good times will last until 2022, when fleet sizes can grow as the current shortage of automotive chips diminishes.

With new cars in short supply, Hertz bought used cars this year to bolster its fleet, which stood at approximately 350,000 vehicles in the second quarter, up from 518,000 in the prior period.

Hertz said it achieved annualized cost savings of $400 million, which combined with strong rental car prices led to a 34% margin in the second quarter, up from 8% over the same period of 2019.

Hertz said revenue per day in the US, by far the most important market, averaged $65.42 per day in the second quarter, up from $42.71 in the same period of 2019 and $37.95 per day in the second quarter. previous period.

During a pre-recorded phone call on the Hertz website, Hertz Chief Financial Officer Kenny Cheung said daily sales were high in July.

Hertz emerged from bankruptcy with a healthy balance sheet, including $1.8 billion in cash and $1.5 billion in debt, or $300 million in net cash, excluding $6.3 billion in asset-backed financing for its rental fleet. Average asset financing costs are below 2%, resulting in $50 million in annual savings over 2019, which Cheung says are not included in the $400 million in annual cost savings.

During that call, Stone said that if the cost cuts had happened in 2019, Hertz would have had $1 billion in Ebitda in 2019. That’s impressive because current pricing and profitability are much higher than they were in 2019.

The current quarter could be stronger than the second quarter due to high rental car rates, meaning Hertz can build significant cash towards the end of the year.

During the conversation, Stone said Hertz wanted to build an electric vehicle rental fleet and continue to make technology investments to better manage its fleet, increase prices and improve the customer experience. The CEO said a new app could allow consumers, who dislike the long lines that often appear at airport rental counters, to skip the counter and select their car from a group of airports.

Hertz shares have fallen from $27 since July 1, the first day of trading for new Hertz shares, amid a sell-off in travel-related stocks. Stone says Hertz has seen steady demand for rental cars despite the rise of the Delta variant.

The company is now valued at approximately $8 billion, based on approximately 470 million shares outstanding. There are also approximately 89 million warrants outstanding, trading at $7.35, up 5 cents on the session.

These 30-year warrants have a strike price of $13.80 per Hertz share and are statistically cheap, derivatives traders say Barrons.

Barrons has written positively about Hertz, arguing that the company will benefit from stronger fleet management, cost savings and better pricing. We’ve argued that warrants are the best way to play Hertz.

Write to Andrew Bary at [email protected]