Sixt:Quarterly Results/2023 Q2

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Results

• Revenue grew by 24.4% y/y to EUR 925.1 million, above analysts estimate of EUR 874 million(+17.5%) while EBT was 131.9 million euros versus analysts estimate of 130 million.
• Co-CEO Alexander Sixt maintained the compay’s FY23 EBT outlook of EUR 430 to 550 million and said, "The current uncertain macroeconomic situation for Europe, especially for Germany, may influence the course of the second half of the year and we are therefore also cautious with regard to our fleet purchasing for 2024.”
• Rental fleet grew 24.6% y/y to 166,300 .
• Sixt's German revenue grew 26.9% y/y to EUR 492.1 million while North America revenue grew 21.1% to EUR 478.1 million in H1. Europe revenue increased by 20.3% to EUR 645.1 million in the same period.
• Sixt said that demand continued into the start of the summer period and that prices were well above 2019 levels.
• Sixt now present in 42 major U.S Airports, achieving 60% of the U.S car rental market.

Management Guidance and Analysts Estimates

Management Guidance

• The management only gave guidance for the full year 2023.

• However, Sixt expects cost increases that began in 2022 to have a full impact in 2023.

Key Items	FY2023	Y/Y growth
Revenue	Expects a significant increase compared to FY2022
Mid-point EBT	EUR 430 to 550 million	-11% at the mid-point

Analysts Estimates

Key Items	Q2 2023	Y/Y growth
Revenue	EUR 874	17.5%
EBT	EUR 127	-2.3%
EPS	EUR 1.99	0%

Industry Insights

Kayak Travel Insights

• Searches by U.S.-based customers for summer travel to Europe are up 55% from last year.

Transportation Security Administration Data

• In Q2, the number of travelers who went through U.S. airport security checkpoints grew 10% y/y to 2.4 million per day, nearly identical to Q2 2019.

United Airlines

• Reported revenue and earnings that beat analysts estimates due to strong demand. United Airlines recorded a revenue of $14.18 billion versus $13.91 billion expected. Earnings per share was $5.03 versus $4.03 estimate.
• Management expects Q3 2023 earnings of $3.85 to $4.35 per share, which is above analysts etimate of $3.70 a share.

Delta Airlines

• Delta Airlines posted the strongest quarterly revenue and earnings ever due to strong demand and a 22% drop fuel costs.
• Revenue was $14.61 billion versus $14.49 billion expected while earnings came in $2.68 cents per share versus $2.40 expected.
• Demand was stronger in international travels.
• Demand for premium seats was also strong during the quarter.
• Delta Airlines hiked its earnings forecast for Q3 to adjusted $6 to $7 a share from $5 to $6 per share range given last month.
• "Consumer demand for air travel remains robust," said Ed Bastian, Delta's chief executive officer.
• “I think the trends that we’ve seen this year are going to continue,” Bastian said in an interview.

Competitor results and Expectations

Hertz Global

Summary of the earnings results

Key Items	Actual	Estimate
Revenue	$2.44 billion	$2.45 billion
Adjusted EPS	$0.72	$0.64

• "Results for the second quarter were strong, reflecting continued high demand for our services and elevated levels of fleet utilization," Hertz CEO Stephen Scherr said in a statement.
• "Our results were the product of higher transaction days and a stable rate environment that remains well above pre-pandemic levels, and we believe no longer reflects a momentary surge of travel, but a more stable baseline of demand growth being witnessed across the travel industry," Scherr said in the earnings call.
• An average of 82% of its fleet was rented out during the quarter versus versus 79% a year ago.
• Hertz saw strong demand in U.S, Europe and Canada.
• Pricing was lower in Q2 2023 versus Q2 2022. Q2 2022 benefited from strong used car market, strong demand coming out of Omicron and limited OEM supply. Total RPD was down 7% y/y to $61.14 but $12 more than the pre-pandemic level. Hertz expects it to improve in Q3 and Q4.In early July, rate move 5% higher than in Q2.
• Also expects to see sequential uptick in demand in Q3.
• Hertz International Inbound Travel has added about 60% of where it was at pre-pandemic level.
• Third party data indicates that business travel is at around 60% of where it was pre-pandemic and is expected to return to about 95% in the next two years.
• Travel has continued to demonstrate strength early in Q3.

Avis Budget Group

Summary of the earnings results

Key Items	Actual	Estimate
Revenue	$3.12 billion	$3.21 billion
EPS	$11.01	$9.79
Americas segment revenue	-5% y/y
International segment revenue	+3%

• “Summer travel has continued to be robust with elevated peak period demand and seasonally improved pricing. Our teams remain focused and ready as we transition into our busiest season of the year," Avis Budget Group CEO, Joe Ferraro said.
• Pricing(RPD) declined 7% Y/Y to $70.65. This was due strong year over year comparissons.
• Vehicle utilization was up 0.5 basis points to 70.5%.
• Demand strengthened with each consecutive month with June being the strongest.
• "Demand for travel is robust, and we believe the summer of 2023 will be one for the record books," Ferraro said in the earnings call.
• Ferraro said in the earnings call that the industry is back to the pre-pandemic period where trends were seasonally determined.
• Expects pricing to improve in Q3 sequentially.

Insights for Sixt

• Demand is strong.
• Pricing was weaker due to softening used car market and strong comparissons. Pricing outlook is positive.
• Industry outlook is positive.
• Industry seems to be back to the pre-pandemic levels.

Analysts Opinions

Analyst Dirk Schlamp, DZ Bank

• Upgraded Sixt's rating from hold to buy and raised price target from 120 euros to 125.
• He said that the tourism industry is recovering from pandemic slump. Schlamp pointed out that the desire to travel is high and prospects remains positive.
• Schlamp said that the company has intact long-term growth prospects.

Analyst Marc-Rene Tonn, Warbug Research

• Maintained buy rating on Sixt and a price target of 160 euros.
• He said that strong demand and favorable price developments should have led to solid results.

Analyst Nicole Winkler, Hauck & Aufhauser

• Maintained buy rating on Sixt with a price target of 108 euros.
• He expects solid figures despite tough economic environment.
• He also expects the company to confirm its outlook for 2023.

Analyst Michael Kuhn, Deutsche Bank

• Lowered Sixt's rating to hold from buy on concerns over near-term weak profitability.
• He thinks that Sixt's profit will come down this year and does not expect major profit growth in the next two years.
• "At the same time, important indicators for the car industry, like used car prices, show signs of intensifying weakness. Air fares have also shown signs of weakness as of late, and we have become more cautious on European airlines. Despite our forecast cuts, we still think the shares trade at relatively attractive valuation levels, but without positive earnings momentum and in the context of a worsening trading environment, we think it makes sense to move down to a Hold until the macro uncertainties resolve and until signs of earnings momentum improving again become tangible, " He said.

Developments during the quarter

Sixt issued EUR 300 million bond

• On June 12, 2023, Sixt issued a bond with a term of four years and 4 months and carries an interest of 5.125% p.a.
• The bond was unrated by a German Corporate.
• Sixt will use the proceeds to refinance maturities due in February 2024 and to strengthen its growth course.
• Sixt said there was strong interest in the bond leading to it being oversubscribed.