HERTZ GLOBAL HOLDINGS, INC Q3 FY2024 earnings call

Gil West - Fleet

• Discussed fleet strategy to operate inside demand, accelerated fleet rotation, established end-to-end fleet management vertical, recorded asset impairment charge, and outlined 3 key pillars for fleet management: buying right vehicles, optimal vehicle rotation, and leveraging retail sales. Highlighted people, technology, and process as enablers.

Sandeep Dube - Revenue and Customer Service

• Focused on customer-first approach, 3 commercial pillars (customer experience, demand selection/monetization, fleet utilization), rapid test-and-learn approach, progress in RPU and RPD, and ongoing commercial transformation.

Scott Haralson - Q3 Results and Costs

• Reported Q3 financials, discussed noncash asset impairment charge, expected Q4 DPU range, potential for lower DPU and less vehicles overall, progress in long-term cost efficiencies, liquidity and cash flow, and litigation related to bankruptcy.

Revenue for the third quarter was $2.6 billion, and adjusted corporate EBITDA was a loss of $157 million. Q4 DPU is expected to be in the $350 to $375 range. The company now expects run rate depreciation to be less than $300 per unit per month. Reducing the fleet 1% while maintaining the same number of transaction days could reduce expenses by over $30 million per year, cash outlay by over $20 million, and debt by over $100 million.

Guidance

• Q4 DPU expected in the $350 to $375 range.
• Target run rate DPU below $300, with significant portion of model year 2025 purchases contracted. Working towards formal guidance in 2025.
• Reducing fleet 1% could have substantial financial benefits.

Risks

• Litigation from bankruptcy, with ongoing appeal to the U.S. Supreme Court and additional accrual of approximately $290 million in Q3.
• Headwinds in areas like insurance and revenue-related expenses.
• Market volatility impacting fleet residual values.

Q: Can you expand on the expectation of getting DPU under $300?

A: Market conditions have normalized, 2025 fleet buy is advanced, changed fleet management strategies to core competency, end-to-end fleet management team in place, targeted unit economics, shorter hold periods, and higher utilization.

Q: Thoughts on scalability and cost cutting?

A: Scale matters, but focus is on operating fleet inside demand curve, creating demand, and tight coordination between fleet and commercial teams.

Q: Rate trends in October, November, and next year?

A: Demand is strong, supply slightly higher at airports affecting rates, but overall demand and supply in balance, focus on improving RPU by fleeting inside demand curve and sweating assets.

Q: Impairment details and future impact?

A: Impairment triggered by cash flow generation and accelerated fleet rotation, noncash expense, doesn't affect ABS facility, less excess depreciation to push through P&L going forward.

Q: Fleet refresh progress and EV impact?

A: Fleet rotation north of 40%, EVs less than 10% of fleet, strategically placed, focus on ICE for impairment and DPU.

Q: Impact of hurricanes on the quarter?

A: Net-net, not a significant impact, supported one-way rentals and post-hurricane cleanup, local demand incrementally increased.

Q: DOE per transaction day guidance and systems optimization?

A: Multilevel process improvement, focus on process rather than large capital investment, progress in operating components but headwinds in some areas.

Q: Utilization efforts and monitoring?

A: Focus on reducing waste in process, improving coordination between fleet and commercial teams, managing off-peak elements, and incremental demand generation for off-peak periods.