Hertz Global Holdings, Inc. Q4 FY2024 earnings call

• Team Strengthening: Added executives like Chris Berg (Chief Administrative Officer) and Doria Holbrook (EVP of Mobility) to enhance leadership and mobility expertise.
• Fleet Rotation: Over 60% of the fleet is 1 year old or less, aiming to complete rotation by 2025. Sold 100k vehicles in Q4, prioritizing retail sales channels and working on digital and partnership initiatives to grow retail sales.
• Customer Experience: NPS improved, service recovery scores up 60 points in 5 months, loyalty enrollments up 18% in Q4, and bookings on hertz.com from Q2-Q4 showed growth in higher RPD bookings.

In Q4, revenue was just over $2 billion, with adjusted EBITDA a loss of $357 million. Fleet-wise, over 60% of the fleet was comprised of vehicles 1 year old or less, and they aim to substantially complete fleet rotation by year-end 2025. In Q4, 100,000 vehicles were sold, up from 30,000 in Q4 '23. Commercially, RPU showed sequential improvements, fleet size was down 7% year-end, and loyalty enrollments grew 18% year-over-year in Q4.

• DPU: Target sub-$300 net DPU by end of 2025. Q1 net DPU expected to be slightly below Q4, then improve as gross depreciation declines, retail sales channels optimize, and selling into stronger seasons.
• EBITDA: Seasonal EBITDA loss in Q1, breakeven in Q2, profit in Q3 and Q4, low single-digit margin for 2025.
• Liquidity: Strong liquidity at $1.8B at end of 2024, completed $500M capital raise, planning to address debt maturities and confident in managing liquidity through the year.

• Residual Value Fluctuations: Impact on depreciation and DPU, as seen with MMR values dropping below forecast in Q4.
• Insurance Headwinds: Higher insurance reserve in Q4, benefits to materialize later in 2025.
• Litigation: Pending litigation with undefined resolution and outcome, but discussions underway to resolve.

Q: Could you give a sense of metrics to gauge Hertz's progress on the operational front?

A: Gil and Scott mentioned the North Star metric of sub-$300 DPU, utilization as a bedrock, and NPS as a critical platform.

Q: How should we think about net DPU going through the year?

A: Scott said net DPU was inflated in Q4, will be inflated in Q1, then work down, still expecting sub-$300 by year-end.

Q: How does fleet size trend from here and impact demand?

A: Sandeep said they'll continue to sweat assets, drive higher yield, expect smaller fleet to capture demand and focus on premium business.

Q: What specifically materialized losses on sale in Q4?

A: Wayne and Scott said it was due to volume, timing of sales, rotating older vehicles, and MMR value drops, but positioned well for future with lower cap costs and retail sales focus.

Q: How are vehicles being disposed and pricing?

A: Wayne said they're moving towards overweight retail channels, running less than 10% of cars through auctions, working on digital and partnership initiatives for retail sales.

Q: Thoughts on tariffs and their impact?

A: Wayne said Hertz is largely insulated, well-positioned with fleet rotation progress and diversified supply chain to manage through tariff uncertainties.

Q: Details on DOE puts and takes?

A: Scott said core operating components are moving in the right direction, but have some peripheral headwinds like accounting changes and insurance issues, with initiatives in place working but some lag effects.