HERTZ GLOBAL HOLDINGS, INC Q2 FY2024 earnings call

• Strategy has three building blocks: fleet, revenue, and cost management. • Strengthened balance sheet and improved liquidity with recent capital raise, enabling accelerated fleet rotation. • Assembled an all-star executive team with skills for transformation. • Focus on operational excellence and customer service, aligning fleet mix with customer demand. • Revenue strategy includes growing unit revenue via direct booking channels, enhancing customer experience through self-service digital platforms, and leveraging dynamic pricing for value-added services. • Progress made in cost structure with DOE per transaction day improving from $37 in Q1 to $36 in Q2, though insurance and labor rates offset some savings.

Revenue for the second quarter was $2.4 billion. Adjusted corporate EBITDA was a loss of $460 million. The Americas segment saw a 5% quarter-over-quarter revenue increase. Fleet rotation efforts are impacting depreciation and maintenance costs, with higher depreciation vehicles expected to be rotated by the end of 2025, aiming for average depreciation per unit (DPU) in the low 300s per month by early 2026.

• Expect average DPU to be in the low 300s per month by early 2026. • Long-term targets: RPD in the low 60s, DPU in the low 300s, and DOE per day in the low 30s. • Fleet rotation expected to continue through 2025, with low point of liquidity likely at the end of Q2 2025. • Anticipate cash release from vehicle sales to cover most new car purchases, though variables affect exact amounts.

• Potential residual value declines faster than forecasted could impact liquidity. • Operational costs, including insurance and labor, may offset cost-saving efforts. • Uncertainty around timing and extent of fleet rotation and cost reductions, as well as variables affecting cash inflow from vehicle sales and outflow for new car purchases.

Q: About liquidity and future needs, Chris Woronka asks if the recent capital raise was the right amount and future liquidity needs.

A: Gil notes the capital raise strengthened the balance sheet and liquidity, allowing fleet rotation acceleration. Scott Haralson adds flexibility in managing cash flow from vehicle sales and new car purchases, with proceeds from vehicle sales expected to cover most new car buys.

Q: John Healy asks about electric vehicles in the fleet.

A: Gil responds that EVs are less than 10% of the fleet, and Hertz is adjusting to EV adoption curves, aiming to align fleet with customer demand across different business channels.

Q: John Babcock asks about cost-cutting goals.

A: Scott Haralson explains cost management is about managing the entire P&L, with a target of DOE in the low 30s, achievable but gradual, focusing on managing the entire cost structure with an efficiency mindset.

Q: Stephanie Moore inquires about program cars and incremental lease payments.

A: Scott Haralson discusses potential incremental lease payments due to residual value declines and the liquidity to handle them, mentioning a potential $50 million to $100 million payment for U.S. ABS facility due to residual declines.

Q: Ian Zaffino asks about fleet management and RPD.

A: Sandeep Dube responds that they are culling low RPD demand while focusing on generating quality revenue through direct booking and value-added services, using technology for revenue management to maintain RPDs.

Q: Christopher Stathoulopoulos asks about value-added services.

A: Sandeep Dube explains value-added services involve merchandising the right product to the right customer at the right time, enabled by technology, and dynamic pricing