HERTZ GLOBAL HOLDINGS, INC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Gil West: Discussed the dynamic first quarter of 2025. Hertz is an asset management company, and the fleet is the economic engine. Over 70% of the core U.S. RAC fleet is 12 months or newer. Worked closely with OEMs to accept model year 2025 vehicle deliveries early to avoid tariff exposure. Retail car sales were a record quarter with the sell right strategy. Achieved nearly $100 million year-over-year improvement in total direct operating expense. Partnered with tech companies like Palintir, UVI, Amadeus, and Decagon for fleet management, vehicle inspections, revenue management, and customer service.
• Sandeep Dube: Proud of the commercial team's accomplishments. Managed fleet prudently, with a 8% year-over-year reduction in Q1. Focused on improving revenue management systems with Amadeus, optimizing off-airport and mobility business units, and improving the mix of durable segments. Customer net promoter scores improved by 11 points year-over-year, and loyalty enrollments were up.
• Scott Haralson: Q1 revenue was $1.8 billion, adjusted EBITDA loss was $325 million. DPU improved, with Q2 expected to be below $300. DOE per day decreased. Liquidity was strong at $1.2 billion at the end of Q1. Amended revolving credit facility and asset-backed securities programs performed well.

Segment Performance

• Fleet: One year ago, Hertz established a disciplined end-to-end fleet management strategy. Now, over 70% of the core U.S. RAC fleet is 12 months old or newer. The model year 2025 fleet has a DPU of sub-300 prior to tariff benefits. Revenue was down year-over-year in the first quarter, primarily driven by reduced fleet capacity. On a monthly per unit basis, revenue would have been flat year-over-year excluding the impact of leap year and fleet mix. Utilization was up 240 basis points year-over-year in Q1.
• Commercial: The commercial team is focused on executing the strategy to reach the North Star metric of ARPU greater than $1,500. Revenue was down year-over-year due to reduced fleet capacity. Pricing was down 5% year-over-year partly driven by fleet mix. Utilization showed improvement with a 240 basis points year-over-year increase.

Guidance

• Q2 EBITDA is expected to be approximately breakeven. Q3 EBITDA is expected to be a sizable profit, and Q4 is expected to be a positive EBITDA result. Full year EBITDA margin is expected to be in the low single digits. Expect fleet size to be down year-over-year in 2025, with utilization improvement to offset some of the reduction. Anticipate over $1 billion of EBITDA core business run rate by 2026. Q2 DPU is expected to be below $300.

Risks

• Macro-economic uncertainty, including consumer sentiment and tariff impacts. Potential local market over-fleeting situations. Uncertainty regarding model year 2026 vehicle supply and pricing. Uncertainty in retail and wholesale vehicle market conditions.

Question and Answer

• **Q: Ian Zaffino from Oppenheimer asked about fleet over-fleeting, residuals in retail vs wholesale, and geographic demand.

A: Gil West said at macro level not over-fleeted, local markets had temporary over-fleeting. Sandeep Dube said residual values rose, with retail and wholesale seeing increases. Sandeep Dube discussed geographic demand differences related to segments and day of weeks.

• **Q: John Babcock from Bank of America Merrill Lynch asked about 4 - 5月 fleet activity and U.S. fleet subject to tariffs.

A: Gil West said deliveries of model year 2025 vehicles were not subject to tariffs. Scott Haralson said Q2 fleet deliveries expected to be mid-to high single digits.

• **Q: Chris Woronka from Deutsche Bank asked about fleet strategy relative to RPD and off-airport/mobility.

A: Gil West and Sandeep Dube discussed prioritizing fleet and cost actions, diversifying revenue streams with off-airport and mobility, and focusing on sustainable demand and yield for profitability.

• **Q: John Healy from Northcoast Research asked about depreciation and fleet reduction impact on rates.

A: Scott Haralson and Sandeep Dube discussed depreciation gains from newer fleet and rate environment influenced by segments and macro factors.

• **Q: Unidentified Analyst from Goldman Sachs asked about RPU cadencing and DOE target.

A: Sandeep Dube and Scott Haralson discussed RPU improvement through utilization and revenue management initiatives, and DOE target dependent on scale and initiatives.

• **Q: Stephanie Moore from Jefferies asked about DOE target and liquidity.

A: Scott Haralson said DOE target dependent on scale and initiatives, and liquidity expected to be over $1 billion in Q2.

• **Q: Dan Levy from Barclays asked about Q2 EBITDA and depreciation gains.

A: Sandeep Dube said Q2 EBITDA breakeven with RPD improvement expected, and Scott Haralson discussed depreciation gains recognized through mark-to-market and vehicle sales.