HERTZ GLOBAL HOLDINGS, INC Q1 FY2024 earnings call

• Gil West introduced himself, noting the challenging quarter and outlining priorities: balancing fleet with long-term implications for return on assets, achieving operational excellence to drive unit revenues, and leveraging products/brands for customer loyalty.
• Justin Keppy discussed fleet updates (global average fleet up 9%, core fleet up 2% by March), EV rationalization (sold half of 20,000 units, increased plan to 30,000 units), profitability initiatives (revenue-driven and cost-driven, focusing on rideshare, value brands, revenue management), and operating costs (DOE per transaction day flat in Q1 with momentum building on productivity efforts).
• Alex Brooks discussed financial results (revenue $2.1 billion, adjusted EBITDA loss $567 million due to increased vehicle depreciation), capital structure and liquidity (net corporate debt $3.25 billion, available liquidity $1.3 billion, extended ABS facility maturity), and cash flow (adjusted free cash flow outflow of $729 million).

Revenue for the quarter was $2.1 billion. Adjusted corporate EBITDA was a negative $560 million. The global average fleet was up 9% year-over-year, and by March, the core rental fleet was up 2% year-over-year. For the EV fleet, about half of the initial 20,000 units were sold, and the plan was increased to 30,000 units to be completed by year-end. Revenue contribution details weren't explicitly broken down by product segment in terms of percentage, but the overall financials reflect the performance across the global business.

No formal quarterly guidance was provided. However, outlined initiatives to improve financial results, including fleet rotation to lower vehicle cap costs, growing premium revenue, and accelerating cost reduction initiatives to drive unit economic improvements for RPD, DOE per day, and DPU.

• Impact of declining forward residual values on vehicle depreciation, which heavily impacted the quarter's results.
• Elevated cost structure, particularly in relation to EV rationalization.
• Uncertainties in fleet rotation and market conditions that could affect residual values and overall financial performance.

Q: Chris Woronka from Deutsche Bank asked about Gil West's views on where the business could go and parallels to the airline business.

A: Gil West emphasized focusing on unit economics, aiming to push RPD into the low 60s, reduce DPU to the low 300s, and lower DOE per day to the low 30s through fleet rotation, product initiatives, and execution.

Q: Ian Zaffino from Oppenheimer asked about priorities and strategies as a new CEO.

A: Gil West outlined prioritizing operational excellence and customer experience, optimizing fleet, growing premium revenue, and accelerating cost reduction initiatives, with a focus on execution.

Q: John Babcock from Bank of America asked about liquidity and fleet refresh.

A: Alexandra Brooks stated they believe they have sufficient liquidity for the fleet refresh, with fleet management being a key tool to improve liquidity through rotating lower cap cost vehicles.

Q: Elizabeth Dove from Goldman Sachs asked about liquidity and cash flow.

A: Alexandra Brooks discussed sufficient equity cushion in ABS, cash burn focus, and the impact of EV residuals on cash flow.

Q: Harold Antor on behalf of Stephanie Moore asked about mitigating repair and collision costs.

A: Justin Keppy discussed efforts to reduce maintenance costs through consolidating spend, negotiating contracts, and fleet rotation benefits.

Q: Christopher Stathoulopoulos from Susquehanna asked about unlocking brand value and industry opportunities.

A: Gil West discussed focusing on customer experience, leveraging digital tools for frictionless processes, and drawing on airline industry lessons to improve customer engagement and brand value.