Q2 2023 Hertz Global Holdings Inc Earnings Call

Speaker 1: Welcome to hert schoolloverholdings. Second quarter 2023 earnings call. Currently all line grenna list only mode.

Welcome to hurts global holding second quarter 2023 earnings call. Currently all lines are in a listen only mode.

Following management's commentary, we will conduct a question and answer session.

I would like to remind you that this morning's call is being recorded by the company.

I would not like to turn the call over to our house Johan Rawlinson Vice President of Investor Relations. Please go ahead.

Speaker 2: Good morning everyone and thank you for joining us. By now you should have our earnings speress release and associated financial information. We also provided SL to accompany our conference call, which can be accessed on our websitei want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance and by their nature are subject to the inure ter uncertainties.

Good morning, everyone and thank you for joining us by now.

You should have all the earnings press release and associated financial information. We've also provided slides to accompany our conference call, which can be accessed on our website.

I want to remind you that checkbook statements made on this call contains forward looking information.

<unk> statements are not a guarantee of performance and by the nature or subject to India uncertainties actual results may differ materially.

Speaker 2: Actual results made differilmaterially. Any forward-looking information relate on this call speaks to early as of today's date and the company under undertakes no obligation to update that information to refer ter circumstances. Additional information concerning these statements is contained in our earnings speress release and in the list facs and forward-looking statements section of our thousand and twenty-q Form 10-K and our second quarter twent thousand and 23 Form 10-Q Fed with the SEC.

Any forward looking information relate underscore speaks Ernie as of today's date.

Company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements is contained in our earnings press release, and and the risk factors and forward looking statements section about 2022 Form 10-K, and our second quarter 2020.

Free Form 10-Q filed with the a C C.

These documents are available on the Investor Relations section of <unk>.

Speaker 2: These documents are available on the Investor relation section of the ver' website. Today will use certain non-GAAP financial measures which are reconciled GAAP numbers in our earnings speressrees available on our website. We believe that these non-GAAP usures provide additional information about our operations, allow D to evaluation of our profitability and performance and, less otherwise noted, are discussed.

Will you say non-GAAP financial measures, which are reconciled with get numbers you know any specialists available on our website.

You believe that these non-GAAP measures provide additional information about our operations, allowing data evaluation of our profitability on performance.

Unless otherwise noted our discussion today focuses on our global business.

Speaker 3: Today's focuses on our global business.

Speaker 2: On the call of morning. We have steam. Ensure I'll achief the Executive Officer and alexbrook, our Chief Financial Officer. I'll now turn the call over to stpheven.

On the call. This morning, we have Stephen sure, our Chief Executive Officer, and Alex Brooks, Our Chief Financial Officer, I'll now turn the call over to Steven.

Speaker 1: Thank you Jo, an good morning and thank you all for joning us on the second quarter earnings. Call for four Turning to our Q2 results, let me for acknowledars deaplopointment of ex growth for the position of keief financial Officer, having SCO G our in terms vo for the past several months, given their talents of the store toa continued partnership with Alex as we execute on a priorities of her.

Thank you Johan good morning, and thank you all for joining us on the second quarter earnings call before turning to our queue to results. Let me first acknowledged the appointment of Alex Brooks to the position of Chief Financial Officer, having served as our interim CFO for the past several months given her talents I look forward to continued partnership with Alex <unk>.

Execute on the priorities of hurts I congratulate Alex on her permanent the appointment with that let me address our second quarter results, which reflect another impressive performance by the team and a successful start to the key summer season.

Speaker 4: A congratulate Alex on her permanent co appointment. With that, let me address our second quarter results, which reflect another perive performance by the team and a successful start to the Q summer season. Our results for the second quarter was strong, reflecting the ongoing strength of our business, continued high demand for our services and lower fleet counting costs.

Ah results for the second quarter was strong reflecting the ongoing strength of our business continued high demand for our services and lower fleet carrying costs revenue is $2.4 billion up 19% sequentially and adjusted corporate EBITDA was $347 million.

Speaker 4: Revenue was two point four billion dollars up 19 perone sequentiy and adjusted corporate EBITDA was $347 million. Our results, with the product of higher transrendaction days and a stable rate environment that remains well above pre pandemic levels and we believe no longer reflects a momentary surge of travel for a more stable baseline of demand growth being witnessed across the travel industry.

Results with a product of higher transaction days in a stable rate environment that remains well above pre pandemic levels and we believe no longer reflects a momentary surge of travel, but a more stable baseline of demand growth being witnessed across the travel industry. Ah results also reflect our fleet being deployed it very elevated.

Speaker 4: Our results also reflect our fleet being deployed a very allevated utilization throughout the quarter as we captured conto demand across multiple trannels and continued contr pistically harvest available gains on the scale of vehicles constrions with our rway driven strategy.

Utilization throughout the quarter as we captured customer demand across multiple channels and continued to opportunistically harvest available gains on a scale of vehicles consistent with our our way driven strategy.

Speaker 4: Volume across our business in the quarter, up 18% sequentially and 12% versus Q2 of last yeardemand was strong in the? U's, Canada and Europe , as each of leisure corporate and rise here continued to demonstrate momentum, with international travel benefiting both our U's and European businesses.

Mm across our business in the quarter was up 18% sequentially and 12% versus Q2 of last year.

Man was strong in the U S, Canada, and Europe as each of leisure corporate and rideshare continue to demonstrate momentum with international travel benefiting both R U S and European businesses.

Speaker 4: Our sequential growth in transaction base in the? U's outpaced fsa, airport traffic and other indicators and broader growth in travel and we generated with only 11% of growth industry. While share of airport volumes remain constant, we experienced increasing volumes across our other customer channels, including rid share, suggesting broader growth in the business.

Or sequential growth and transaction days in the U S outpaced TSA airport traffic and other indicators broader growth in travel and was generated with only 11% growth and feed while share of airport volumes remain constant we experienced increasing volume across our other customer channels, including <unk>.

Are you, suggesting brought her in growth in the business.

Speaker 4: As being mature. We expect these initiatives to grow top line and to be accretive to margins in 2024 and beyond. In Europe we are realizing results from our restructuring, with improvement feseen in the second quarter as volumes and rates show strength and our delivery costs improved in all travel holdoff in the quarter and is continued to demonstrate strength fully into Q3.

As they mature we expect these initiatives to grow top line and to be creative to margins in 2024 and beyond.

In Europe , we are realizing results from a restructuring with improvements seen in the second quarter is volumes and rate showed strength and our delivery costs improved.

I'll I'll travel held up in a corner and has continued to demonstrate strength early into Q3 on the forward. We will look to benefit from a continuing tailwind in U S inbound travel and further recovery and business travel.

Speaker 1: On the forward, we will look to benefits from a continuing fllowwind in U's inbound travel and further recovery in business travel.

On pricing R. P. D. In two two was $61.14 up versus Q1, reflecting typical seasonality and are lining with our expectations.

Although Q2 R. P. D was down ear over a year you will recall that last year second quarter or a P. D benefited from very tight fleet levels matched against surging travel coming out of Omicron. Zoe M supply was limited in car sales accelerated into an exceptionally strong residual market like many of our <unk>.

<unk>, we were impacted by sell out conditions across the significant number of markets and Q2 of last year as demand for cars outstripped excessively tight supply and.

Two two of this year well fleet was not as tight as last we nonetheless ran it even higher levels of utilization benefiting from operational productivity, including materially lower out of service, which provided opportunity for more cars to be profitably on rent.

Speaker 1: Our expectation on rates to the balance in 2023 is for year-over-year comparisons to improve from year. Looking forward, we expect to see a sequential uppttick in both rate and demand into Q3, with rateholding at a material premium to prepandemic levelswith an early view into surion D, we have seen rate move higher versus Q Q by more than 5%, while OEM have had more hard on offer this year, which historically would have given rate to rate pressure.

Our expectation on right for the balance of 20 twenty-three is per year over year comparisons to improve from here looking forward, we expect to see a sequential uptick in both right and demand into Q3 with right holding at a material premium to pre pandemic levels with an early view into July to date, we have.

Scene, right move higher versus queue to buy more than 5%.

<unk> have had more cars on offer this year, which historically would've given way to rein pressure, we have not seen such a dynamic to date for Kurtz, we're thinking about our fleet differently than the company did in the past as we have said previously we believe that dynamic approach to managing the fleet and adherence to in a row a mindset.

Speaker 4: We have not seen such a dynamic to date. For first, we are thinking of our LE differently than the company given in the past. As we have said previously, we believe a dynamic approach to manag the threele and adherece to an early mindset has contributed to our ability to keep RPD attractive or stable and capable of yielding healthy returns.

Has contributed to our ability to keep heartbeat, the attractive more stable and capable of yielding healthy returns.

To be clear utilization is driving price and not the other way around I said often been the case historically maintaining high utilization allows us to command better pricing and therefore produce higher revenue per unit and higher margin and the business operationally, we achieved fleet utilization in 82 per cent and a quarter.

400 points higher than Q1, and 230 points better than year over year, and we anticipate further improvement from here.

<unk> bye lower out of service or monthly revenue per unit came in at $1516 up 8% sequentially and reflecting both price and utilization as key components of financial return.

As we continue to take cost out of the business drive higher utilization of our assets grow rideshare and are value driven customer channels. We're confident that we will produce increasing margins for the business.

Speaker 4: As I reed, the company produced adjusted corporate EBITDA for the quarter of $247 billion. Let me reflect on the components.

As I noted the company produced adjusted corporate EBITDA for the quarter of $347 million, let me reflect on the components.

Depreciation per unit came in at $195 favorable to the range laid out on our last call.

As Alex will expand upon we viewed depreciation as in output of many fleet plan decisions that we're making on a day to day basis throughout each quarter, including whether to add <unk> or ice vehicles for new versus used cars.

As well as vehicle cap cost vehicle length of keep vehicle condition and mileage and vehicle rotation.

Two two each of these factors influenced appreciation and our decisions ultimately resulted in a lower depreciation expense versus prior expectations. This is about careful management of the fleet.

Speaker 1: On expenses, we took actions on both our direct operating expenses and experiing in the quarter. Fuel per transaction day improved $2 sequentially, notwithstanding continuing inflationary influences on operational costs like waver and transportation.

Unexplained is we took actions on both our direct operating expenses and S G and a and a quarter U.

Do you per transaction day improved $2 sequentially, notwithstanding continuing inflationary influences on operational costs like labor and transportation.

Speaker 1: On fgna, we took steps in the quarter to reduce corporate overhead through a reduction of about $3 million on an annualized basis to attrition and reduction in force.

S. G N. A we took steps in the quarter to reduce corporate overhead with a reduction of about $30 million on an annualized basis to attrition and reduction in force.

Speaker 1: Despite these, reductions may have worked to doal and cost. Going forward, we will continue to focus on key controllable cost items- both dourdoe msgma- in an effort to drive productivity proross-set, inflationary cost pressures and fund growth-related investments.

Despite these reductions we have work to do on cost going forward. We will continue to focus on key controllable cost items. So D. N. A D O E M S G and a and an effort to drive productivity offset inflationary cost pressures and fund growth related investments, we've been strategically replacing more expensive third party.

Speaker 4: We've been strategically replacing more expensive third-party labor in the field with her employees. We Ve deployed teenmanic process to producing fual cost down to D vehicle fap and approve the feed and cost of pri recovery. These carp initiatives will be supplemented by further actions taken over the next year as we migrate our business to the cloud and thereby reduce significant third-party spend to currently burden our results.

Labour in the field with hurts employees.

Deployed telematics across asleep to bring fuel costs down produced vehicle theft, and improve the speed and cost of car recovery. These cost initiatives will be supplemented by further actions taken over the next year as we migrate our business to the cloud and thereby reduce significant third party spend the currently burdens are results.

Speaker 1: As in prior year, cash out flow in the first half of the year is driven primarily by the build of our fleet to meet the summer peak demand. Cash flow generation and the back half of the year is expected to improve materially to the result of the expected pace in business. The seasonal reduction in feleet followiling the summer' search.

As in prior years cash outflow in the first half of the year was driven primarily by the build of our fleet to meet this summer peak demand.

Cash flow generation in the back half of the year is expected to improve materially as a result of the expected piece of business the seasonal reduction in fleet. Following this summer search.

Speaker 4: beingay with we for a moment. We are benefiting from increased operational productivity, as evidenced by a material reduction in average service and more efficient maintenance terms, but squimply. We are making more fees available for more revenue earning acivities which better enabable us to serve base demand as well as demand across our new ventures, including Li here, and are revitalized value brands.

Staying with fleet for a moment, we are benefiting from increased operational productivity as evidenced by a material reduction and out of service and more efficient maintenance turns put simply we are making more fleet available for more revenue, earning activities, which better enables us to serve based demand as well as demand across her a new ventures, including right.

Sure and a revitalized value branch.

Speaker 1: Think of lower out of servurther with helping for fund growth in the business. As we opened the third quarter, there is no current evidence with smoloftenany demand, never the less for risk of a weaker epromity. Al the nothing is to be acknowledged and as Dutch we have changed our bias on fleet versus our thinking at the start of the fiscal year. Our objectives to always deliver profitable volume through high utilization.

Think of lower out of service is helping to fund growth in the business as we open the third quarter. There's no current evidence the softening demand.

Nevertheless, the risk of a weaker economy, albeit lessening is to be acknowledged and as such we have changed our bias on sleep versus are thinking at the start the fiscal year or objective is to always deliver profitable volume through high utilization is demand is driven by many factors, we do not use for rack pricing as a tool for demand creation.

Speaker 5: That demand is driven by many factors. We do not use core rack pricing of the tool for demand creation, nor do we use price to trace market shathere.

Nor do we use price to chase market share.

Speaker 1: Risk of economic slowdown not standing the expected benefit from a supportive business environment for the balance of Q3. As we said a year ago, tribal T trends are preventing over the risk from an economic slowdown. Until that equation changes, we will continue to benefit from the former and will be ready for the latter.

Risk of economic slowdown notwithstanding we expect to benefit from a supportive business environment for the balance of Q3, as we said a year ago traveled <unk> are prevailing over the risks in an economic slowdown until that equation changes, we will continue to benefit from the former and will be ready for the ladder now.

Now, let me turn to progress on strategic initiatives, where we've made significant progress across a wide range of opportunities. These initiatives when taken together will supplement the work we are doing to build a more robust baseline rack business with an expectation of driving additional EBITDA generation in 2024 and beyond further enhancing the earnings power.

Of the business overall.

Let me begin with dollar and.

June we launched our new website for dollar as part of the revitalization of the brand you're bringing forward new digital properties for dollar designed to pursue profitable mid market growth crossbows leisure and business seconds. We believe that the new dollar when fully operational will enable us to better access customer segments that where you're not fully tapping.

Today, including a younger value driven consumer that comes to us directly or through online travel agencies Consolidators tour operators select airlines and other partners. We also believe that our work on dollar will enable us to deploy a higher number of lowered depreciating vehicles driving higher margin revenue to the business World <unk>.

<unk> the data since launch is positive and the first three weeks of July and admittedly off a low base. The new dollar website, so I'll pick up a 14% in conversion growth of 15% in revenue per visitor.

<unk>, 12% value added service revenue provoking.

Speaker 1: The right share business continues to get growth in Q2, as revenue grew by 84% year-over-year and 14% sequentially, primarily on volume transaction days in the R share business grew by 69% year-over-year and 17% sequentially. We believe that bring greater scale to the R share business and creating what is, in essence, the subscriptions business for drivers will better position us to moderate quarterly peak trough, typically experien in leiser differeniness and to flatten the depreciation curve on our vehicles.

The rideshare business continued hits <unk>. Thank you too as revenue grew by 84 per cent you over a year and 14% sequentially primarily on volume two.

Transaction days in the Rideshare business grew by 69% year over year, and 17% sequentially, we believe that bringing greater scale to the rideshare business and creating what is in essence, a subscription business for drivers will better position us to moderate quarterly peak to trough typically experienced in the leisure business.

And to flatten the depreciation curb on our vehicles.

Speaker 4: While a month multi rental may generate lower RPD, when coupled with a lower transactional expense, the business produces accretive EBITDA margins.

<unk> multi <unk> rental may generate lower R. P D. When coupled with lower transactional expense the business produces accretive EBITDA margins.

Let me next spend a moment on E D's, where we are creating longterm value through our first mover advantage and electrification.

Speaker 4: If you are aware, we are investing in the largest Ed rental fleet in North America, in one of the largest in the world. These for early days in a transition that hasn't happened in the automotive industry in the century.

As you're aware, we are investing in our largest easy rental fleet in North America, and one of the largest in the world.

These are early days in a transition that hasn't happened in the automotive industry in a century.

Readying ourselves for an electric future and are pleased with our progress on this strategy.

Speaker 1: First economic opportunities for EVs are compelling. leing maintenance is better than ice vehicles and while at present e damage repair is stubbornly more difficult and expenses, we expect that the entry at multiple fleet-oriented OEMs C space will bring the supply to parts and EV technicians up and cost down.

First economic opportunity city. These are compelling easy maintenance is better than ice vehicles in wallet present, Edie damage repair is stubbornly more difficult and expensive we expect it the entry of multiple fleet oriented Oems T. D. E V space will bring the supply of parts and he'd be technicians up and <unk>.

Down.

Second running a large E. D fleet brings you need unique operational demands that we believe are not easily turned on overnight.

We are building an embedded first mover advantage in the area of V V fleet management from charging stations, both proprietary and through partnerships to training employees around he these hurts will be better positioned longer term to pursue adjacent fleet management opportunities whether in the form of managing electric fleets for others or even adapting to the Grove.

[noise] prospect of autonomous vehicles now in early commercial development.

I'm sure. We are positioning hurts is that unique provider abebe across multiple cost customer segments leisure corporate and rideshare, all the while providing choice for our customers to assist those who might be trying any D. For the first time, we provide robust digital and other educational content and we have deployed Evie ambassadors.

Speaker 1: To assist those who might be trying eb for first time, we provide robust digital and other intercational content and we have deployed eating and bafades, as at key airport locations. And last week, behld 1, of the new's largest B press drives at LAX, the first in the series where hundreds of people came to htts Foran introduction to easds of various mixand models.

At key airport locations and last week, we have one of the nation's largest EDI test drives at L. A X. The first in a series where hundreds of people came to hurts for an introduction D E DS or various makes and models.

Speaker 1: Taken together, when you re seen the hurts, is an evolution of readiness and smart inductments that are not easy to replicate quickly.

Taken together, what you are seeing it hurts as an evolution of readiness and smart investments that are not easy to replicate quickly.

Speaker 1: Finally we are creating value through our investments in technology. Customers want more seamless experiences and we are leveraging leading edge technology and partners with indisting leaders to deliver. At the same time, we are rebuilding the foundational elements of the technology on which we run. I'm pleased to share a few update for progress.

Finally, we are creating value through our investments in technology customers want more seamless experiences and we are leveraging leading edge technology and partners with industry leaders to deliver at the same time, we are rebuilding the foundational elements of the technology on which we run I'm pleased to share a few updates on her progress.

Speaker 1: First me Jeff, passed the Midway points of our migration to the cloud. We are moving our reservations, fleet finance and other systems to the cloud and expected me our European data center by the end of 2023 and our U's data center to follow in early 2000 and twenty-fiveonce complete the expected benefit from all that terms being in the cloud including, as I mentioned, a significant reduction in the cost of third-party service providers that leave being needing to support our systems.

First we are just passed the midway point of our migration to the cloud we are moving our reservations fleet finance and other systems to the cloud and expected demise, our European data center by the end of 2023 and R. U S data center to follow in early twenties twenty-five once complete we expect to benefit from all that <unk>.

Comes with being in the cloud, including as I mentioned, a significant reduction in the cost of third party service providers that we've been using to support our systems.

Speaker 1: Second we are progressing more agile pricing tools, modernization of our revenue management system, in the build of a broader fleet control tower, all with an eye to capturing the most profitable demand available in the market at any given time.

Second we are progressing more agile pricing tools modernization of our revenue management system and the build of a broader fleet control tower, all with an eye to capturing the most profitable demand available in the market at any given time.

Speaker 4: We will optimize in-level fleet decisions to maximize ourway across the portfolio, including whether lth moved by sellar repa, apcar for context, to modest price improvements of $1 at a daily rate brought about by better fee allocation and or more dynamic pricing ST revenue by one hundred fifty million dollars across the equal number of transaction DA per year that our current levels of margin pull-through to EBITDA.

We will optimize vin level of sleep decisions to maximize R O a across the portfolio, including whether the rent move by celo repair a car for context, a modest price improvement of one dollar and a daily rate brought about by better fleet allocation and or more dynamic pricing with bush boost revenue by 150.

$80 million across an equal number of transaction days per year with our current levels of margin pull through to EBITDA.

Speaker 1: Third on the customer facing side, we've made improvements to the hert mobile app for IOS users. Q2 STS taken 42%, four reervations versus last year, with an uptick attributable to a revam booking experience and broader customer engagement. In Q2 we saw an 84% increase in downloads of the herd app versus last year, as improved customer experience elevated the outstanding in the Apple store.

Third on the customer facing side, we've made improvements to the first mobile app for I O. S. Users Q2 sauce taken 42 per cent more reservations versus last year with an uptick attributable to a revamped booking experience and brought our customer engagement in Q2, we saw an 84 per cent increase in down-low.

It's a for her it's app versus last year has improved customer experience elevated the app standing in the Apple store, we've also lunch new functionality for Android users.

Speaker 4: We've also launched new functionality for Android users.

Speaker 1: Sports refs to the deployment of AI intend use natural language therei in our operations, starting with customer care and at the front end, or our digital customer engagement.

<unk> with respect to the appointment of AI, we intend to use natural language <unk> in our operations, starting with customer care and at the front Dan are digital customer engagement.

On customer care, we are working on an initiative to deploy natural language AI for call Center and reservation queries, we believe that a significant majority of our call center and reservation inquiries can ultimately be handled through a I bring our call center agents to focus their time more productively on the needs of customers, whose request or more from.

<unk> on the front end of Commerce. There is also opportunity to embed natural language AI into our digital properties, enabling our customers to ask simple questions about an upcoming reservation for rental and being more efficiently directed to the most relevant information, giving rise to higher transaction conversion and improved customer.

Your experience.

Fifth and final on technology and further their customer experience. We're excited to work with Apple across a range of initiatives starting with payments. We are on track to begin accepting apple pay on our U S e-commerce and mobile platforms by ear and making hurts one of the first major companies in the travel industry to do so.

While more details or to come later this year, we're looking forward to working with Apple to deliver a better customer experience by enabling a convenient and secure way for our customers to pay online and in the App.

Speaker 1: What is clear across these initiatives is that our rorowing mindset is producing tangible results and becoming part of the fabric ochts. Moving into the second half of this year and beyond, I'm confident in our ability to build on this progress and continue forging a new way of doing business ochurts with the perspective that is both grounded in risk management and motivated by the expanse of possiabilities that lay before us.

What is clear across these initiatives is that R. R. O. A mindset is producing tangible results and becoming part of the fabric of hurts moving into the second half of this year and beyond I'm confident in our ability to build on this progress and continue forging a new way of doing business. It hurts with a perspective that is both grounded and risk management and <unk>.

Motivated by the expansive possibilities that lay before us with that let me turn the call to Alex.

Speaker 4: With that, let me turn the call to toalex.

Speaker 6: In feason is the morning everyoneas even noted. We had a strong second quarter that reflected continued pritive momentum in finance for services. Revenue resulted in both the Americas and international segment and per Ed two point four billion and increased 19 per cent sequently both volume and rate there. Expectations for the quarter as il on our last callall, with volume of 18% and R up 1% versus two Mon.

Thank you for that and good morning, everyone is Steven noted we had a strong second quarter that reflected continued pathogenic momentum and demand for our services revenue without them, both the American and international segment until about 2.4 billion, an increase of 19% sequentially.

Volume and rate that our expectations for the corps as we laid out in our last call.

At 18 per cent and re one per cent verses two one.

Speaker 7: International indownound volume continue to improve and was at 78% of twentthousand 19 levels for the quarter. We also experienced growth in R to rental volumme, which were 69% ofabboth Q to 20 and 20: two we expect our righter margins to be accretive as the business benefits from longer renth of fees and reduced direct costs, notwith standard lower RP date.

International inbound valium continue to improve in was it 78 per cent of 2019 levels credit card now.

We also have experienced or anything right to your rental volumes, which were 69% about Q2 2022, we expect our rights marches to be accretive as the business benefits from longer length of Keith <unk> direct cost notwithstanding goodbye <unk>.

Speaker 7: We believe that progress here will demonstrate that revenue per unit for RP use, when coupled with a lower direct operating cost, is a better measure of margin creation, V age rtv and a better reflection of our focus on roay.

We believe that progress here will demonstrate that revenue per unit R. R. P U when coupled with a low rent direct operating cost is a better measure of margin creation Dennis R. P D and a better reflection of <unk>, So I'll get that right away.

Speaker 7: Adjusted corporate EBITDA was $347 million in the second quarter, a margin of 14% growrove to global travel and rid shaare regards contributors with continued strength in meter.

Just a corporate EBITDA with $347 million in the second quarter emerging that 14 per cent.

<unk> and global travel Enright Tamara large contributors with continues trapped in Niger.

Speaker 7: Americas and international generated profive margins of 16% and 23% resspectively, while maintaining a tight feat.

American and international generated impressive Martin's at 16 per cent and 23 per cent, respectively, while maintaining a tightly.

Speaker 7: In terms of fleet, we held an average in Q2 of 56 thousand vehicles, which was managed to be in pred to demand curve, as demonstrated by utilization of 82% for the quarter, thereby enabling after whole break and generate healthy returns.

In terms of <unk>, we have an average in Q T with 560000 vehicles, which was managed to be inside the demand curve as demonstrated by either <unk> or 82% for the quarter, thereby enabling us to hold rate in January healthy returns.

Speaker 7: The preciate simper unit for Q2 was $195 and was below the earnings we made out on our last call.

I appreciate this in for you and it for two two with $195 and was below the range, we laid out on our last call.

Primarily due to an increase in the number of totally depreciated vehicles in our fleet as well as favorite bulk kleenex.

Speaker 7: Turning to our operating costs, as Stephen noted, we continue to focus on key controllable cost items in the quarter, driving productivity and mitigating inflationary cost pressures. Our DOE per transaction day to due two $34 in $2 improvement sequentially. About half of this improvement was the result of improved internal labor productivity and reduced third-party labor costs.

Turning to our operating costs.

Even though that we continue to focus on can you control at all costs <unk> driving primary care Thingy and mitigating inflationary cost pressures idea we per transaction <unk>. Two two is $34 a two dollar improvement sequentially about half of this improvement with the result of improved Internet labor productivity <unk> third party.

Speaker 7: As we have noted on prior calls, we expect DOE per transaction day to continue to improve through the back half of the year.

Labor costs <unk>.

As we have noted down prior calls we expect <unk> per transaction day to continue to improve through the back half of the year.

Speaker 7: asqd expenses for 200 and imeighty-five million dollars in the second quarter, reflecting slightly higher marketing spendse on a sequential basis. Ahead of the summer surge, we expect spma in the back half of the year to fall below $5 million as actions taken in Q2 take hold.

S T any expenses for $285 million in the second quarter.

Reflecting slightly higher marketing fan and a sequential basis ahead of the summer search we expect F. T. In a in the back half of the year to fall below $500 million as action taken in queue to take hold.

Let me turn to our capital structure and liquidity.

Speaker 7: With respect to our balance sheet, net corporate debt at the end of the quarter was two point six zillion dollars and net corporate reververs for Q2 was one point seven X moest sute, above our target of one point five X and in line with expected seasonality, mainly as the result of our net reart backx during the quarter.

With respect to our balance sheet that corporate that at the end of the quarter with $2.6 billion in that corporate leverage for Q2 with 1.7 times <unk> about our target of 1.5 times and in mind with expected seasonality, mainly as a result of our Netflix capex during the court.

Speaker 7: We expect net corporate leverage to come down over the second half of the year, given anticipated performance and projected fleet reduction.

We expect net corporate leverage to come down over the second half of the year, given anticipated performance and projected fleet reduction.

Speaker 7: And qunhundred thirtieth are available. Liquidity was $1.4 million, which includes $682 million of unrestricted cash.

At June 30th are available appointment liquidity with $1.4 billion, which includes $682 million unrestricted cash.

Speaker 7: During the quarter we took a variety of actions of mineral courts of business to extend the maturities and increased aggregate commitments related to our ABF facilities globally in June and as planned we drew $5 million on our revolving credit facility which funded vehicle purchases and seasonal working capital as we fleeted up for peak demand we expect to pay this down in the second half of the year as cash flows through meaningfully positive we also amended our first Fe term loan fee and fee to transition from library chto sila as for primary underlying benchmark index.

During the corner, we took a variety of accents in the normal course of business to extend the maturity and increase the aggregate commitments related to R. A b S facilities globally in June and as planned wait to $500 million on a revolving credit facility, which funded vehicle purchases and season I'm working capital at <unk>.

For peak demand, we expect to pay this down in the second half of the year as cash flow turns meaningfully positive. We also amended our first theme term loans B M C to transition from <unk> as the primary underlying benchmark index at.

Speaker 7: At June eartieth, we had capacity under our ES of $773 million globally and our vehicle debt portfolio was approximately 67% sixxed -rate, which mitigate the intensity ring rate environment. We also maintained sufficient equity cushion in our 80 assets that our ERS.

At June 30th we have capacity under R. A D F of $773 million globally, and our vehicle that portfolio was approximately 67% fixed rate, which mitigate the impact of the rising rate environment.

We also maintain sufficient equity question in R. A b S at quarter end.

Speaker 7: Overall we continue to maineen and well structured debt maturity. ladatder. We have new material corporate debt maturities until 2020 -six, and.

Overall, we continue to maintain a well structured debt maturity ladder, we have no material corporate debt maturities until 2026.

Speaker 7: Turning to our cash flow capital allocation for the second quarter, we recorded adjusting operating cash flow of nine million doars, free CapEx of 400 and thirventty-seven million dollars and nonwith CapEx of 77 million doll, resulting in free cash outflow of 400 and twenty-three million dollars. As we begin our deep leadeting cycle in the third quarter, we expect free cash flow generation to turn uningousfully positive for the second half of the year.

Turning to our cash flow and capital allocation for the second quarter, we recorded adjusting operating cashflow at $91 million free capex of $437 million and nine slick capex of $77 million, resulting in free cash outflow of $423 million <unk>.

As we begin our D freedom cycle and the third quarter, we expect free cash flow generation to turn meaningfully positive for the second half of the year.

Speaker 7: In addistitioning to our investment DFE and n lywe CapEx. In Q2 we repurchased six point three million shares of our common stock for $1 million. At quarter end we had approximately $95 million remaining under the Board's authorization.

In addition to our investments and fleet and Nancy Capex. Thank you too, we repurchased 6.3 million shares of our common stock for $100 million at corner, and we had approximately $950 million remaining under the boards authorization.

Speaker 7: Finally let me give some color around our forward-looking expectations on Q3 revenue. We expected sequential uptick from Q2, consistent with seasonal patterns, with continued growth in demand, seasoningly improved rpv and continued improvement in these utilization.

Finally, let me get some color around are forward looking expectations I see three revenue, we expect a sequential uptick from two two consistent with seasonal patterns with continued growth in demand seasonally improved R. P D and continued improvement in utilization.

Speaker 7: On our global fleet. We will begin a reduction in fet in Q3 off a July peak, with the current intention of breding our fleet size at miran to stand modestly higher than where we began the year, subject to go to demand indicators But with a trer bias as we see some risk through digital prices into the back half of the year.

And our global <unk>, we will be getting a reduction in fleet and two three off of the July peak with the current intention of frightening our fleet size that your AD to Sam modestly higher than where we began the year subject is always to demand indicators, but with a tighter bias as we see some risk to reschedule prices into the back half of the year.

Sleep carrion cost, we expect it to three depreciation rate per unit at 275 to $300, reflecting current market conditions we.

We expect global free interest not limited to the U S to be about $140 million in the third quarter, reflecting fell asleep thighs and the rate curve.

And operating expenses, we expect to you we per transaction day to continue to decline and for the back half SG&A to tell the less than $500 million.

Speaker 6: In closing, we believe that strong results in the second quarter and the early momentum in July to addition us for a strong second half of the year. Longer term, we expect our growth initiatives to continue to mature as contributtor to the top and bottom line has to even noted all the while we stay focused on driving productivity and efficiency to contribute to our margin expansion objectives.

In closing we believe the strong results in the second quarter and the early momentum in July position us for a strong second half of the year longer term, we expect our growth initiatives to continue to mature as contributors to put at the top and bottom line at leave a note at.

All the while we stay focused on driving productivity and efficiency to contribute to our margin expansion objective. We're confident that these dynamics along with a strong balance sheet will contribute to long term shareholder value.

Speaker 7: We're confident that these dynamics, along with a strong damme sheet, will contribute to long-term shareholder value.

With that let's open up the call for Q&A.

Speaker 8: We will now open the line for questionions. Please limit your question to one question, first speaker and one follow-up. If need Ed to ask the question, please dial Star 1- one on your phone. If you wish to answer your question, press Star 1- one again.

We will now open the line for questions. Please limit your questions to one question per speaker and one follow up if needed to ask a question. Please dial star one one on your phone if you wish to cancel your question Press Star one one again.

Our first question.

Comes from the line.

Of Chris Baraka of Deutsche.

Deutsche Bank.

Speaker 9: They good morning everyone to shaate all color so far and congratulations to alice the hermman loyment am so.

Pay good morning, everyone. I appreciate you all colors, so far and congratulations to Alex me permanent appointment.

Thank you so.

Speaker 1: Sure So we look to 2000 and pointy four and if we, I guess, kind to assume that demand space relatively constant, maybe pricing is similar to 2000 and twenty-three. And then you talked about initiatives around dollar fifrifty and maybe year a longer tail to European recovery and further growth in ridees share, I guess. Do you think it's possible that year-over-year EBITDA would be positive next year?

Sure. So you know as we look to 2024, and if we <unk> I I guess kind of assume that demand stays relatively constant maybe pricing is similar to 2023.

You talked about initiatives around dollar thrifty, and maybe there's a longer tail to the European recovery and in further growth and rideshare I guess do you think it's possible that year over year EBITDA would would be positive next year.

Thanks for the question Chris appreciate it the short answer is yes, uhm, we do see opportunity for growth into 2024, Uhm and I I would say to put our confidence in a number of different sort of factors first of all we're seeing no abatement in baseline fundamentalists that is <unk>.

And for our product is there you know you saw demand grow at 18, 19% and we're seeing that and expecting that to continue and I would say that you know demand is both in our core rack business, but equally we will experience increasing demand an opportunity in Europe in ride share <unk>.

<unk> dollar and I'll come back to those I would also say as a general matter that the demand function. I think is also gonna come from continued opportunity in the rack business. So international inbound travel, which is a very positive force for US you know has added about you know <unk>.

Call it 60% of <unk> of of where it was pre pandemic and we have yet to see kind of the full throat throat. It benefit if you will of what comes from Asia.

Look at business travel you know there have been various analyses done by third parties that point the business travel back at about 60% of pre pandemic.

Returning to about 95 per cent in the next two years, so baseline demand fundamentals in the core rack business along with incremental demand that is still not yet present, and then demand across the various sort of growth growth components of the business.

Right and as we said you know we expect it right over the balance of this year to improve in terms of year over year comparisons. So Q2 year over year rate was down 7% I would venture to say that Q2 as we suggested was a bit of an anomaly last year.

And that you had excessively high demand coming out of Covid and you had all of the rental car companies selling cars decreasing supply into an extraordinary bid on the residual value base of used cars. So wildly as soon as wild Wild a cemetery and supply demand.

We think that the year over year, a comparison is going to improve Q3, perhaps you know appreciably less than 7% that Q2 was down in queue for exhibiting progress from there.

The next thing I would say about 2024 is that the history. In this industry. Obviously is to the extent that there is meaningful supply of cars coming into the market. The temptation was to <unk> big and price would follow obviously, it's not consistent with a strategy that we have around R. O a.

But I don't think the temptation is even going to be there across the industry. When you look at analyses of 2024 in terms of OEM production, it's mark to be only about 2% higher than 20 twenty-three. So yes cars will be free or if you will and where they were and the depth of COVID-19, but not.

Nearly back to where pre pandemic levels are.

Speaker 4: Then I think the biggest component of optimism around 2- 24 and why growth and happen is around our rice shahere business around Europe and around dollar dollar, obviously placed for us taking more of a very big addressable market, lower depreciating the holes reflected in depreciation and putting the to use of higher margin. T n C is showing growth and improvement.

Then I think the biggest component of optimism around 24, and white growth can happen is around a rideshare business around Europe and around dollar dollar obviously plays to us taking more of a very big addressable market lowered depreciating vehicles reflected in depreciation putting those to use it.

Higher margin T.

T M C is showing growth and improvement we've expanded what we're doing with Uber into Europe Ranch 60 markets around the U S. And then in Europe . All of our countries are proving profitable and we're seeing rate and volume extend through to this summer's such this summer would appear now to and from a rental car point of view.

Speaker 4: We've expanded what we're doing with U into Europe , whening 60 markets around the? U's and then in Europe , all of our countries are proving profitable and we're seeing rate and volume extend through this summer. This summer would appear now and from a rental par point of view, in kind of October , and so that's another vector of continued growth.

In kind of October and so that's another vector of continued growth I would stay on the expense side again, just to to play to margin and the work we have to do it's important to remember that while we are working on D. O E. N. S. G. N. A we are running side by side I G platforms as we move.

Speaker 1: I would sayay on the exexpense by again to see the plate to margin and the work we have to do. It's important to remember that while we are working on de and extrea we are running side rice, side it platforms. As we move from the bigner center into the cloud that will start to converge more than where we have been. We will de my a single components of that and we will seeing material benefit in terms of costs to particly through two thousand and 24 and beyond.

From you know the data center into the cloud.

That will start to converge more than where we have been we will demise you know a single component of that and we will see material benefit in terms of cost, particularly am through 2024 and beyond.

Speaker 4: Last thing I would say again plaining and margin plaining to EBITDA generation is we continue to try to pour our away- our, our ones are away and will do more in 24- from the vagaries of the wholesale marketts into risk retail cars and look to rely more heavily on our retail sort of components, which is both our stocores and carbana. That's the good MIT.

Last thing I would say again plaint margin Plaint EBITDA generation is we continued to tried to pull our way our ourselves away and will do more than 24 from the vagaries of the wholesale market into which we sell cars and look to rely more heavily on our retail sort of component which is both.

Our stores and Carvana, that's a good mate again to risk the residual decline it does harvest greater gain on sale for US I think we're unique in the context of pursuing that so taking all of that and driving to hire EBITDA level or higher margin. In 2024, you know those are the various components.

Speaker 4: Again to risk through residual decline. It does harvest greater gain on sale for us. I think we're unique in the context that are through that. So taking all of that in driving through a higher EBITDA level, a higher margin in two thousand and 24, both of the various components, that I think se kind of a level of optimism on the floor.

Instead, I think feed kind of a level of optimism on the forward.

Okay. Thanks, Steven Super Helpful. And then I I did have a follow up which you know maybe we can we can drill down on on where you are on E V. As a little bit and you know I know you mentioned earlier that you might change your tip. It a little bit in terms of what what you're in pleading when and where and maybe just.

You have the economics of of that business, so far where where you're at on <unk> kind of puts and takes you're seeing from <unk> pricing changes at the Oems on <unk> and just again kind of the economics of how that impacts the business in 24 and beyond in terms of you know RPT difference in in in margin difference would be Oh.

And things like that thanks sure sure. Okay. So Tvs are now 11, 12% of our overall fleet.

Still skews to a dominant presence of Tesla in the fleet.

But I think we're encouraged that we are now taking delivery on the first C. DS out of G. M. As part of 175000 that we agreed to purchase over the next five years <unk>.

They are all coming at more attractive price points, then where we thought they would originally that only benefits. The economics in terms of the margin to be had and the returns to be had on these cars.

I would also say that as we take in more general Motors <unk> one it mitigates the sort of single supply of risk just in terms of recall and operations, but equally I think you know we're encouraged Eddie working more aggressively with G M by virtue.

There are parts supply their network and the like because I think that you know the ability on those cars at various price points, just sort of <unk> more readily available at lower price points is an important element in the overall economics of running you know the E D platform from a straight.

We maintenance point of view <unk> are still what they promised to be which is lower maintenance, obviously subject it sort of tires and brakes and I think we're quite encouraged at the longer length of keep that we'll be able to have flattening the depreciation curve buying more E V. As at lower price points, then where we bought them.

In the past and I think we find ourselves in a really interesting opportunity, particularly our cities are requiring Brian sure companies like Uber and left to be 100 per cent electric by 2030, only kind of you know six years or more from where we are and we become to viable.

Path for that to happen and so again, having lower price points <unk> longer length of Keith lowered depreciating sort of components and having sort of an embedded base of demand for them in the context of rideshare. It's just another added component of why we think the economics and the first <unk>.

Over edge is there and again none of this relies on what I had mentioned in her prepared remarks, which is that the whole undertaking around E. DS puts us in a position longer term to think about fleet management to think about autonomous vehicles and alive again all of that is an add on to some of the baseline business that.

We're putting eev's too.

Okay very helpful. Thanks, Thanks, Steven Thanks, a lot Chris.

Thank you.

Our next question.

Comes on the line of <unk> of Oppenheimer Company.

Alright, great. That's it. Thank you very much you're very very good color. You know can you really touch upon manheim residuals I've been pretty volatile recently how're you know thinking about that impact as you manage the business going forward.

Speaker 6: And it Al ex? I'll take that question. Yeah, you're right. We have seen decreases in the manim rental index, publicpubl feat over the rest to about 4% decline for the month of two and we've seen you diminished pricing in the spot market. But when you think about that manim rental index I think it's appoint the context of where we started the year. So it's pretty much around trip on that in terms of where we started January and even compared to the beginning of Q1, you know we we increases and came back down in the last month of the quarter.

And it's it's Alex I'll take that question Uhm, Yeah, you're right. We have seen uhm decreases in the Mannheim rental index published you know over the last few weeks about a 4% decline for the amount of <unk> and we seen him you know diminished pricing in the spot market, but when you think about that Manhattan rental in.

<unk> I think it's important to put it in the context of where we started the year. So it's pretty much a round trip on that in terms of where are we starting January .

Speaker 6: So just to put second in perspective, in terms of how you think about damaggen residual risk in the business, I mean, as you know, driving for a profitable disposions of the e of it exittor fleet is an important component of return on asset and how we manage to return of that on asset. So in a declining residual environment it's more important than ever that we vert volume away from auctction and a baseline whoallesal right to more profitable channel.

Return on assets and how we manage to return that bat an app.

Speaker 7: This includes the direct and you know right now we have more of our volume go for deal direct channel than we do at auction and we also really feel like our differentiator is our retail channel and our car de operation.

Really feel like our differentiator is that retail channel and our car sales operation.

Speaker 6: So our car sales operations includues our partnership with carbhona and we're yielding much better returns than what we would otherwise realized. By disclosing of the unical through oxes, our carvidideer volume is throwing and contributce through us an immunical way. So, that being said, in the current digital environment were even more focused on disciplinine management and managing our fleet sze within the demand curve energy mentioned in our prepared remarks.

So uhm our car sales operations includes our partnership with Carvana and we're yielding much better returns than what we would otherwise realized by disposing of these vehicles through auction I kind of had a volume is growing and contribute to us in a meaningful way so that being said in the current reschedule environment, where even more focused and disciplined Clinton.

Management and managing our fleet size within the demand curve and as we mentioned in our prepared remarks, we are going to redo Starfleet side towards the end of the year. So it stands modestly higher than where we started the year and this is a function of managing to the downside risk understanding that if demand indicators more <unk>, we can pay that quick.

Speaker 6: We are going to reduce our fleet site towards the end of the year, So it modestly higher than where we started the year and this is a function of managing to the downside risk understanding if demand in the between ERS' more we can send quickly to the outside in manage that through spot market puripes. So with that context and as we look forward to Q3, as I mentioned, we're expecting that depreciation in 275 to three hundred dollars per unit and this is as view on the games that we expect to realize in car of sales, given the current residual environment, as well as the impact of the current spot market on the floors and other words, on the forard of the fleet in terms of how long our holding period and F for disposition at future date.

<unk> to the upside and manage that through spot market purchases. So would that contacts then as we as we look forward to Q3 as I mentioned, we're expecting that depreciation of 275 to $300 per unit and this is a view on the gains that we expect to realize in car sales uhm given the current.

Residual environment as well as the impact of the current spot market on the forward in other words it on the floor of the fleet in terms of how long are holding period and future disposition uhm at future date.

Okay. So that's that's really good color and I guess just from listening to the prepared comments at that you made it seems like you guys are the businesses performing argued or the outlook is better than expected or at least what you thought initially there seems to be a nice growth component here, you're talking about a lot of free cash flow coming in and the second half of.

A year instead of how are we thinking that by back here and I know you got it back about a 6 million shares this past quarter, but what should we really be expecting and how it you know thinking about kind of the value of your stock.

And the purchase of shares just given you know your <unk>.

Seemingly improved outlook. Thanks.

Speaker 4: Well I think look, obviously we generate appreciably more cash flow in the back half of the year. The back half would be the point in year to sort of consideration, to sort of of take up in share repurchase. But our strategy has always been looking at fleet and non-fleet CapEx and then looking at share repurchase as an option. We have conserable capacity under our existing authorization to do that.

Well I think look obviously, we generate appreciably more cash flow and the back half of the year the back half would be the the point in the year to sort of give consideration to sort of take up in share repurchase, but our strategy has always been looking at fleet and honestly capex.

And then looking at share repurchase as as an option we have considerable capacity under our existing authorization to do that we'll continue to sort of look at you know where value sits in the stock we share obviously, rather bullish view on what the forward it looks like and so.

Speaker 10: We'll continue to sort of look at where value is in the stock we share, obviously a rather bullish you on what the forward look right, and so the opportunity will present itself in the second half and you should. You should- think of us as a continueed byy, our stock, as we move through the back half of the year.

You know the opportunity will present itself in the second half and you should <unk> you should think of US as it continued buyer of stock you know as we move through the back half of the year.

Okay. Thank you very much.

Sure.

Thank you.

Our next question comes.

Comes from the line of John Healey of North Coast Research.

Oh, thank you.

I hate to try to get into we've done this but I I just kind of wanted to spend a little time on the depreciation line for the quarter, obviously, a nice benefit you to over Q1. Your fleet went up you know say 40000 cars and I can imagine those cars are coming in and hired appreciation than than previous so just trying to cut back into the game that you had.

This quarter honestly disposition and I don't know my guess is it's probably 125 million or so so.

Speaker 5: If the used car market was softter in Q2 that we can see that versus Q1 you had that big gain.

If he used car market was softer and Q2 that we can we can see that versus Q1, you had that big gain.

Why would you not have another big gain in Q3 is it just the age of the cars are moving through I'm I'm, just trying to understand why the.

<unk> you know from from 280 download 198, and then back to 280 again.

Speaker 6: Yes for John , this of balallex you're right. So for Q2 we had 100- about 100- and ten million dollars gains on her sales in the quarter and as we look ahead to Q3, we we obviously have a dynamic fleet. Our consists of different vehicles, different ages and as we look ahead, there's some fleet mix impact there in terms of what we expect to see and again, we're managing also, I think 2, a residual environment in which we see some downside risk versus some upside risk.

Yeah, Sir John This is Alex you're right. So for Q2, we have 100 <unk> about 110 million dollar gains on car sales in the corner and as we look ahead to Q3. We've got you know, we obviously have a dynamic fleet. Our fleet consists of different vehicles different ages and as we look ahead, there's some fleet next impact.

They are in terms of what we expect to see and again you know we're managing also I think to a reschedule an environment in which we see some downside risk versus some upside risk. So I'm thinking about that for a depreciation rate of 275 to 300, we tried to incorporate to the best of our knowledge, what we see happening in terms of fleet plan dynamics.

Speaker 7: So in thinking about that, or depreciate from rate 2, 75 to three hundred, we Ve tried to incorporate to the best of our dollars, what we see happening in terms of fleet plan dynamic, S as well as our view on the spot market and the market in which those carars sales will happen.

As well as our view on the spot market and the market in which those car sales will happen.

Okay.

That makes sense and then just on your furniture K, a giant John John John If Stephen just before we move off that <unk>. So let's talk about the different channels that we have okay. The wholesale market is a spot market right now it is as you see in the Mannheim rental rental index down quite considerably over the latter part of June .

Going into July all consistent with comments that Alex made earlier about it being a round trip on the year.

As we look to us kind of what I would describe as more proprietary channels the likes of carvana or for that matter our own retail network, there's a longer sale period, there than there is in the spot market and so you know right. Now for example, those proprietary channels can yield two to $3000 more per car than what we.

We see in the wholesale market, okay, but they require a 30 or 40 day should've process to get through and so <unk>.

What you're seeing in the reflection is Alex said is a realisation of where the wholesale market is trading the.

The time to be able to sort of sell the cars that we have with a very clear view that we are bringing <unk> down off of the early Q3 peak you know as we get back down into the back or the end of the year and so that's just to give you a bit of a of a flavor for it I would say also in the context of Q2.

You know, there's obviously arise in zero depth cars that were holding because they have greater utility to us in the context of the business that we're growing around dollar for example, or N. T. M. C. So these are the dynamics around depreciation it. It is not the sort of you know here's a given output instead it is.

The output of a series of actions that we take you know which include choice of car. We by choice of car, we keep length of keep what we sell whether we advanced the sale what car as we advance in the context of those that carry elevated equity and equally the ability to sort of capture.

Equal or better price around a car that may have a lower depreciation so the feature than not.

Speaker 11: 's helppeful and want to bring a carbon there and mean clearly that companyiess gone through a lot over the last 18 months or so and it appears to be. Maybe on the other side of things to some degree. Is a relationship that you guys entered in with them kind of still structured the same way, are they as excited about being in this business with you guys that they had been just kind of experiious?

Sure, it's really helpful and I wonder if they could carve onto their I mean, clearly the company has gone through a lot over the last 18 months or so and appears to be maybe on the other side of things to some degree is the relationship that you guys entered into with them kind of still structured the same way or are they as excited about being in this business with you guys as they.

Had it been just kind of curious like if we could get some visibility on kind of where that stands in the durability of it because to me that probably is a big part of the the 24 changeover and distribution how you get out of fleet.

Speaker 5: Like if we could get some visibility on kind of where that standans in the durability of it, because to me at believe is a big part of the 24 change over and distribution I to get out of lease.

Yeah, I I would say the commercial relationship with Carvana is better now than it has been you may remember that.

When they first you know ran into challenges with creditors and the like they had pivoted on their own business model to move away from smaller more bespoke providers or dealers have cars to larger scale operations of which hurts is clearly one so we've seen.

Growth in volume, but we can put through Carvana, a very engaged you know partner with us in the context of car sales. So I would say that things have improved you know in the context of of where we are.

The way I should also say John that.

You know just back to the Mannheim question Uhm.

There is spot risk when you look at it what I would say to you though is that there are some interesting dynamics about the used car market, which I think we're looking at it and considering you know to <unk>.

Put ourselves marginally more optimistic about it which is that structurally speaking the used car market is now into a point of being short used cars that are attractive to rental car companies, namely off lease. If you think about it the supply that would come or start right now into the used car market would've gone.

On at least three years ago. They didn't go on these because they weren't manufactured because we were in the throes of Covid. So we're entering a period structural shortage in terms of supply of attractive cars that should have some upward lift if not stability just sort of where the Mannheim rental indexes now corresponding negative view on it of course.

Would be the interest rates are higher so borrowing you know on the part of the consumer you know is is it.

Puts them in a more reluctant sort of position, but I think we shouldn't lose sight of the structural element there I don't mean to make a pattern of the last two weeks, but the last two weeks have shown more stability than what we saw in as Alex put it a 4% decline over latter part of June into early July .

Okay, great. Thank you so much and Alex congrats on the promotion.

Thank you.

Thank you.

Our next question.

Comes from the line of Stephanie more of Jefferies.

Hi, good morning, Thank you.

Good morning.

Speaker 12: Well CRE think you gave a little bit of color of the trends that you were seeing in July , but maybe if we could discuslect it out a little bit. So if you could just touch on the demand trends to be seeing in July , how that's compared to the local seasonality and at the same time you know if you could discuss, and that you're seeing from a comtendof standpoint here for you kind thir y season as low, that might D be helpful. Thank you.

I I think I think he gave a little bit of color of the trends that you were seeing in July but maybe if we could just flesh that out a little bit yeah. If you could just touch on demand trends you've seen in July and how that compared to make me normal seasonality and at the same time you know if you could discuss to what you're saying from a competitive standpoint, you know through this.

You know kind of busy peak season, as well that might be helpful. Thank you.

Sure well I would say that the trend in July that I took note of in the prepared remarks was looking at rate in July is being in or around you know five per cent or slightly better relative to where we were in Q2 in July <unk>.

Being higher than June kind of on a month over month sequential basis.

Typically in you know Q2 Q3, you know you would see 10% uptick in right and you would see a more modest 5% uptick in volume I think that we are forecasting here.

Perhaps an inverse of the two which is we're expecting and are experiencing materially better volume than what is otherwise seasonal may be breaking with a seasonal sort of nature of it all and we're seeing right sort of continue higher but again off of a higher base right then where are we.

He otherwise would have been and as I mentioned equally you know looking away just from the sequential quarter on quarter. If you look at year over year Q2 was 7% lower year over year, we envision Q3 to be lower than it was last year, but lower than that.

Meaning down call at five ish percent relative to where it was and improving throughout the year. If there's a better comparable set moving away from kind of the extremity of what was Q2 of 2022, but I think overall very strong demand of which we're gonna find other channels defeated even more.

And continued strength in price again in a very stable rate environment, you know relative to to what we otherwise might've seen or cynically thought would come again with a slightly looser availability of cars and so forth.

Speaker 13: Great actually, solut.e no, that's that' helpful. And then maybe, lookinging the dections here got on the expense and side. I think you called out clearly continuing to place a lot of focus on whether it's guesting a direct cost and I think you highlighted there were some plicit of costs, zil right now, as you kind of migrants of the cloud, migrants further into the cloud, do you quantify what you're seeing and impact?

Great escalate note that that's helpful and then maybe switching <unk>.

Switching gears on the expense management side, I think he called out clearly continuing to place a lot of focus on whether it's destiny retract cost and I think you highlighted that there were some keeps us at a cough right now as you've had them migrate into the cloud my <unk> further into the cloud could you.

Really quantify what you're saying or the impact that was that and a quarter.

Speaker 14: That was there the quarter.

Speaker 1: Well I would say you know, without putting precise numbers to it by would simply tell you that you know there's a material amount of the expense that we incur in the course of a transition from operating two data centers to where we will ultimately the for the end of next year, into 2- 25, you know- up into the cloud with various instances on the global basis.

Well I would say you know without putting precise numbers to it I would simply tell you that.

You know, there's a material amount of expense that we incur.

In the course of a transition from operating two data centers to where we will ultimately be.

For the end of next year into 25.

Up into the cloud with various instances on a global basis, we will shed ourselves of a meaningful number of outside consultants and other service providers that have for probably the better part of two decades stood up.

Speaker 4: We will shed ourselves of a meaningful number of outguide, consultants and other service providers that have, for probably the better part of two decades, put up old platforms that BAs in physical data center and so ceivings move get is not just simply the kind of more conventional feings that consistently being in the cloud is the ability to move away from a reliance on third party providers.

Older platforms that sit in physical data center and so the savings we will get is not just simply the kind of more conventional savings that comes with simply being in the cloud is the ability to move away from our reliance on third party providers and we're not there yet in its entirety. Because this is up this is a a <unk>.

Speaker 4: And we're not FA yet in this entirety, because this is that this is a a gradual sort of move where, as I've mentioned finance, for example, is up in the cloud. There are other element for platforms that will be migrated intoue course and as we do that, we're reducing down our reliance on third parties. Obviously there is the cost of cloud, this cost of our own employees, but this will be know, quite a material number in the context of what we will realize as it be forward into the latter parts of 2020 four.

Gradual sort of move, whereas I've mentioned finance for example is up in the cloud there are other elements or platforms that will be migrated in due course and as we do that we're reducing down our alliance on certain parties.

Obviously, there's the cost of the cloud this cost of our own employees, but this will be you know quite a material number in the context of what we will realize as it bleeds forward in through the latter part of of 2024.

Great and then lastly for me I was hoping you could maybe get a little bit of an update on that hurts and is there a partnership in Europe that was launched earlier this year, particularly with easy and the availability that you're providing for any other drivers and uncertainty European city, Sir any any difference.

In outcomes or learning anything thus far comparing the European market and then maybe the U S market. Just curious what you are sure sure well first of all it's early days in Europe , you know to draw the comparison.

But our venture is starting off in London, and Amsterdam, and will next be in France, and you know these are areas, where there's a very professional cadre of drivers that drive that a license that are required you know to take and pass certain exams and so forth.

What that will bring to us I suspect is a more uniform professional group of drivers on which we can rely kind of more readily on risks that we take in terms of risk of collision and so forth I would say that in certain of the European jurisdictions.

Insurance and the risk bearing relative to what it is in the U S will shift, meaning we can put risk on third parties, whether it's obligatory insurance programs or otherwise so the economics all in if you will so put aside right in volume is the key components, but the ancillary costs of.

Collision damage salvage all keyed off of quality of driver and equally kind of insurance and risk bearing I think could possibly be better in Europe than it would be in the U S. Although you know the U S business will be larger for us for awhile, but I think the European business holes sort of considerable promise.

Great. Thank you so much.

Sure.

Thank you.

Our next question.

Comes from Christopher Stephanopoulos Susquehanna International.

Speaker 10: forning everyone and I would more interact on the promotion and Stephen a lot of the detail here. Your repared remarksers. It relates to demanding some of the Q a But if we look at the airlines here, re permitted than enering airlines doing the correlation to rental arms.

Good morning, everyone and good morning grabs on the promotion so Steven a lot of.

Oh good detail here in your in your <unk> remarks, as it relates to demand and some of the Q&A, but if.

If we look at the airlines here for a minute and I mentioned the airlines given the the the the correlation to random volumes uhm.

You know domestically here, we are seeing some signs of swelling, but perhaps figure declines in pricing and uhm concerns on some elevated inventory here in North America.

Long haul travel as you said.

With with the Airlines are saying is very struck her so you know given that in your global footprint. I was wondering if you could perhaps put a little bit more sort of a nuanced you here with respect to how you're seeing demand here domestically, if you're able to parse set out regionally west coast the coast.

In <unk> your your thoughts with how you see what looks to be a lot of pent up demand, but certainly the last segment to recover with respect to travel playing out to the back half. Thank you sure.

So so <unk> just as as a as a baseline okay. It's important to realize that you know we've been we ran in queue to it and 82% utilization and we are signaling to you that we will take that even higher in the context of of our fleet and that's.

Not price driven as I said, that's fleet driven so we calibrate the fleet and we'll take it down you know to sort of maintain very high levels of utilization so as to maintain price and the like I raise that because across the whole of the business. All geographies are contributing to an elevated level view, let me start domestic I'll.

Just decompose it is in your question.

Domestically, we continue to see strange you know across all of our regions I would say the region's behave on a seasonal basis. So quite strong in the northeast in the summer will be quite strong and we'll see bookings in through the winter in the southern clients like Florida, and Arizona, I would say that the <unk>.

West is picking up and this factors into inbound travel, which is Asian inbound travel has been kind of the last of the three meaning European travel back strong Latin American travel back strong Asian travel was late but we're seeing more and more travel, particularly.

Among Japanese and Korean tourists into the California market and also into Hawaii, I would say an interesting twist is that we're seeing Chinese tourists not in the United States by virtue of visa issues, but rather in our European markets in places like Paris and elsewhere.

Extra growing that.

The European side, we're seeing certainly this summer you know Ah considerably elevated level of Americans that are traveling to Europe . Obviously, the places that you know like the southern part of France, and through Spain, and in Italy. The business has been really quite strong.

Strong in demand at a moment, where we have made very material changes to our cost base in certain parts in certain countries of Europe , France in particular, and so the margin throw off of that business is quite enticing and so you know what we see in this is quite strong but.

I would point out we're not done meaning we're not yet back to where international inbound was I think the airlines would tell you that they would redeploy capacity as in if they had it to feed that we would like that because this international inbound business going both ways is very attractive to us carries very.

Three high rate very high pick up in vass, very attractive margins and so we'd like to see and expect to see that continue.

Great Great color. Thank you a follow up so.

You're prepared remarks.

Speaker 15: You took what you, your view or how you approach management and what is certainly, I would say, a different approach today. If you could experare that a little bit, more facts: you know reic about how conversation with investors- for me at least, start office. You know how. How has management chang for her. You know how how. Even think about manageing the pre crew cycle today versus how you just ok, Thank you, Thanks a lot.

You touched on what is your view of or how you approach fleet management and what is certainly I would say a different approach today. If if you could expand on that a little bit more. That's you know that's just about how every conversation with investors for me at least star.

It's office you know how how how has fleet management changed for her it's you know how how does Steven take about managing the fleet recycled today versus how it usually already done.

Okay. Thank you <unk>. Thanks, a lot look in support of the strategy as we've said and all the calls in which I'd been a participant is that R. O E drive this okay.

Speaker 4: Look to core the strategy, as we've said, and all the call in which I adman participants, is that RO a drrives this ok, and we re targeting a marginal ROA on fleet at 15 to 20% in terms of what the ROA ought to be on the cars that we hold. We're dynamic all the time ok, which is why depreciation and fleep by could move and will move depending on where demand is.

And what targeting a marginal R O a on fleet at 15% to 20% in terms of what the R O a ought to be on.

On the cars that we hold.

With dynamic all the time, Okay, which is why depreciation and fleet size could move and we'll move depending on where demand is but you're always looking to optimize your return by the way that may be as it was in various portions of last year selling the car over renting the car but.

Speaker 4: But you're always looking to optimize your return. I way that may be, as it was in various portions of last year, selling the car over renting the car, But as prices have come off, the rental proposition has obviously become more attractive.

But as prices have come off the rental proposition has obviously become more attractive.

Speaker 1: At a very stable base rate that we are at. Yes, it is down year-over-year, but I think it's explainable in the context of where we're coming from and now seing sequentially as what we view to be a relatively stable rate environment that sustains adequate and attractive marginal returns on our assets.

Add a very stable base right you know that we are at so yes. It is down your over a year, but I think it's explainable in the context of where we're coming from and now sitting sequentially at what we view to be a relatively stable rate environment that sustains adequate and attractive marginal returns on our <expletive>.

<unk>.

If you think about <unk>, Okay, and you think about utilization and fleet being the key component of what drives utilization not taking price down to beef up against the static fleet number.

We started off the year AD kind of 475000 to 500000 cars, we surged into the summer challenging ourselves to ensure that what we were getting at appropriate levels of utilization was adequate return and as Alex pointed out we will be back down you know to something that's.

Slightly higher than where we began the year again in the context of being mindful of where demand sits maintaining better than 82% utilization on the fleet maintaining high R. O a a cars.

And all the while you know serving a diverse set of customers you know that have.

Different R. P D, but very attractive expressions of margin. So in other words, the fixation on right in and of itself I think starts to skew because as we've said what we do in rideshare will be a lower R. P D, but longer length of keep N lower expanse and better.

And more creative margin, what we do an insurance replacement, maybe dilutive P D, but again the length of cheap lower expression of cost better margin.

So each of these channels will express different levels of of of margin potential all that feeds into the <unk> even in the context of what we're planning on doing with dollar right. Now dollar has been an inferior product.

Customer experience has been a poor one can you go on to Expedia, because the reading a dollar is much lower than budget at Avis, we have no choice, but to keep a low rate.

As we improve the customer experience on dollar we will have room to take that right Oh, okay. As we take that right up just know that we will be using lowered depreciating vehicles in that to create margin. So I'm, just giving you kind of a walk around the business plan all of the central focus on <unk>.

<unk> all with a central focus on returns all with a <unk> a central focus on managing this fleet as you would expect an asset manager to do and generating increasing returns for our shareholders.

Great that's a great color. Thank you.

Sure.

Speaker 16: Thank you. This concludes today's canate session. I would now like to hand the call over to stephenshire Chief Executive Officer. Please go ahead.

Thank you. This concludes today's Q&A session I would not like to hand, the call over to Stephen sure Chief Executive Officer. Please go ahead.

Speaker 4: Thank you all for your participation today. Before we close the call, I want to thank the more than two thousand employees of her for the continued service and their attention to our customers, particularly as we're in the busy summer seasonwe look forward to sharing further updates with you on our next call and with that I'll turnend it back to the operator.

Thank you all for your participation today before we close the call I want to thank the more than 20000 employees of hurts for their continued service in their attention to our customers, particularly is wearing the busy summer season, we look forward to sharing further updates with you on our next call and with that I'll send it back to the operator.

Speaker 16: This concludes our global Holdings. Second quarter 2023 earnings conference call. Thank you for your participation.

This concludes to hurts global holding second quarter 2023 earnings conference call. Thank you for your participation.

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Speaker 17: four six four six nine six 4, three and.

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