Q4 2023 Hertz Global Holdings Inc Earnings Call

Operator: Welcome to the Hertz Global Holdings fourth quarter 2023 earnings call. Currently, all lines are in a listen-only mode.

Welcome to the Hertz Global Holdings fourth 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.

Operator: Following management's commentary, we will conduct a question and answer session. I'd like to remind you that this morning's call is being recorded by the. I would like to turn the call over to your host, Johann Rawlinson, Vice President of Investor Relations. Please go ahead.

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

I'd like to turn the call over to your host Johan Robinson, Vice President of Investor Relations. Please go ahead.

Johann Rawlinson: Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call, and these can be accessed through the investor relations section of our website. I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not guarantees of performance and, by their nature, are subject to inherent risks and uncertainties. The actual results may differ materially.

Johan Robinson: Good morning, everyone and thank you for joining us by now you should have all earnings press release and associated financial information. We've also provided slides to accompany our conference call and these can be accessed through the Investor Relations section of our website.

Speaker Change: 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 and you get rid of trusts and uncertainties actual results may differ materially.

Johann Rawlinson: Any forward-looking information relayed on this call speaks only as of today's date, and the 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 the filings we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website.

Speaker Change: Any forward looking information relayed on this call speaks only as of today's date.

Speaker Change: <unk> undertakes no obligation to update that information to reflect changed circumstances.

Speaker Change: Additional information concerning these statements is contained in our earnings press release and the filings we make with the Securities and Exchange Commission all filings are available on the Sec's website and the Investor Relations section of the Hertz website I would also direct your attention to the form 8-K that we furnished to the S E C.

Stephen M. Scherr: I would also direct your attention to the Form 8K that we filed with the SEC on January 11th, which includes information on our strategic decision regarding the sale of a portion of the EV fleet. Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website. Unless otherwise noted, our discussion today focuses on our global business. On the call this morning, we have Stephen Scherr, our Chief Executive Officer, Alex Brooks, our Chief Financial Officer, and Justin Keppy, our Chief Operating Officer. I'll now turn the call over to Stephen.

Speaker Change: On January 11th which includes information on our strategic decision regarding the sale of a portion of the fleet.

Speaker Change: Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website we.

Speaker Change: We believe that these non-GAAP measures provide additional useful information about our operations, allowing data evaluation of our profitability and performance.

Yes, otherwise noted our discussion today focuses on our global business.

Speaker Change: On the whole. This morning, we have Stephen Scherr, our Chief Executive Officer, Alex Brooks, Our Chief Financial Officer, and Justin <unk>, Our Chief operating officer.

Stephen M. Scherr: I'll now turn the call over to Steven.

Stephen M. Scherr: Good morning, and thank you for joining our fourth quarter earnings call. We have a lot to cover this morning. On our performance, we will address the cost challenges that the business faced in the fourth quarter, which were a continuation of the challenges we faced throughout 2023, as well as the solid demand and stable rate environment we continue to experience. The core message we are sharing this morning as we begin 2024 is one of confidence on the forward. Our confidence is based on the continued stability of the demand and rate environment, the expected benefits of the strategic decision that we made in the fourth quarter regarding our EV fleet, which is also expected to reduce operational distraction, and the continued execution of our enhanced profitability plan.

Stephen M. Scherr: Good morning, and thank you for joining our fourth quarter earnings call. We have a good amount to cover this morning.

Stephen M. Scherr: On our performance, we will address the cost challenges that the business faced in the fourth quarter, which were a continuation of the challenges we faced throughout 2023 as well as the solid demand and stable rate environment. We continue to experience. The core message. We are sharing this morning as we begin 2024 is one of confidence on the forward.

Stephen M. Scherr: Our confidence is based on the continued stability of the demand and rate environment do you expected benefits of the strategic decision that we made in the fourth quarter regarding our EV fleet, which is also expected to reduce operational distraction and the continued execution of our enhanced profitability plan. All told we expect that to.

Stephen M. Scherr: All told, we expect that 2024 will be a transitional year for Hertz, and we expect to regain our operational cadence and improve our financial performance with increasing effect into 2025. With that, let me turn to our Q4 results, both revenue and cost, and our progress on select initiatives. Justin Keppy will then share impressions from his first 90 days in his role as our Chief Operating Officer and the initiatives he is leading to enhance productivity with a particular focus on our goals for 2024. Alex will then conclude our prepared remarks with additional commentary on our financial performance, liquidity, and outlook before we turn the call over to your questions. For the quarter, revenue was $2.2 billion, in line with our expectations and in line with sequential seasonality, and up 7% year over year.

'twenty 'twenty four it will be a transitional year for Hertz, and we expect to regain our operational cadence and improve our financial performance with increasing effect into 2025.

Stephen M. Scherr: With that let me turn to our Q4 results, both revenue and cost and our progress on select initiatives. Justin Kepi will then share impressions from his first 90 days in his role as our Chief operating officer and the initiatives. He is leading to enhanced productivity with a particular focus on our goals for 2024 hour.

Stephen M. Scherr: <unk> will then conclude our prepared remarks with additional commentary on our financial performance liquidity and outlook before we turn the call over to your questions.

Stephen M. Scherr: On the quarter revenue was $2 $2 billion in line with our expectations and in line with sequential seasonality and up 7% year over year. Our top line performance reflected continued demand for our product consistent with travel trends reported across airlines and hotels.

Stephen M. Scherr: Our top line performance reflected continued demand for our product, consistent with travel trends reported across airlines and hotels. Specifically, Q4 volume was up 12% year over year. The organization delivered Q4 revenue with a strong focus on rates. Revenue per day in the quarter came in better than expected at $58.09, which is slightly better than typical seasonality would yield.

Stephen M. Scherr: Pacifically Q4 volume was up 12% year over year the.

Stephen M. Scherr: The organization delivered Q4 revenue with a strong focus on rate revenue per day in the quarter came in better than expected at $58.09, which is slightly better than typical seasonality would yield.

Stephen M. Scherr: Year over year, RPD reflected a moderating trend relative to prior quarterly comparisons, and the rate of year over year decline decelerated. Overall, this better than expected rate performance was the product of a relatively stable rate environment in the quarter and underscores that rates for the whole of 2023 remained 40% higher than rates in 2019. Our ability to capture this rate was not only a product of stable demand but our prioritization of RPD. We made some very intentional decisions in the quarter to forego lower-margin business, even though it was at the expense of utilization.

Year over year, our P. D reflected a moderating trend relative to prior quarterly comparisons and the rate of year over year decline decelerated.

Stephen M. Scherr: Overall this better than expected rate performance was the product of a relatively stable rate environment in the quarter and underscores that rate for the whole of 2023 remained 40% higher than rate in 2019.

Our ability to capture this rate was not only a product or a stable demand, but our prioritization of our P. D. We made some very intentional decisions in the quarter to forego a lower margin business, even though it was at the expense of utilization.

Stephen M. Scherr: Further to utilization, we did carry more cars into quarter end than we had previously anticipated. Like all decisions regarding fleet, we are guided by an ROA or return on asset mindset with the central objective of keeping our supply of fleet inside profitable demand. Against declining vehicle residual values in the fourth quarter and what we might yield on sale, we saw the opportunity for greater returns in the continued deployment of these assets. As you are aware, we have been focusing on growing customer channels like dollar and ride share, both of which can accommodate higher mileage vehicles. In addition, we are being very intentional about our choice of disposition channel. We continue to see the opportunity to increase vehicle sales through retail channels, including Carvana and our proprietary network. As compared to auction or wholesale, retail typically yields higher selling prices when residual prices are in decline.

Stephen M. Scherr: Further to utilization, we did carry more cars into quarter end than we had previously anticipated like all decisions regarding fleet. We are guided by an ROA or return on asset mindset with the central objective of keeping our supplier fleet inside profitable demand.

Stephen M. Scherr: Against declining vehicle residual values in the fourth quarter and what we might yield on sale, we saw the opportunity for greater returns and the continued deployment of these assets. As you are aware, we have been focusing on growing customer channels like dollar and rideshare, both of which can accommodate higher mileage vehicles.

Stephen M. Scherr: In addition, we are being very intentional about our choice of disposition channel. We continue to see the opportunity to increase vehicle sales through retail channels, including Carvana and our proprietary network.

Stephen M. Scherr: Compared to auction or wholesale retail typically yields higher selling prices when residual prices are in decline in Q4. For example, we saw a positive variance between wholesale and retail gross price in the range of 5% to 10%.

Stephen M. Scherr: In Q4, for example, we saw a positive variance between wholesale and retail gross prices in the range of 5 to 10 percent. This prioritization of more favorable economics related to continued rental versus immediate disposition and the selection of channel to optimize price reflects our continued attention to asset return. Let me turn to vehicle carrying and operating costs. Quickly on carrying costs. Weakness in residual values, together with the charge we took on the held-for-sale EVs, along with higher interest rates, resulted in higher than expected vehicle carrying costs for the quarter. Alex will expand on this in more detail. With respect to operating costs, direct operating expense, or DOE, per transaction day was $36.92 in the fourth quarter.

Stephen M. Scherr: This prioritization of more favorable economics related to continued rental versus immediate disposition and the selection of channels to optimize price.

Stephen M. Scherr: Flex our continued attention to asset returns.

Stephen M. Scherr: Let me turn to vehicle carrying and operating costs quickly on carrying costs weakness in residual values together with the charge. We took on the held for sale Evs, along with higher interest rates resulted in a higher than expected vehicle carrying costs for the quarter, Alex will expand on this in more detail.

Alex Brooks: With respect to operating costs direct operating expense or a D. O per transaction day was $36.92 in the fourth quarter, excluding net collision and damage and adjusting for extraordinary litigation expense in the fourth quarter of 2022 D. O per transaction day was flat in Q4 versus a year ago.

Stephen M. Scherr: Excluding net collision and damage and adjusting for extraordinary litigation expense in the fourth quarter of 2022, DOE per transaction day was flat in Q4 versus a year ago and decreased by 8% for the year. We continued to experience elevated collision and damage in the quarter, largely driven by costs associated with running our EV fleet. And perhaps more significantly, the challenge of the EVs had an impact on our operational efficiency more generally, further supporting the advisability of our EV sales plan. As Justin will speak to more, DOE is squarely in our sights. All told, fourth quarter adjusted corporate EBITDA was a loss of $382 million, which includes the $245 million of incremental net depreciation expense associated with the EV sales plan. To be clear, this bottom line result is unacceptable.

Alex Brooks: And decreased by 8% for the year, we continued to experience elevated collision and damage in the quarter largely driven by costs associated with running our EV fleet.

Alex Brooks: Perhaps more significantly the challenge of the Evs had an impact on our operational efficiency more generally further supporting the advisability of our EV sales plan.

Alex Brooks: As Justin will speak to more D O S squarely in our sites.

Alex Brooks: All told fourth quarter adjusted corporate EBITDA was a loss of $382 million, which includes the $245 million of incremental net depreciation expense associated with E. V sales plan to be clear. This bottom line result is unacceptable, but as I said at the beginning of my remarks I have confidence in.

Stephen M. Scherr: But, as I said at the beginning of my remarks, I have confidence in our trajectory, particularly with the bold but achievable cost-out plan and our decision around EVs. The drivers of this outcome are understood and are being addressed, and the opportunities before us are real. Our decision regarding the EV fleet is one driver of opportunity. As we discussed in our 8K, we expect the consequences of our Q4 decision to be material and positive in the future. We expect improved adjusted corporate EBITDA and cash flow over the next two years from that decision.

Alex Brooks: Our trajectory, particularly with the bold, but achievable cost out plan and our decision around Evs. The drivers of this outcome are understood and are being addressed and the opportunities before us are real.

Alex Brooks: Our decision regarding the EV fleet is one driver of opportunity as we discussed in our 8-K, we expect the consequences of our Q4 decision to be material and positive on the forward. We expect improved adjusted corporate EBITDA and cash flow over the next two years from that decision. We will also be.

Stephen M. Scherr: We will also be positioned to better meet customer demand through higher utilization of fewer and less expensive ICE vehicles while maintaining an EV fleet where, again, supply better meets profitable demand. And because we are eliminating a portion of the EV fleet that yielded the lowest RPD and exhibited the highest level of damage incidents, we expect to yield a disproportionately higher financial benefit over this year and next than the size of the fleet reduction would imply. The anticipated two-year payback on the charge taken in Q4 related to EVs in terms of aggregate benefit to adjusted corporate EBITDA production is to be understood as entirely separate and apart from the opportunity to generate an incremental $500 million of adjusted corporate EBITDA, which we have discussed on previous calls.

Alex Brooks: <unk> to better meet customer demand through higher utilization on fewer and less expensive ice vehicles, while maintaining an EV fleet, where again supply better meets profitable demand.

Alex Brooks: And because we are eliminating a portion of the EV fleet that yielded the lowest our P. D and exhibited the highest level of damage incidents, we expect to yield a disproportionately higher financial benefit over this year and next then the size of the fleet reduction would imply.

The anticipated three year payback on the charge taken in Q4 related to Evs in terms of aggregate benefit to adjusted corporate EBITDA production is to be understood as entirely separate and apart from the opportunity to generate an incremental $500 million of adjusted corporate EBITDA, which we have discussed.

Alex Brooks: On previous calls.

Stephen M. Scherr: This incremental $500 million opportunity falls into three areas. First, we have our project-driven initiatives, which are focused on the creation of profitable incremental revenue. This includes growing rideshare and improving our European and value brand business. In 2024, we will expand on the progress we made across each of these initiatives in 2023, which included growing rideshare revenue by 75% over the prior year. Uber drivers have now driven over 1 billion miles in EVs rented from Hertz. Additionally, our international business increased volume across key customer channels and grew annual revenue by 17% over the prior year.

Alex Brooks: This incremental 500 million opportunity falls into three areas.

Alex Brooks: First we have our project driven initiatives, which are focused on the creation of profitable incremental revenue. This includes growing rideshare and improving our European and value brand businesses in 'twenty 'twenty four we will expand on the progress we made across each of these initiatives in 2023.

Alex Brooks: Included on Rideshare growing revenue by 75% over the prior year. We were drivers of now driven over 1 billion miles any of these rented from Hertz.

Alex Brooks: Our international business increased volume across key customer channels and grew annual revenue by 17% over the prior year.

Stephen M. Scherr: We also made progress in our dollar and thrifty brands, where we now have new websites designed to enable improved direct bookings and enhance customer loyalty. Second, we have focused our efforts to enhance the yield on our core business and the assets deployed against it through a focus on improved revenue management. Some specific progress to note: our team rolled out an improved skip-the-counter process across all brands in select airports during the quarter, reducing pressure on field employees and improving the customer experience, with a real opportunity to increase the sale of value-added services or other products through the digital channel. And we started to roll out Apple Pay for the Hertz brand in select U.S. channels, providing our customers with an easy, secure, and private payment option.

Alex Brooks: We also made progress in our dollar and Thrifty brands, where we now have new websites designed to enable improved direct bookings and enhance customer loyalty.

Alex Brooks: Second we have our efforts to enhance the yield on our core business and the assets deployed against it through a focus on improved revenue management some.

Alex Brooks: Some specific progress to note our team rolled out an improved skip the counter process across all brands and select airports during the quarter, reducing pressure on field employees and improving the customer experience with real opportunity to increase the sale of value added services or vas products through digital channels.

Alex Brooks: And we started to roll out Apple pay for the Hertz brand in select U S channels, providing our customers with an easy secure and private payment option. We are already seeing over 20% of eligible reservations completed with Apple pay.

Stephen M. Scherr: We are already seeing over 20 percent of eligible reservations completed with Apple Pay. Third, and perhaps most in focus now, is our disciplined approach to productivity to reduce costs throughout the business. Justin will speak to this cost-out opportunity in more detail, but the work is well underway. The team is energized and sees the opportunity, and is working to deliver. A terrific addition to the team who is already putting us in an improved position is our new chief operating officer, Justin Keppy. And I'm pleased to turn it over to him for his comments, Justin. Thank you, Stephen. And good morning, everyone.

Alex Brooks: Third and perhaps most in focus now is our disciplined approach on productivity to reduce cost throughout the business Jocelyn will speak to this cost out opportunity in more detail, but the work is well underway.

Alex Brooks: The team is energized and seize the opportunity and is working to deliver a terrific add to the team who is already putting us in an improved position is our new chief operating officer, Justin Kepi and I'm pleased to turn it over for his comments Justin.

Justin Kepi: Thank you Steven and good morning, everyone. It's been an exciting first 90 days it hurts learning the business visiting our larger operations and medium to field operations teams, who make it happen.

Justin Keppy: It's been an exciting first 90 days at Hertz, learning the business, visiting our larger operations, and meeting the field operations teams who make it happen. Their engagement and passion to support our customers and move the business forward are inspiring. We have a great foundation to pivot towards improved profitability. Looking forward, I see the road to profitable growth by getting back to the fundamentals in line with the three areas Stephen referenced. In partnership with our leaders, we are bringing greater operational discipline and focusing on what immediately matters, getting costs out. It's clear that we need to take bold action on both fixed and variable costs and accelerate productivity across our operations. We aim to get $250 million in benefits this year in addition to the benefit we expect to achieve from the EV reduction. While the company has been successful in tackling costs, we believe we can do more. On productivity and cost benefits, efforts fall into five, four areas. Let's start with staffing and third party spend across our business. We have taken a first step in rightsizing and reducing third-party spend and are assessing further action.

Justin Kepi: Their engagement and passion to support our customers and move the business forward is inspiring.

Justin Kepi: We have a great foundation to pivot towards improved profitability.

Justin Kepi: Looking forward I see the road to profitable growth by getting back to the fundamentals in line with the three areas as Stephen referenced in.

Justin Kepi: In partnership with our leaders, we are bringing greater operational discipline and focusing on what immediately matters getting cost out.

It's clear that we need to take bold action on both fixed and variable costs and accelerate productivity across our operations.

Justin Kepi: We aimed to get $250 million in benefit. This year. In addition to the benefit we expect to achieve from the EV reduction.

Justin Kepi: While the company has been successful in tackling cost we believe we can do more.

Justin Kepi: On productivity and cost benefit efforts fallen to five core areas.

Justin Kepi: Start with staffing and third party spend across our business.

Justin Kepi: We have taken our first step in right sizing and reducing third party spend and are assessing further actions.

Justin Keppy: Within our fleet operations, we are enhancing our workforce planning process to better align staffing to volume and location. We expect meaningful benefit from these actions. Fleet footprint is our second core focus area.

Justin Kepi: Within our fleet operations, we are enhancing our workforce planning process to better align staffing to volume and location, we expect meaningful benefit from these actions.

Justin Kepi: Footprint as our second core focus area, we have assessed our network and we expect to reduce the cost of our physical off airport real estate footprint as we exit underperforming locations.

Justin Keppy: We have assessed our network, and we expect to reduce the cost of our physical off-airport real estate footprint as we exit underperforming locations. These actions are designed to provide more focus and enable the redeployment of over 10,000 vehicles to more attractive uses without the detriment to the robustness of our remaining network. We expect these network actions to be initiated within Q1.

Justin Kepi: These actions are designed to provide more focus and enable the redeployment of over 10000 vehicles to more attractive use without the detriment to the robustness of our remaining network.

Expect these network actions to be initiated within Q1.

Justin Keppy: Third, we are attacking operating costs and improving field productivity. Collision, damage, maintenance, transportation, fuel, and out of service are the prime targets. We're rolling out new digital tools to improve visibility and decision making. During the quarter, we began to deploy digital capabilities in the field to enable more real-time and simpler documentation of damage upon a vehicle's return to the lot. This tool promises to capture an increasing number of damage incidents with better precision and ultimately yield better reimbursement outcomes.

Justin Kepi: Third we are attacking operating costs and improving field productivity collision damage.

Justin Kepi: <unk> transportation fuel and out of service are the prime targets, we're rolling out to the field, new digital tools to improve visibility and decision making.

Justin Kepi: During the quarter, we began to deploy digital capabilities into the field to enable more real time and simpler documentation of damage upon of vehicles returned to allot.

Justin Kepi: This tool promises to capture an increasing number of damage incidents with better precision and ultimate yield better reimbursement outcomes.

Justin Keppy: The fourth area is procurement, a big opportunity with an addressable spend of nearly $3 billion. We have started centralizing Consolidate Spin to reduce consumption and buy more effectively. We will continue to explore opportunities to accelerate our progress in this key area.

Justin Kepi: The fourth area is procurement.

Justin Kepi: A big opportunity with an addressable spend of nearly $3 billion.

Justin Kepi: We have started to centralize and consolidate spend to reduce consumption and by more effectively we.

Justin Kepi: We will continue to explore opportunities to accelerate our progress in this key area.

Justin Kepi: The final area is technology.

Justin Kepi: Acknowledging is critical to what we do.

Justin Keppy: As we have previously mentioned, we are well underway in modernizing our infrastructure, moving solutions to the cloud, and retiring legacy software platforms. We have made real progress, and we'll start seeing benefits in 2024, including a year-over-year reduction in spend, as previously highlighted. To ensure progress against our $250 million target for the year, we are developing detailed action plans with KPIs and implementing a governance process run by a newly formed and expanding program office.

Justin Kepi: As we have previously mentioned, we are well underway and modernizing our infrastructure moving solutions to the cloud and retiring legacy software platforms. We.

We've made real progress and we'll start seeing benefit in 2024, including a year over year reduction in spend as previously highlighted.

Justin Kepi: To ensure progress against our $250 million target for the year. We are developing detailed action plans with kpis and implementing a governance process run by a newly formed an expanding program office.

Justin Keppy: In addition, and separate from the $250 million benefit I just outlined, we are progressing our efforts to reduce collisions and damage across EVs more broadly. These include active discussions with key OEMs to get access to parts and labor more quickly and at better prices. Leveraging our digital tools and insights to improve underwriting and collection, and in Rideshare specifically, lowering driver return rates and expanding our EV charging network. To wrap up, I joined H.E.R.S.E.

Justin Kepi: In addition, and separate from the $250 million benefit I just outlined we are progressing our efforts to reduce reduce collision and damage across evs more broadly these.

Justin Kepi: These include active discussions with key Oems to get access to parts and labor more quickly and at better pricing.

Justin Kepi: Leveraging our digital tools and insights to improve underwriting and collections.

Justin Kepi: And in Rideshare, specifically lowering driver churn and expanding our EV charging network.

Speaker Change: To wrap up.

Justin Keppy: to make a real impact. My first impressions of the business are positive, and I'm excited to capture the opportunities ahead. We know what to do and are organized to do it. On future calls, I look forward to providing you with updates on our progress. Now, let me turn it over to Alex. Thank you, Justin. And good morning, everyone.

Speaker Change: Drawing her to make a real impact.

Speaker Change: My first impressions of the business are positive and I am excited to capture the opportunities ahead.

Speaker Change: We know what to do and are organized to do it in.

In future calls I look forward to providing you with updates on our progress.

Speaker Change: Now, let me turn it over to Alex.

Alex Brooks: Thank you Justin and good morning, everyone.

Alexandra Dawn Brooks: Let me start by covering our full 2023 results. Revenue was $9.4 billion, up 8% year over year. Although down 4% year over year, rates remained healthy at $60.62. This was about 40% above 2019, as noted earlier. Volume for the year was up 13% compared to 2022, with meaningful growth across leisure, corporate, and ride share. Our fleet size grew only 9%, resulting in utilization that was 190 basis points higher than 2022, primarily driven by improved agri-service levels. Strength and Utilization of the Fleet meaningfully contributed to RPU of $1,479 in 2023, down slightly versus 2022. DPU of $307 for 2023 was broadly in line with our expectations at the start of the year, notwithstanding the $245 million of incremental net depreciation expense resulting from our EV plan of sale. For the fourth quarter, DPU was $498, inclusive of the incremental depreciation, and $350, excluding the charge.

Alex Brooks: Let me start by covering our full 2023 gross out.

Alex Brooks: Revenue was $9 4 billion.

Alex Brooks: Up 8% year over year.

Alex Brooks: Although down 4% year over year rates remained healthy at $60 62.

Alex Brooks: This was about 40% above 2019 as noted earlier.

Alex Brooks: For the year was up 13% compared to 2020 tail with meaningful growth across leisure corporate and rideshare.

Alex Brooks: Our fleet size grew only 9%, resulting in utilization that with 190 basis points higher than 2022, primarily driven by improved service level.

Alex Brooks: Strength in utilization of the fleet meaningfully contributed to our <unk> $1479 in 2023 down slightly versus 2022.

Alex Brooks: GPU of $307 for 2023, when it's broadly in line with our expectations at the start of the year, notwithstanding the $245 million of incremental net depreciation expense, resulting from our EV plan of sale.

Alex Brooks: For the fourth quarter, GPU with $498 inclusive of the incremental depreciation and $350 excluding the charge.

Alexandra Dawn Brooks: As you're aware, DPU is driven by a variety of factors, including fleet mix, mileage, and condition, as well as views on forward residual values and our historical sales experience. The combination of these factors drove Q4 DPU higher than we expected. We're closely watching residual values entering Q1, particularly in light of our plans to rotate the fleet over the course of 2024 to a materially younger composition. [inaudible] Regarding operating costs, DOE per transaction day in 2023 was consistent with our prior year, excluding net collision and damage in both years and litigation settlements in 2022. DOE per day was down 8%, reflecting progress on our cost initiative.

Alex Brooks: As you are aware GPU, that's driven by a variety of factors, including fleet, Mac mileage and condition as well as views and polaroid residual values and our historical sales experience. The combination of these factors drove Q4 GPU higher than we expected we're closely watching residual values entering Q1, particularly.

Alex Brooks: In light of our plans to rotate fleet over the course of 2024, so a materially younger composition as Stephen shared we bring a return on asset mentality to our fleet plan and that includes our central tenet of maintaining fleet within profitable demand.

Alex Brooks: Regarding operating costs per.

Alex Brooks: Per transaction day in 2023 was consistent with our prior year, excluding net collision and damage in both years and litigation settlement in 2022 <unk> per day was down 8%, reflecting progress on our cost initiatives.

Alexandra Dawn Brooks: Both vehicle and non-vehicle interest expense was higher in 2023 compared to 2022, driven primarily by the macro rate environment with a modest impact from the fleet side. Adjusted corporate EBITDA for 2023 was $561 million, a 6% margin, which reflected a drag of several hundred basis points related to the EV headwinds previously discussed and further burdened by the charge related to the EV sale plan. Turning to our capital structure and liquidity. With respect to our balance sheet, net corporate debt at the end of the fourth quarter was $2.5 billion, resulting in net corporate leverage of 4.5 times at year end.

Alex Brooks: Both vehicle and non vehicle interest expense was higher in 2023 compared to 2022, driven primarily by the macro rate environment with modest impact from fleet size.

Alex Brooks: Adjusted corporate EBITDA for 2023 was $561 million, a 6% margin, which reflected a drag of several hundred basis points related to the EV headwinds previously discussed and further burdened by the charge related to the <unk> sale plan.

Alex Brooks: Turning to our capital structure and liquidity with respect to our balance sheet net corporate debt at the end of the fourth quarter with $2 5 billion.

Alex Brooks: Resulting in net corporate leverage of four five times at year end.

Alexandra Dawn Brooks: While this is well above our long-term leverage ambition of 1.5 times, we intend to de-lever over time as our operational initiatives yield improved profitability. Our available liquidity at December 31st was $2 billion, comprised of $764 million of unrestricted cash and the balance available under the first lien revolving credit facility. Our corporate debt maturity ladder is well structured with no material maturities until 2026. As of December 31st, we had $2.6 billion of capacity under our vehicle debt facilities globally, with a portfolio that was approximately 70% fixed rate. We maintained sufficient equity cushion in our global ABS facilities at the end of 2023. Of note, $2 billion of medium-term notes under our U.S. ABS facility mature in December of 2024. And we intend to refinance those notes in the normal course of business, with the exact timing subject to market conditions. Turning to our cash flow and capital allocation, Adjusted free cash flow for the year was an outflow of $321 million, primarily comprised of adjusted operating cash flow of $44 million, offset by $358 million of net sweet growth.

Alex Brooks: While this is well above our long term leverage ambition of one five times, we intend to delever overtime as our operational initiatives yield improved profitability.

Alex Brooks: Our available liquidity at December 31, with $2 billion comprised.

Alex Brooks: Comprised of 764 million of unrestricted cash and the balance available under the first lien revolving credit facility, our corporate debt maturity ladder is well structured with no material maturities until 2026.

Alex Brooks: At December 31, we had $2 $6 billion of capacity under our vehicle debt facilities globally with a portfolio that was approximately 70% fixed rate, we maintained sufficient equity equity cushion in our global ABL facilities at the end of 2023.

Alex Brooks: Of note $2 billion of medium term notes under our U S. ABS facility mature in December of 'twenty, four and we intend to refinance those notes in the normal course of business with the exact timing subject to market conditions.

Alex Brooks: Turning to our cash flow and capital allocation.

Alex Brooks: Adjusted free cash flow for the year with an outflow of $321 million, primarily comprised of adjusted operating cash flow of $44 million offset by $358 million of net fleet growth.

Alexandra Dawn Brooks: Net fleet growth supported a $1.6 billion increase in revenue-earning vehicles on slightly lower than anticipated vehicle disposition. Our non-fleet CapEx for the year was minimal as expenditures were offset by asset sales, including the previously disclosed sale of real estate adjacent to LAX and Q1. Lastly, in 2023, we repurchased $291 million of our common stock. We enter 2024 with solid demand in a stable rate environment. We expect demand to track to historical seasonal patterns and anticipate supporting RPD through initiatives such as better monetization of upgrades, incremental value-added services revenue through digital channels, and improved price capture in our value brand. Regarding vehicle carrying costs, we expect the dynamic residual environment to be an important macro trend for the industry in the year ahead. It will influence, but not dictate, a return on asset-based approach to fleet rotation and, of course, depreciation. We plan for normal seasonality in the used car market, notwithstanding our view that the market is structurally short of used vehicles in the near to medium term.

Alex Brooks: Net fleet growth supported a $1 $6 billion increase in revenue, earning vehicles are slightly lower than anticipated vehicle dispositions.

Alex Brooks: Our non fleet capex for the year with minimal as expenditures were offset by asset sales, including the previously disclosed sale of real estate adjacent to <unk> in Q1.

Alex Brooks: Lastly, in 2023, we've repurchased $291 million of our common stock.

Alex Brooks: We enter 2024 with solid demand and a stable rate environment, we expect demand to track to historical seasonal patterns and anticipate supporting RPG through initiatives, such as bigger monetization of upgrades incremental value added services revenues through digital channels and improved price capture in our value brands.

Alex Brooks: Regarding vehicle carrying costs, we expect the dynamic residual environment to be an important macro trend for the industry in the year ahead.

Alex Brooks: Will influence, but not dictate a return on asset based approach to fleet rotation and of course depreciation we plan for normal seasonality in the used car market notwithstanding our view that the market is structurally short used vehicles in the near to medium term.

Operator: On productivity, we look to achieve $250 million in benefits over the course of 2024, as Justin covered earlier. More broadly, we expect adjusted corporate EBITDA to benefit from improvements associated with the strategic sale of a third of our EV fleet, as well as the benefits of our productivity and cost initiatives, and, as referenced, a focus on fundamental and improved operational discipline. In closing, I look forward to the future of our business and bringing the opportunities we discussed today to fruition. With that, let's open the call to questions and answers. We will now open the line for questions. Please limit your questions to one question per speaker and one follow-up. To ask a question, please dial star 1-1 on your telephone. To cancel your question, please press star 11 again.

Alex Brooks: On productivity, we look to achieve $250 million in benefit over the course of 2024 as Justin covered earlier.

More broadly we expect adjusted corporate EBITDA to benefit from improvement associated with that strategic sale of a third of our EV fleet as well as the benefits of our productivity and cost initiatives and as referenced our focus on the fundamentals and improved operational discipline and closing I look forward to the future of our business and bringing the opportune.

Alex Brooks: <unk>, we discuss today to fruition with that let's open the call for Q&A.

Speaker Change: We will now open the lines 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 on your telephone if you wish to cancel your question. Please press star one again.

Speaker Change: One moment for our first question.

Speaker Change: Our first question comes from the line of Chris <unk> of Deutsche Bank. Your line is open.

Operator: One moment for our. Our first question comes from the line of Chris Woronka of Deutsche Bank. Your line is open. Hey, good, good morning, everyone. Hey, he's...

Chris: Hey, good morning, everyone.

Chris: Hey, Chris.

Chris Jon Woronka: So, since you made that announcement regarding the, you know, planned reduction in the EV fleet, I guess the question is, At what point do you kind of evaluate your progress on that, and what would be the kind of markers that might cause you to possibly accelerate that further? Just trying to get a sense for how you're going to evaluate the, you know, the success of it, and when you might decide you need to do more, if you need or want to do so. Sure. Thanks for the question, Chris. Look, this is dynamic.

Hey, Stephen so.

Chris: Since you made that announcement regarding the <unk>.

Chris: Planned reduction in the EV fleet.

Speaker Change: I guess the question is.

Speaker Change: At what point do you kind of evaluate your progress on that and what would.

Speaker Change: What would be the kind of markers that might cause you to.

Speaker Change: Possibly accelerate that further I'm, just trying to get a sense for how you're going to evaluate the success of it.

Speaker Change: When you might decide you need to do more if you need or want to do more.

Speaker Change: Sure. Thanks for the question Chris. This is dynamic I mean, we are assessing the movie we made all of the time not just simply on the disposition of the cars, but equally on the residual EV fleet that we had.

Stephen M. Scherr: I mean, we are assessing the movie we made all of the time, not just simply on the disposition of the cars but equally on the residual EV fleet that we had. We obviously took and are taking 20,000 cars out. That's largely to bring supply inside demand. And the frame of reference as to whether there's more to do or whether we're content with the fleet we have is going to be, you know, an ROIC, return on invested capital, assessment of the EVs. You know, when taking the 20,000 out, think about it this way.

Speaker Change: We obviously took and are taking 20000 cars out.

Speaker Change: Largely to bring supply inside demand and the frame of reference as to whether theres more to do or whether we're content with the fleet. We have is going to be an ROIC return on invested capital assessment on the Evs.

Speaker Change: In taking the 20000 out thinking about it this way we have effectively clipped.

Stephen M. Scherr: We have effectively clipped, you know, the lowest rung of demand in terms of R.P.D. and, candidly, the most offensive component of demand as it relates to damage. And so our view is that while we're taking a third of the fleet down, our expectation is that we will capture close to a half, if you will, of the economic drag that's posed there.

Speaker Change: The lowest rung of demand in terms of RPG and candidly the most offensive component of demand as it related to damage and so our view is that while we're taking a third of the fleet down.

Speaker Change: Our expectation is that we will capture a close to a half if you will of the economic drag that suppose there so where does that come from we obviously told you in the 8-K that we expect over the two years in the aggregate to recapture about $250 million of EBITDA and free cash flow of about $2 50 to 300.

Stephen M. Scherr: We obviously told you in the eight K that we expect, over the two years, to recapture about two hundred and fifty million dollars of EBITDA and free cash flow of about 250 to 300. So, what's embedded in that, and what are we going to look at as we harvest this? Well, first of all, there's a reduction in fleet carrying costs. There are lower operating costs relating to collisions and transport, charging, and labor. And then we expect enhanced revenue in the context of, you know, deploying fewer cars at higher utilization than the cars we're taking out. And, you know, on the reduced carrying cost. I mean, that's in front of us. The depreciation is captured. That's for us to take.

Speaker Change: So what's embedded in that and what are we going to look at as we harvest. This well first of all there's a reduction in fleet carrying costs, there's lower operating costs relating to collision in transport and charging and labor and then we expect enhanced revenue in the context of deploying fewer cars.

Speaker Change: At higher utilization than the cars, we're taking out.

Speaker Change: And.

Speaker Change: On the reduced carrying cost I mean, that's in front of us. The depreciation is captured that's for us to take what we do in terms of unit economics will be a function of the fact that we're going to only replace 15000 of the 20000 cars taken out. So these are less expensive cars lower depreciation lower.

Stephen M. Scherr: What we do in terms of unit economics will be a function of the fact that we're going to only replace 15,000 of the 20,000 cars taken out. So these are less expensive cars, lower depreciation, lower vehicle carrying costs, and they operate at higher utilization. So that will produce much higher margin dollars for us. And the operating costs are just simply around collision, transport, and labor will be there.

Speaker Change: Vehicle carrying cost operating at higher utilization, so that will produce much higher margin dollars to us.

Speaker Change: And the operating costs, just simply around collision transport and labor will be there and so we need to sell these cars and we're on pace to do that at or around where our Mark was at December 31, two we need to capture the cost savings through EBITDA and realize the cash flow that we've laid out to go get.

Stephen M. Scherr: And so, A, we need to sell these cars, and we're on pace to do that at or around where our mark was at December 31. Two, we need to capture the cost savings through EBITDA and realize the cash flow that we've laid out to get. And third, we need to make constant reassessments.

Speaker Change: And third we need to make a constant reassessment if at the end of the day. The returns that we are modeling for the balance of the fleet against the demand that we believe to be there doesn't it doesn't.

Stephen M. Scherr: If, at the end of the day, the returns that we are modeling for the balance of the fleet against the demand that we believe to be there don't show up, then you should assume we will take more action than not. The other aspect around this I would point out, and this runs to kind of the expense initiatives that Justin has, is I think we have dramatically de-risked the ability to go forward at costs unrelated to EVs. Meaning, away from the sort of clear categories of expense that we are relieving ourselves of in the sale of the EVs, we are reducing the kind of operational distraction in the field in a very meaningful way. And in doing that, we will position the field to action some of the cost reduction that Justin has and will take you through. And I think that's an important variable in this equation.

Speaker Change: Show then you should assume we will take more action than not.

Speaker Change: The other the other aspect around this I would point out and this runs to kind of the expense initiatives that Justin has is I think we have dramatically derisked the ability to go at cost unrelated to the evs, meaning away from the sort of clear categories of expense that that.

Speaker Change: That we are relieving ourselves and the sale of the Evs, we are reducing kind of the operational distraction in the field in a very meaningful way and in doing that we will position to feel to action some of the cost reduction.

Speaker Change: Justin has and will take you through and I think that's an important variable in this and so look we're about providing choice to customers. We think we've landed on an EV fleet that meets demand, but I can assure you if those numbers don't scratch to an adequate return then we will take further action against that fleet.

Stephen M. Scherr: And so, you know, look, we're about providing choice to customers. We think we've landed on an EV fleet that meets demand, but I can assure you, if those numbers don't scratch an adequate return, then we will take further action against that fleet. Again, always with the mindset of keeping supply inside demand. And I think the lesson of this, if you will, is that incremental steps to wrestle down the cost elements of the EVs were not going to work, and we're not going to work at the speed of execution that we were comfortable with. And as a consequence, and as evident in the fourth quarter, the need to take a big bite out of this issue was one that was in front of us, and we did it. Thanks, Stephen. That's really helpful.

Speaker Change: Again always with the mindset of keeping supply inside demand and I think the lesson of this if you will is that.

Speaker Change: Incremental steps to Russell down the cost elements of the Evs, we're not going to work and we're not going to work with the speed of execution that we were comfortable with and as a consequence and as evidenced in the fourth quarter the need to take a big bite out of this issue was one that was in front of us and we took it and if that.

Speaker Change: It's not enough, we'll do more if it is we'll play forward with attractive returns on the deployment of those vehicles.

Stephen M. Scherr: I guess as a follow-up, I am curious about how you're thinking about fleet sourcing. And this is both for kind of the 15,000 or so ICE cars that you want to backfill the EV sales with, but also just kind of your natural rotation. I mean, are you willing to lean more into the used car market now, given the current pricing environment there? Is that something that's more on the table this year?

Speaker Change: Okay.

Speaker Change: Thanks, Steve and that's that's really helpful. I guess as a follow up.

Speaker Change: Curious about how youre thinking about fleet sourcing.

Speaker Change: This is both for kind of the 15000 or so are used cars you want to backfill the EV sales with but also just kind of your natural rotation. I mean are you are you willing to lean more into the used car market now that.

Given the current pricing environment, there or is that something thats more on the table this year.

Stephen M. Scherr: Well, I would say a couple of things about the fleet. First of all, on the ICE vehicles, to sort of substitute in for the EVs, recognize that as we reduce down unprofitable network locations, OK, as Justin noted, we are redeploying the fleet, mostly ICE vehicles, back to airports and other locations. So part of the 15,000, OK, will be vehicles that we're capturing from other locations where utilization is not sufficient

Speaker Change: Well I would say a couple of things on the fleet first of all on the ice vehicles to sort of substitute in for the Evs recognize that as we reduce down unprofitable network locations. Okay. As Justin noted, we are redeploying fleet, mostly ice vehicles back to airports and other locations.

Speaker Change: So part of the 15000, okay will be.

Speaker Change: Vehicles that we're capturing from other locations where utilization is not sufficient number one <unk>.

Stephen M. Scherr: Number two, we are this month at our lowest out of service. We're going to continue to drive our out of service down and redeploy and use those vehicles right where we can. Third, in deference to cash, we're going to look to sort of manage between purchases and sales and modulate that, again, based on kind of the return profile of what those activities have. So the point I was making was that it'll take 15,000 cars to replace the 20,000 cars that we're taking out in the EVs. Again, lower cost ICE vehicles used at a higher level of utilization. We do not need to go out and buy 15,000 additional cars to make that happen.

Speaker Change: Number two we are this month at our lowest out of service, we're going to continue to drive out of service down and redeploy and use those vehicles right, where we can.

Speaker Change: Third in deference to cash we're going to look to sort of manage between purchases and sales and modulate that again based on kind of the return profile of what those activities have so the point I was making was that it'll take 15000 cars to replace the 20000 cars that we're taking out in the Evs again.

Speaker Change: Lower cost ice vehicles used at a higher level of utilization, we do not need to go out and buy a 15000 additional cars to make that happen as part of that will be lower out of service part of that will be redeployment of the fleet around the overall network, particularly as we pinch off.

Stephen M. Scherr: Part of that will be lower out of service. Part of that will be redeployment of the fleet around the overall network, particularly as we pinch off, you know, unprofitable locations. And I think, you know, we're quite comfortable with what's there in the inner ability to sort of backfill for demand. Thanks. Our next question comes from the line. Oppenheimer: Okay, great.

Speaker Change: Unprofitable locations and I think we're quite comfortable with what's there.

Speaker Change: In the interim ability to sort of backfill for demand.

Okay understood. Thanks, Thanks, a lot Stephen Yes of course.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Ian.

Speaker Change: Zaffino.

Operator: Thank you. Thank you very much. Thank you for all the details on the cost savings. And I'm just trying to conceptually understand here, when you think about your normalized EBITDA number, I guess, where do you think that is? And then, you know, you've stated it previously.

Ian Alton Zaffino: Oppenheimer Your line is open.

Ian Alton Zaffino: Okay, great. Thank you. Thank you very much.

Ian Alton Zaffino: Thanks for all the details on the cost savings and I was just conceptually I'm trying to understand here. When you think about your normalized EBITDA number.

Ian Alton Zaffino: Where do you think that is.

Speaker Change: Then you know.

Ian Alton Zaffino: So now, is this cost savings on top of that normalized earnings number or EBITDA number, or is this what you need to get to that? So thanks for the question, Ian. Here's what I would tell you. You need to separate out what we're forecasting in terms of EBITDA benefit from the EV sale, which we believe to be $250 million of EBITDA uplift over two years, such that that's a round trip, if you will, relative to the charge that we took in the fourth quarter. So set that aside and let's call that the normal, as it were, right?

Speaker Change: Stated previously so now is this cost savings on top of that normalized.

Speaker Change: Earnings number or EBITDA number or is this what you need to get to that number.

Speaker Change: So thanks for the question Ian Here's what I would tell you.

Speaker Change: You need to separate out what we're forecasting in terms of EBITDA benefit from the <unk> sale, Okay, which we believe to be $250 million of EBITDA uplift. Okay over two years such that that's a round trip. If you will relative to the charge that we took in the fourth quarter. So.

Speaker Change: Set that aside and let's call that the normal as it work right adjusting for the EV move on top of that we are coming back to the $500 million that we've spoken of before which is a combination of new projects like rideshare and and and otherwise okay second.

Stephen M. Scherr: Adjusting for the EV move. On top of that, we are coming back to the $500 million that we've spoken of before, which is a combination of new projects like rideshare and otherwise, okay? Second, is realizing higher yield on the assets that we have, so using the fleet in a way that we can. And third, and perhaps the most important in the context of this call, is an ability to gain productivity and pull costs out of the business. The combination of those three things, projects, yield, and cost, amount to a $500 million go-get.

Speaker Change: Is realizing higher yield on the assets that we have so sweating the fleet in a way that we can in the third and perhaps the most important in the context of this call is an ability to gain productivity and pull cost out of the business. The combination of those three things projects yield and cost amount to a five.

Speaker Change: $500 million go get.

Stephen M. Scherr: It's within that $500 million that Justin has talked about $250 million of that $500 million being realized through productivity and cost in 2024. So again, separate out the EBITDA benefit that comes back to us on the EV sale, focus then on $500 million of EBITDA addition, and within that $250 million, that is a very definite productivity and cost out in 2024. And Justin can give you kind of his take on what's the makeup of that $250 million cost out this year. Sure. Thanks, Stephen. Ian, you can look at it.

Speaker Change: It's within that $500 million.

Speaker Change: Justin has talked about $250 million of that $500 million being realized through productivity and cost in 2024. So again separate out the EBITDA benefit that comes back to us on the EV sale focused then on $500 million of EBITDA addition.

Speaker Change: And within that $250 million that is a very definite productivity and cost out in 2024, and Justin can give you kind of his take on whats. The makeup of that $250 million of cost out this year.

Justin Kepi: Sure. Thanks Steven.

Justin Keppy: I'll say just the majority of our planned $250 million productivity benefit for the year is costed out. So, it's spend reduction taking costs out. If I look across the categories, and we're looking globally, it's just not in America's effort.

Justin Kepi: And you can look at it I will say just the majority of our planned $250 million productivity benefit for the year is cost out so spend reduction taking cost out, but if I look across the categories and we're looking globally is just not an America's effort, we're working across to all of our businesses.

Justin Keppy: We're working across all of our businesses. First thing, within staffing and third-party, we've already taken action. So, we've got headcount actions that are benefiting us coming into the year. We're locking down hiring requests.

Justin Kepi: First thing within staffing and third party, we've already taken action. So we've got.

Justin Kepi: Head count actions that are benefiting us coming into the year.

Justin Keppy: So, any new ads are being scrutinized, and we're only adding where we're essential. And third-party spend took a tough look first thing when I came in, and we've already identified over $30 million of spend reductions. And I can tell you, we're not done yet.

Justin Kepi: We're locking down higher new requests so any new ads are being scrutinized and we're only adding where we are essential and third party spend took a tough look first thing what I came in and we've already identified over $30 million of spend reductions and I can tell you we're not we're not done yet.

Justin Keppy: On footprint, we've closed eight of our lower-performing real-deal locations year-to-date as we expand our relationship with Carvana and others. And we've completed an assessment of our off-airport rent-a-car locations, looking at the ones that are underperforming. And as Stephen highlighted, it gives us the ability to free up vehicles to reallocate them to on-airport or other more profitable locations. We expect a sizable portion of those actions to be complete here in Q1. Field productivity I'm pleased to say the team's energized.

On footprint.

Justin Kepi: We have closed year to date eight of our lower performing retail locations as we expand our relationship with Carvana and others.

Justin Kepi: And we've completed assessment of our off airport rental car locations looking at the ones that are underperforming and as Stephen highlighted it gives us the ability to free up vehicles to reallocate to an airport to other more profitable locations and we expect a sizeable portion of those actions to be complete here in Q1.

Justin Kepi: On field productivity I'm pleased to say the teams energize, it's going technology that we launched last year has taken hold we are rolling out the digital tool in collusion Ive mentioned before also on the telematics seen real progress on the fuel that's been talked about before it's accelerating is expanding its looking very positive.

Justin Keppy: It's going. Technology that we launched last year has taken hold. We're rolling out the digital tool for collisions, I mentioned before. Also on the telematics, seeing real progress on the fuel that's been talked about before. It's accelerating, it's expanding, it's looking very positive, and procurement. I said we spent almost $3 billion. If you just think about that for a second, 1% is $30 million.

Justin Kepi: And procurement.

Speaker Change: I said, we spent almost $3 billion. Just if you just think about that for a second 1% $30 million.

Justin Keppy: First of all, there's more that we can do to leverage our larger spend on categories such as tire or glass, and we can get real meaningful reductions here, and we're going to. And finally, the last category, technology. Our modernization continues. We're seeing the benefits of the capabilities that were developed last year. This year, it's all about prioritization and speed of completion, and we're going to see meaningful reductions in spend year over year. And as you heard, there's a lot of activity there, cross-country activities.

Speaker Change: And first first kind of observations theres more that we can do to leverage our larger spend on categories, such as tire of glass and we can get real meaningful reductions here and we're going to end.

Speaker Change: Finally, the last category of technology, our modernization continues we're.

Speaker Change: We're seeing benefit of the capabilities that were developed last year. This year, it's all about prioritization speed of completion, and we're going to see meaningful reductions in spend year over year.

And as you can herb theres a lot of activity there across activities. That's the reason why we're taking a programmatic effort to ensure that we stay on track in building up the program office.

Justin Keppy: It's the reason why we're taking a programmatic effort to ensure that we stay on track and build out the program office. And I'd just like to say, while I see $250 million in productivity as I outlined it, I'm personally going to be disappointed if we don't do more. The opportunities are there, and it's exciting to see the momentum continue to build. I look forward to giving you updates in the future. Thanks for the question. Hopefully, this clarifies things. That's great. Thank you very much.

Speaker Change: And I'd, just like to say, while I see $250 million of productivity that I outlined I am personally going to be disappointed if we don't do more.

Speaker Change: The opportunities are there and it's exciting to see the momentum.

Speaker Change: Continue to build I look forward to giving you updates in the future. Thanks for the question hopefully this clarifies.

Speaker Change: No that's great. Thank.

Ian Alton Zaffino: And I guess, maybe a higher level on just another topic. You guys seem a little bit more confident in the right environment and RPG going forward. Kind of, you know, what's giving you that confidence, or maybe give us a little data point of what you saw in Sure. So, So, Let me start with what we're seeing in January or what we saw in January. First of all, leisure business and leisure demand is really quite strong, and we're seeing considerable volumes across the sort of sunbelt from Florida all the way west to Hawaii, with Hawaii making sort of a considerable rebound.

Speaker Change: Thank you very much and I guess.

Speaker Change: Maybe higher level I'm just another topic.

Speaker Change: You guys seem a little bit more confident in the rate environment and RPC going forward kind of.

Speaker Change: What's giving you that confidence there or maybe give us a little data point on what you saw in January thanks.

Speaker Change: Sure so so.

Speaker Change: Let me start with what we're seeing in January or what we saw in January.

Speaker Change: First of all leisure business and leisure demand is really quite strong and we are seeing considerable.

Speaker Change: Considerable volumes across the Sun belt from Florida, all the way west to Hawaii, Hawaii, making sort of a considerable rebound.

Stephen M. Scherr: We've seen larger inbound activity growth, and we've seen strong corporate growth, particularly in the Midwest, locations like Detroit and Chicago that are showing high volumes. I would say that looking backwards, as I said in the prepared remarks, the rate of decline year over year on a quarterly basis is decelerating. And so, you know, we saw better performance in the fourth quarter on rate than we had seen again on a year over year basis in the prior quarter.

Speaker Change: We've seen <unk>.

Larger inbound activity growth and we've seen strong corporate growth, particularly in the Midwest locations like Detroit and Chicago that are showing high volume.

Speaker Change: I would say that looking backwards as I said in the prepared remarks, the rate of decline year over year on a quarterly basis is decelerating and so we saw better performance in the fourth quarter on rate than we had seen again on a year over year basis in the prior quarters.

Stephen M. Scherr: I'd also say that, you know, as we listen, as you listen to sort of what the airlines and the hotels and the travel industry are reporting, you know, forecast growth, which is substantial. And I think that the back half of this year, you know, holds considerable promise for us in the context of sort of economic trends that are playing out, which is lower inflation, lower interest rates, and a clear view that the American consumer, in particular, continues to consume travel as an experiential good that they're looking to partake in. And so, you know, we're just seeing very strong demand.

Speaker Change: I would also say that as we listen as you listen to sort of what the airlines and hotels and the travel industry is reporting.

Speaker Change: <unk> forecast growth, which is substantial and I think that the back half of this year.

Speaker Change: <unk> considerable promise for us in the context of sort of economic trends that are playing which is lower inflation lower interest rates and a clear view that the American consumer in particular continues.

Continues to consume travel.

Speaker Change: As a as an experiential good that theyre looking to partake in and so we're just seeing very strong demand I would also say that where there are generally higher cost inputs.

Stephen M. Scherr: I would also say that where there are generally higher cost inputs, you know, there is less incentive for any one of the major players in rental to sort of look to lower rates. And on that, in that regard, I think we feel quite good about what we're seeing, both in terms of demand and what we saw as a decelerating trend in terms of decline. And I'd also point out that, as I did in the remarks, we're 40% better than where we were, and stability around that number, I think, you know, is in front of us. All right, perfect. Thank you very much.

Speaker Change: There is less incentive for any one of the major players in rental to sort of look to lower rate.

Speaker Change: And on that in that regard I think we feel quite good about what we're seeing both in terms of demand.

Speaker Change: And what we saw as a decelerating trend in terms of decline and I'd also point out that as I did in the remarks, we're 40% better than where we were and stability around that number I think is in front of us.

Speaker Change: Alright, perfect. Thank you very much appreciate that no problem.

Ian Alton Zaffino: I appreciate that. No problem. Sure. Thanks.

Speaker Change: Thank you one moment please.

Operator: Our next question comes from the line of Adam Jonas of Morgan Stanley, the line of... Hi everybody, I have a question for Steve and one for Justin. Steve, what does the transitional year mean? Could Hertz lose money, earn cash, or test the covenants? I'm getting a lot of questions.

Speaker Change: Our next question comes from the line of Adam Jonas of Morgan Stanley. Your line is open.

Adam Jonas: Hi, everybody I have a question for Steve and one for Justin.

Adam Jonas: Steve what is the what is transitional year mean could hurts lose money burn cash test covenants I'm getting a lot of questions.

Adam Michael Jonas: A lot of questions from clients on the covenants, another sign of a lack of confidence in the strategy and execution. I'm sure that's not a surprise to you, but what message do you have for, I mean, there's just an army of people betting against Hertz right now, and how much worse does it have to get? Obviously, we know it gets worse, but is there some kind of... without providing guidance, some base or kind of clearing or bottom that you might have some confidence in, in terms of how, where that bottom would be this year? That would, that would mean a lot. Well, yeah.

Adam Jonas: A lot of questions from clients on the covenants as another sign of lack of confidence in our strategy and execution I'm sure. That's not a surprise to you, but what message do you have for <unk>.

Adam Jonas: There's just an army of people betting against hurts right now and kind of how bad how much worse does it have to get obviously, we know it gets worse, but.

Adam Jonas: Is there some kind of.

Adam Jonas: Without providing guidance some base or kind of clearing our bottom that you might have some confidence in terms of how where that bottom would be this year that would that would mean.

Stephen M. Scherr: So, here's what I would say, Adam. I think that had we not taken the step that we did around EVs in the fourth quarter, it would have been a rocky path forward in terms of trying to sort of patch up for the continuing operational distraction and the cost that we were otherwise incurring on the bottom third of that fleet. And so I think by taking that step in the fourth quarter, we've set ourselves up with a much clearer path to sort of the reconciliation of our cost structure to a revenue line that is strong and sustainable. This company is not experiencing revenue intake or demand.

Yeah, so so here's what I would say Adam.

Adam Jonas: I think that had we not taken the step that we did around <unk> in the fourth quarter.

Adam Jonas: It would be a rocky path forward in terms of trying to sort of patch up for the continuing operational distraction and the cost that we were otherwise incurring on the bottom third of that fleet and so I think by taking that step in the fourth quarter, we've set ourselves up with a much clearer path to sort.

Adam Jonas: The reconciliation of our cost structure to our revenue line that is strong and sustainable. This company is not experiencing revenue intake or demand. What it was and is experiencing is a cost challenge we've pinched off the single largest component of that cost challenge, which is.

Stephen M. Scherr: What it was and is experiencing is a cost challenge. We've pinched off the single largest component of that cost challenge, which is EVs. And as I've said, if we need to do more, we will. But reducing a third of that fleet puts us in a better position. It yields out certainly on depreciation and a short view on a reduction in expense, and it promises to carry lower direct operating expenses relative to our ability to meet that demand with ICE vehicles. I think secondly, it sets up Justin to achieve, you know, the elements and items in his cost out that he reflected in the prior question. And I think we have these things in front of us. And this is not sort of a blueprint.

Adam Jonas: Is the Evs and as I've said, if we need to do more we will we're reducing a third of that fleet puts us in a better position.

Adam Jonas: It yields out certainly on depreciation and assured view on a reduction in expense and it promises to carry lower <unk>.

Direct operating expense relative to our ability to meet that demand with ice vehicles.

Adam Jonas: I think secondly, it sets up Justin to achieve.

Adam Jonas: The elements and items in his cost out that he reflected in the prior question and I think these are in front of US and this is not sort of a blueprint. These are actions that are being taken right now.

Stephen M. Scherr: These are actions that are being taken right now. It therefore gives us confidence that against a very good and solid demand rate and revenue backdrop, we have a path where we've already taken a very big down payment in the charge we took in the fourth quarter. And therefore, the transitional year means that in 2024, we are executing against the reduction in the EV fleet against a series of very precise cost-out elements that give us confidence that we won't be in a position where the covenants will come into play, and that we will emerge at the end of 2024 and into 2025 with a much better cost structure against which we can engage with a level of demand that is in front of us.

Adam Jonas: It therefore gives us confidence that against a very good and solid demand rate and revenue backdrop, we have a path where we've already taken a very big downpayment and the charge we took in the fourth quarter and therefore transitional track.

Adam Jonas: Transitional year means that in 2024, we are executing against the reduction in the EV fleet against the series of very precise cost out elements that gives us confidence that we won't be in a position where the covenants will come into play and that we will emerge at the end of 'twenty four into 'twenty five.

Adam Jonas: <unk> with a much better cost structure against which we can engage on a level of demand that is in front of us and I think equally if one forecast for what the back end of this year might look like much is I'm not relying on that for the success of hurts, but lower interest rates and continued.

Stephen M. Scherr: And I think equally if one forecasts for what the back end of this year might look like, much as I'm not relying on that for the success of Hertz, but lower interest rates and continued demand and lower inflation spell well both for the core element of demand in the business, control over cost, and equally stability to residual prices, which lends itself to an easier execution across the whole. And so that's what I'm referring to in terms of transition and kind of a little bit of my own mindset about how the forward is accomplished. Thanks. Thanks, Stephen. Justin, I know you've only been at the company for 90 days. But you did say you were out in the field. I'd be very interested in what the field managers, licensees, and people on the desk are most concerned about. What's their top, like Justin, you got to fix this?

Adam Jonas: Demand and lower inflation spell as well both for the core element of demand in the business our control over our cost and equally stability to residual prices, which lends itself to an easier execution across the whole and so that's what I'm, referring to in terms of transitional and kind of a little bit.

Adam Jonas: My own mindset about how the forward is accomplished.

Thanks, Thanks Steven.

Steven: Sure I know you've only been at the company for 90 days.

Steven: But you did say you were out in the field I'd be very interested in what the field managers license.

Steven: License. These people on the desk, what they're most concerned about whats their top like Justin you got affects us this is not good enough.

Adam Michael Jonas: This is not good enough. And anything will take you by surprise. And as a follow-up, I'd be well, and I just have one little follow-up to that question. But, What were you hearing from them? Yeah, sure thing. So I'll say it was extremely invigorating to go see the patch in the field.

Steven: And anything take you by surprise.

Speaker Change: As a follow up I'd be well I have one and I just have one more follow up to that question, but.

Speaker Change: What were you hearing from them yes.

Speaker Change: Yes sure thing so I'll say it was extremely invigorating to go see the passion that field. These employees some of them been there for decades are hugely customer service oriented and focused.

Justin Keppy: These employees, some of them have been there for decades, are hugely customer service oriented and focused. And I'll say the one kind of unanimous theme to answer your question is that they were concerned about the EVs and having to substitute EVs for consumers that might not otherwise have wanted them. And that has an NPS effect. It's certainly if people aren't looking to drive an EV or whatnot; we're seeing incident rates of damage and collision. But the feedback I've gotten with this announcement, we didn't take this announcement lightly, is that this will give us some bandwidth to focus back on servicing the customers as Hertz has been known to do. Okay, and my fault there is, what about the mileage of the cars? My understanding is your cars are just damn old, really. What did that come up with? And I'd be curious if you could please give us some data on that. What's the average mileage of your fleet, for example, in the US? Where, you know, is that versus normal?

Speaker Change: And I'll say, the one kind of unanimous steam to answer. Your question is they were concerned about the evs in having.

Speaker Change: Having to substitute Evs for consumers that might not otherwise have wanted them and then you know that has an NPS of factors certainly if people arent looking to drive an EV or <unk> or whatnot. So we're seeing incident rates of damage and collision but that.

Speaker Change: Uh huh.

Speaker Change: The feedback I've gotten with this announcement there was we didn't take this announcement lately is that this will give us some some bandwidth to focus back on servicing the customers as purchased been known to do.

Speaker Change: Okay and my follow up there is what about the mileage of the cars. My understanding is your cars are damn old really just what did that come up and I would be I'd be curious if you could please give us some data on that what's the average mileage of your fleet for example in the U S.

Adam Michael Jonas: Where do you want it to be? Because that strikes me as an indicator. I don't know if you'd consider it a KPI, Justin, but it's something that, you know, if you have a smelly car with 60,000 miles on it, and it's just getting your OpEx up, that's not something Enterprise and Avis are doing right now, but you are. So tell us where you are and where you want to be on that.

Speaker Change: Where is that versus normal and where do you want it to be because that strikes me as an indicator I don't know if you had considered a kpis Justin but.

Speaker Change: It's something that you know if you have a smelly car with 60000 miles on it and it's just got.

Getting your Opex up that's that's not something to enterprise and Avis is doing right now, but you are so tell us where you are and where you want to be on that that's really important. Thanks Joseph.

Stephen M. Scherr: That's really important. Thanks, Justin. Well, hey, Adam, let me take it first, and then I'll pass it to Justin.

Speaker Change: Hey, Adam let me take it first and then I'll pass it to Justin.

Stephen M. Scherr: You know, the fleet plan that we have for 24 is to meaningfully reduce the age of the fleet. I mean, by several hundred basis points in terms of the percentage of cars that ultimately will be 50,000 miles or older. So that's the path that we are on in the context of the first part of your question would be about the transition. Okay.

Speaker Change: The fleet plan that we have for 'twenty four is to meaningfully reduce the age of the fleet I mean by several hundred basis points in terms of the percentage of cars that ultimately will be 50000 miles or older. So that's the path that we're on in the context of the first part of your question would be about the transition okay.

Stephen M. Scherr: The second is that we do have homes for cars that are not otherwise being rented to purge premium customers. So, for example, growth in dollar and TNC, I'm not suggesting that these are cars that wouldn't want to be rented, but these are older cars that have homes for them. And I think that's an important sort of element to think about in the context of a comparison to others where our ride share business is not sort of similar to the others that are in it. But the fleet, in our current fleet plan, is meant to become or meant to be rendered appreciably younger, both in age and miles. And I'll ask Justin to finish up on your question.

Speaker Change: The second is that we do have homes for cars.

Speaker Change: That are not otherwise being rented to purchase premium customers. So for example growth in dollar and PNC I'm not suggesting that these are cars that wouldnt want to be rented but these are older cars that have homes for them and I think that's an important sort of element to think about in the context of a comparison to others.

Speaker Change: Where our rideshare business is not sort of common to the others that that are in it but.

Speaker Change: But the fleet in our current fleet plan is meant to become or meant to be rendered appreciably younger both in age and miles and L. S. Justin to fin.

Justin Keppy: Thank you. Yeah, just to, Yeah, expand a bit upon that too. The other positive thing as we look to our fleet plan for 2024 is that we're noticing a transition with us becoming more of a buyer's market than a seller's market that we experienced with the OEMs over the past couple years. Already in Europe, we're seeing program cars that are very favorable rates to what we've experienced in 23 and earlier, and it enables us to take good actions with the refresh in the fleet that Stephen otherwise You know, Adam, I'd also say that obviously, rendering your fleet younger is one part buy and one part sell.

Speaker Change: Finish up on your question.

Justin Kepi: Just to put some numbers just to.

Yes, the expand a bit upon that too the other positive thing as we look to our fleet plan for 2024, we're noticing any transition with are becoming more of a buyer's market than a seller's market than we experienced with the Oems over the past couple of years already in Europe, We're seeing program cars that are in <unk>.

Justin Kepi: Favorable rates to what we've experienced in 'twenty, three and earlier and then enables us to take.

Justin Kepi: Good actions with the refreshing the fleet that Steven otherwise outlined.

Speaker Change: Adam I would also say that obviously in rendering your fleet younger is one part by in one part sell and I wouldn't take the comment lightly in the context of our access unlike others to our proprietary retail network and Carvana and others like them in part because in a declining residual market.

Stephen M. Scherr: And I wouldn't take the comment lightly in the context of our access, unlike others, to a proprietary retail network and Carvana and others like them, in part because, in a declining residual market, OK, the delta historically between wholesale and that retail can be 10 percent or greater. And so the ability for us, within the bounds of what we're trying to do in a transitional year, to dispose of fleet at prices that are not necessarily reflected in what you see in indices that track wholesale auctions will be of benefit to us in the context of managing the financial element of this kind of fleet rotation. Okay, thanks, Steve. We'll follow up on the mileage later if you don't want to provide it. Sure. Thank you. Our next question comes from the line of John Healy of North Carolina. Hi, thank you.

Speaker Change: Okay. The delta historically between wholesale and that retail can be 10% or greater and so the ability for us within the bounds of what we're trying to do in a transitional year to dispose of fleet at prices that are not necessarily reflected in what you see in indices that track wholesale auction.

Speaker Change: It will be a benefit to us in the context of managing the financial element of this kind of fleet rotation.

Speaker Change: Okay. Thanks, Steve will follow up on the mileage later I figure I didn't want to provide it sure.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of John Healy Northcoast Research. Your line is open.

Operator: Stephen, I wanted to get a couple of big picture questions out to you. Obviously, a lot of time was spent this morning on EV, but can we talk about EV and ride hailing together? Obviously, two businesses that are kind of newer to the company over the last five years.

John Healy: I think Stephen I wanted to get a couple of big picture questions into you know.

John Healy: Obviously, a lot of time spent this morning on EV, but can we talk about EV and ride hailing together.

John Healy: Obviously, two businesses that are kind of newer to the company over the last five years.

John Michael Healy: If you look at these businesses, does maybe the hypothesis or the penciling out of the potential need to be longer-term revisited just from what you're learning? Because I think there was an expectation that EV and ride-hailing could actually be margin-accretive type businesses. And I'm curious to know, now that you've been in them, if you agree with kind of the longer-term economics and potential of those businesses, or is this, you know, the sign that, hey, maybe it penciled out in Excel, but in reality, these businesses are just different than we thought. So I'd love to get your thoughts there. No, that's an excellent question.

John Healy: As you look at these businesses.

John Healy: Maybe the hypothesis are the penciling out of the potential need to be longer term revisited just from what Youre learning because I think there was an expectation that EV in ride hailing could be actually margin accretive type businesses and I'm curious to know now that you've been in them. If you agree with kind of the longer term economics and potential of those businesses are.

John Healy: Or is this the sign that hey, maybe it penciled out and excel, but in reality that these businesses are just defer.

Speaker Change: <unk> than we thought so I'd love to get your thoughts there.

Stephen M. Scherr: I would say the following. I think the long-term proposition around that business is a good one. I think that it's not to be ignored that against the financial model, if you will, at the time that Hertz entered this when it came out of bankruptcy, a number of things have happened, not least of which is the deployment of Teslas has become a more expensive proposition because when the MSRP came down, the residual came down, and the depreciation went up. And obviously, the experience around damage has been elevated.

Speaker Change: An excellent question I would say the following.

Speaker Change: I think the long term proposition around that business is a good one I think that it's not to be ignored that against.

Speaker Change: The financial model, if you will at the time that hurts entered this.

Speaker Change: When it came out of bankruptcy a number of things that happened not least of which is the deployment of tesla's has become a more expensive proposition because when the MSRP came down the residual came down and the depreciation went up and obviously the experience around damage has been elevated. So if you think about your revenue intake and you deduct your cost of the.

Stephen M. Scherr: So if you think about your revenue intake and you deduct your cost of the car, largely depreciation, you deduct damage, and then you look at other expenses, it yields a positive margin, but not near that which it had initially or we had initially intended it to do. So we need to rotate the sort of cars in there. And we have obviously reduced the number of EVs that are in there. And the forward will be the deployment of less expensive cars, which will render that business more profitable. The other thing I will say to you is that. This business is for drivers that are in our car for an extended period of weeks. So in other words, when you get past four weeks or five weeks of a driver in that car, the economics are very attractive, meaning you need to get through the initial underwriting of the driver, okay, and some experience of that driver in the car. Because when you get that combination of a well-underwritten driver and a driver that has experience, the margins on that car are very attractive, in part because the maintenance in the turn goes down, and the The damage level is low because the incident level is low because the driver is experienced in the context of the EV, although perhaps they hadn't been at the start.

Speaker Change: Car largely depreciation you deduct damage and then you look at other expenses it yields a positive margin, but not near that which he had had initially we had initially intended it to do so we need to rotate this sort of cars in there and we have obviously reduced down the number of evs that are in there.

Speaker Change: And the forward will be deployment of less expensive cars, which will render that business more profitable.

Speaker Change: Other thing I will say to you is that.

Speaker Change: This business four drivers that are in our car for an extended period of weeks. So in other words, when you get past four weeks or five weeks of a driver in that car.

Speaker Change: Economics are very attractive, meaning you need to get through the initial underwriting of the driver okay and some experience of that driver in the car because when you get that combination of a well underwritten driver and a driver that has experience the margins on that car are very attractive in part because.

Speaker Change: The maintenance and the turn goes down the drivers keeping the current extended period just as the model held the damage level is low because the incident level is lower because the driver is experienced in the context of the EV, perhaps they hadn't been at the start so the real challenge is to get buy if you will the cost of acquisition on the driver.

Stephen M. Scherr: So the real challenge is to get by, if you will, the cost of acquisition for the driver because the margin on the longer-term driver is very, very attractive, and you should assume that we are working with Uber and Lyft and others to sort of overcome that issue. And so that's a little bit more than sort of a yes or no answer. [inaudible] When you guys talk about the 250 cost of EV being recovered over two years, and then the 250 cost benefit this year, how much of that EV item do you think we've recovered this year? And when you talk about those cost items, does that flow through for 2024? Or is that like a run rate number?

Speaker Change: Because the margin on the longer term driver is very very attractive and you should assume that we are working with Uber and lyft and others to sort of overcome that issue and so I know, that's a little bit more than sort of a yes or no answer but it is a <unk> business model and I think it works I think we were thrown occur.

Speaker Change: You have to sort of how it modeled out from the start but I think that's the direction, we're going in and I think that's an attractive business as a general matter, but we need to work through that underwriting segment of it.

Speaker Change: Okay. Thank you and just as a quick follow up question for me. When you guys talk about the $2 50 of cost on EV being recovered over two years and then the $2 50, a cost benefit this year.

Speaker Change: How much of that EV items do you think we would recover this year and when you talk about those cost items that flow through for 2024 or is that like a run rate number how do we parse what we actually might be kind of in that in the results. This year. Thanks sure. So I would say on the 250 of EBITDA recapture over two years in the AG.

John Michael Healy: How do we parse what we might actually see kind of in the results this year? So, I would say on the 250 of EBITDA recapture over two years in the aggregate, I mean, roughly, roughly speaking, I would say it's 50 50 right over 24 and then 25 and then obviously runs OK as a permanent fixture in our overall EBITDA production. On the separate $250 million of cost out that Justin was referring to, you should view that as cost coming out and materializing in 2024 and to carry forward on a run rate basis as we move. Again, that's a byproduct of both productivity and cost. Great. Sure. [inaudible] Again, Stephanie Moore of Jeffries, Yolanda Dole.

Speaker Change: <unk>.

Speaker Change: Roughly roughly speaking I would say, it's 50 50 right over 24, and then 25 and then obviously runs okay on as a permanent fixture in in our overall EBITDA production.

On a separate $250 million of cost out that Justin was referring to you should view that as cost coming out and materializing in 2024 and to carry forward on a run rate basis as we move again, that's a that's a byproduct of both productivity and cost.

Speaker Change: Great. Thank you.

Speaker Change: Sure.

Speaker Change: One moment please.

Speaker Change: One moment.

Speaker Change: Our next question comes from the line of Stephanie more of Jefferies. Your line is open.

Speaker Change: Okay.

Speaker Change: Again, Stephanie more of Jefferies. Your line is open.

Operator: Oh, yes. Sorry. Good morning.

Stephanie: Oh, yes, sorry, good morning, Thank you.

Stephanie Lynn Benjamin Moore: Thank you. Thanks, Stephen. There are a good number of moving pieces here that we kind of went through on the call here. So Stephen, I know you said in the past that you expected to achieve EBITDA growth in 2024, but given the current dynamics, but also your own cost reduction program, is that still the case? Well, I think EBITDA on 24, you know, will show to be higher than what we produced in 23, taking account of the EV charge that was otherwise taken in Q4. So I think we'll see a higher level of EBITDA production in 24 relative to the reported number in 23. Okay, no, perfect.

Stephanie: By Stephanie.

Stephanie: Thanks, David.

Stephanie: A number of moving pieces here.

Stephanie: You kind of went through on the call here. So Steven I know you said in the past that you expected to achieve EBITDA growth in 2024, but given the current dynamics and but also your own cost reduction program is this still the case.

Steven: Well I think EBITDA in 'twenty four.

Steven: We will show to be higher than what we produced in 'twenty three taking account of the EV charge that was otherwise taken in Q4.

Steven: So I think we will see a higher level of EBITDA production.

Steven: In 24 relative to the reported number in 'twenty three.

Stephen M. Scherr: That's helpful. And then as you think about the cadence of these initiatives, again, these kind of major cost savings, when should we expect to start to see those materialize in 2024? You know, how quickly can these headwinds that we certainly saw in 2023 start to be offset? I mean, is this more of a second half of 2024, or just any kind of color on the cadence throughout 2024 would be helpful. Thanks.

Speaker Change: Okay perfect. That's helpful. And then as you think about the cadence of these initiatives.

Speaker Change: Again, these kind of major cost savings when should we expect to start to see those materialize or how quickly can these headwinds that we certainly saw in 2020 right. Dr. Can be offset I mean is this more of a second half 2020 core or any kind of any kind of color on the cadence throughout Shanghai it'd probably be helpful. Thanks.

Stephen M. Scherr: Well, I think on the EVs, obviously, they are being sold out now that depreciation has been stopped on those cars. So depreciation should, you know, fall pretty quickly in the context of that zeroing out on the charge itself. Obviously, the costs will be reduced as progress is made on the sale of the 20,000 vehicles, which is running at a pace. And we're obviously quite incented to see that happen quicker rather than later.

Speaker Change: I think on the Evs, obviously, they are being sold out now much as the depreciation has been stopped on those cars. So so depreciation should.

Speaker Change: Paul pretty quickly in the context of that zeroing out on the charge itself, obviously the costs will be.

Speaker Change: Reduced down as progress is made on the sale of the 20000 vehicles, which is running at pace and we're obviously quite incentive to see that happen quicker than than longer maybe I'll ask Justin to comment on kind of the pace and.

Justin Keppy: Maybe I'll ask Justin to comment on kind of the pace and, you know, when you'll see some earlier and some later in the context of the categories he's focused on. Sure, on some of just the cost out on budget reductions or third-party spend, we've enacted those already. So we're going to see the benefit of those starting here in Q1, which will run through the entire year. Some of the other items will take a bit more time just to get in place as well as rolled out across the broader network.

Justin Kepi: When youll see some earlier some later in the context of the categories. He is focused on.

Justin Kepi: Sure I'm, sorry, just the cost out on budget reductions of third party spend we enacted those already so we're going to see the benefit of those starting here in Q1, which will run rate through the entire year. Some of the other items, we will take a bit more time just to get in place as well as rollout across the broader network.

Stephanie Lynn Benjamin Moore: So we will see a bit of a ramp as the year goes on. But that's natural with any cost reduction program. As you implement it, you see the benefits compound in the back half of the year.

Justin Kepi: So we will see a bit of a ramp as the year goes through but that's natural with any cost reduction program and as you implement you see the benefits compound in the back half of the year.

Stephen M. Scherr: And then just one kind of somewhat related question. I think we saw that Tesla announced a pretty major recall here in the last couple of weeks. Can you just kind of walk us through what that impact could be on your business? Well, I think you should always assume that we obviously follow all of the recalls and make sure that we comply with the necessary rules and laws as it relates to that with respect to the rental car industry. I would say on the recalls, at least in the past with Tesla, they've been over-the-air recalls, so software adjustments that have been made. And so it is easier to execute on those recalls. But that's largely how we're dealing with all of them. Great. Thank you so much.

Speaker Change: Got it and then just one kind of relay.

Speaker Change: A related question I think we saw the Tesla announced a pretty major recall here in the last couple of weeks can you just kind of walk us through what that impact could be on your business.

Speaker Change: Well I think you should always assume that we obviously follow all of the recalls and make sure that we comply with necessary rules and laws as it relates to that with respect to the rental car industry I would say on the recalls at least in the past with Tesla they've been over the air recalls so software adjustments that have been made and so it is easier.

Speaker Change: To execute on those recalls.

Speaker Change: But that's that's.

Speaker Change: That's largely how we're dealing with all of them.

Speaker Change: Great. Thank you so much.

Operator: No problem. Our next question comes from the line of Ryan... JP Morgan. Hi, thanks for taking my question. I wanted to ask on the softer trend to earnings in 4Q, apart from the one time charge related to the plan to sell 20,000 electric vehicles, I'm curious, you know, in order to help us better understand the jumping off point as we head into 2024, you know, the annualized rate of EBITDA, I guess, you know, how much of the shortfall, excluding the charge, may have nevertheless still related to the EV fleet headaches that should significantly ameliorate given the sale, such as higher damage repair costs, or maybe even the RPD pressures that bled over from having too many EVs in the rack fleet, versus how much of the shortfall in 4Q X the charge might be more of a recurring nature, such as, you know, normal course depreciation on the EVs you are retaining, or on the rest of the portfolio, or incrementally softer, non-EV, RPD, etc. You know, how are you thinking about these considerations? And after taking them into account and excluding the charge, how should investors be thinking about, you know, the sequential trend in EBITDA or results generally from 4Q to 1Q this year, relative to the more typical 4Q to 1Q seasonal pattern?

Speaker Change: No problem. Thank you one moment please.

Speaker Change: Our next question comes from the line of Ryan Brinkman of Jpmorgan. Your line is open.

Ryan Brinkman: Alright, Thanks for taking my question I wanted to ask on the softer trend to earnings in <unk> apart from the one time charge related to the plan to sell 20000 electric vehicles I'm curious in order to help us better understand the jumping off point as we head into 2024.

Ryan Brinkman: Annualized rate of EBITDA, I guess, how much of the shortfall excluding the charge may have nevertheless, still related to the EV fleet headaches that should significantly ameliorate given the sale such as higher damage repair costs or maybe even the RPT pressures that bled over from having too many evs in the rack fleet versus how much of the shortfall in <unk>.

<unk> extra charge might be more of a recurring nature such as normal course depreciation on the <unk> you are retaining or on the rest of the portfolio or incrementally softer non EV RPG et cetera. How are you thinking about these considerations and after taking them into account and excluding the charge how should investors be.

Ryan Brinkman: And about the sequential trend in EBITDA results generally from <unk> to <unk> this year relative to the more typical <unk> seasonal pattern.

Ryan Brinkman: Well, I would say that, remember, we spoke about several points of margin as the effect of EV relative to ICE. So, you know, think about that as a 70 to 80 million dollar drag in the quarter in the context of overall cost. I would say that wholly independent of the specific entry categories of expense, and I made this comment earlier, I think the implication as manifest in the fourth quarter of the EV challenge, which in part motivated us to take the charge and the action that we did, is the spillover effect and the distraction on the field more broadly. It meant that we were running with more personnel than we needed to. It meant that we were incurring transport costs higher than we needed to. All of those, or both of those, I should say, are not linked, if you will, to the EV itself and the way in which we refer to several points of margin.

Ryan Brinkman: Well I would say that remember we spoke about several points of margin.

Ryan Brinkman: As the effect of EV relative to ice so think about that as a $70 million to $80 million drag in the quarter in the context of overall cost I would say that wholly independent of the specific entry categories of expense and I made this comment earlier I think the implication is.

Ryan Brinkman: In the fourth quarter of the EV challenge, which in part motivated us to take the charge and the action that we did is the spillover effect then the distraction on the field more broadly it meant that we were running with personnel higher than we needed to it meant that we were incurring transport costs higher than we needed to.

Ryan Brinkman: All of those or both of those I should say are not linked if you will to the EV itself and the way in which we referred to several points of margin, but the spillover effect on our cost base was becoming.

Stephen M. Scherr: But the spillover effect on our cost base was becoming too widespread, and therefore, taking a bolder action to arrest that trend by pulling down a third of the fleet was the choice that we made. But I'm giving you that because there's an effect that's related to the EV fleet. Then there's sort of the collateral impact on broader costs that was there. And I think you're equally right in the context of the uplift to RPD that we can get by virtue of, if you will, removing sort of the worst performers among the EV fleet in terms of RPD and the like. Okay, and maybe just diving in on that last topic there, could you help us with dimensioning the step down in those repair costs and the cadence or pace of that step down?

Ryan Brinkman: Two widespread and therefore, taking a bolder action to arrest that trend by pulling down a third of the fleet.

Was the choice that we made but I'm, giving you that because there is an effect that's related to the EV fleet. Then there is sort of the collateral impact on broader cost that was there and I think you're equally right in the context of uplift to our PD that we can get by virtue of if you will removing sort of the worst performers among.

Ryan Brinkman: The EV fleet in terms of RP D and the like.

Speaker Change: Okay, and maybe just delving in on that last topic there.

Speaker Change: Yes.

Speaker Change: Could you help us with.

Speaker Change: Dimension in the step down in those repair costs and the cadence or pace of that step down you did suggest that it would drop by more than a third the repair costs given that these are the more problematic vehicles right. But then what are the other kind of knock on benefits there like.

Stephen M. Scherr: You did suggest that the repair costs would drop by more than a third, given that these are the more problematic vehicles, right? But then what are the other kind of knock-on benefits there, like Tesla was supplying a certain amount of parts; it wasn't sufficient, but now it will be more sufficient, right? And then also there's the efforts that you talked about on the 3Q call, I don't know, maybe around vertical integration or something, just given all of these factors, do you have an estimate for the dollar savings in 24 versus 23, I don't know, in EBITDA or in DOA per transaction day or something like that? Well, listen, they should trend lower and remember that there were a series of steps that we were taking to try to address But at the end of the day, that was not going to make a sufficient difference to sort of put us back on track as fast as we wanted. So, therefore, the reduction mattered.

Speaker Change: Tesla one supply in a certain amount of parts of it wasn't sufficient but now it will be more sufficient right and then also there is the.

Speaker Change: The efforts that you've talked about on the <unk> call I don't know maybe around vertical integration or something just given all of these factors do you have an estimate for the the dollar savings and 24 versus 23, I don't know in EBITA.

Speaker Change: DLA per transaction day or something like that.

Speaker Change: Well listen they should trend lower and and remember that.

Speaker Change: There were a series of steps that we were taking to try to address both the elevated damage in the elevated cost of damage, including as Justin referenced we just didn't begin to negotiate with the Oems on lower labor and lower parts costs, but at the end of the day that was not going to make a sufficient difference okay.

Speaker Change: Put us back on track as fast as we wanted so therefore the reduction mattered. It also means though that those measures that we were taking okay.

Stephen M. Scherr: It also means, though, that those measures that we were taking will have a greater effect on the balance of the two-thirds of the EVs that are there. And if they don't, then we'll move, you know, more aggressively on that fleet size. But the effect of the cost out, if you will, on the EVs is more effective against, you know, 65% of the standing fleet as opposed to 100%. And again, taking out the biggest offenders of RPD and the biggest offenders of damage incidents, and therefore cost, will translate into what I was saying before, which is probably a 50% reduction in that, notwithstanding only removing a third of the fleet itself. That's very helpful. Thanks.

Speaker Change: We will have greater effect on the balance of the two thirds of the Evs that are there and if they don't then we will move more aggressively on that fleet size, but the effect of the cost out if you will on the Evs is more effective against <unk>.

Speaker Change: 65% of the standing fleet as opposed to a 100% and again taking out the biggest defenders of RP D and the biggest offenders of damage incident, and therefore costs will translate into what I was saying before which is probably.

Speaker Change: A 50% reduction in that notwithstanding only removing a third of the fleet itself.

Ryan Brinkman: And then just lastly, I know there was some discussion earlier about normalized earnings, but maybe looking beyond all this noise, you know, maybe out two years from now or something like that. Now, what would you say is the normalized earnings power? I mean, I know there are some EBITDA numbers.

Speaker Change: That's very helpful. Thanks, and then just lastly, I know there was some discussion earlier about normalized earnings, but just maybe looking beyond all of this noise maybe out two years from now or something like that.

Speaker Change: What would you say is the normalized earnings power I mean, I know, there's some EBITDA numbers what about like have you looked at it on an EBITDA per car basis, just given sort of any structural change in the size of the market or in.

Ryan Brinkman: What about, have you looked at it on an EBITDA per car basis, you know, just given sort of any structural change in the size of the market or in market share? And when you compare EBITDA per car normalized versus pre-pandemic, you know, what are the big differences there? Is it because we've got the RPD tailwind? Or, you know, what improvement do you expect there to be? And what are the biggest drivers of that?

Speaker Change: <unk> market share and and when you compare EBITDA per car normalized versus pre pandemic.

Speaker Change: Are the big differences there is because we've got the RPT tailwind or what.

Speaker Change: What improvement do you expect that there is in and what are the biggest drivers of the improvement.

Stephen M. Scherr: Well, I mean, listen, from a methodology point of view, to try to get back to what you would view to be a normal number, you know, you need to reverse or pull back the benefit of the EV sale, right, of 250 million, as we've been forecasting over the past two years, and sort of start yourself from there. And then, you know, it will be a question of the pace of achievement of the $500 million that we've talked about, which is both revenue and productivity and cost. I think that there ought to be heightened confidence in the ability to take the cost out and ascertain the productivity gains, as we represent we will do, to the tune of $250 million by the end of 2024.

Speaker Change: Well I mean listen from a methodology point of view to try to get back to what you would view to be a normal number you need to reverse or pulled back the benefit of the EV cell right up $250 million as we've been forecasting over the two years and sort of start yourself from there and then.

Speaker Change: It will be a question of the pace of achievement of the $500 million that we've talked about which is both revenue and productivity and cost.

Speaker Change: I think that.

Speaker Change: There ought to be heightened confidence in the ability to take the cost out and and ascertain the productivity gains as we represented we will do to the tune of $250 million by the end of 'twenty four and so half of that $500 million should be seen by the end of 'twenty four right with progress on that $250 million of EV.

Stephen M. Scherr: And so half of that $500 million should be seen by the end of 2024, right, with progress on the $250 million of EV. So listen, it's hard for me to sort of put myself in your place and understand the assumptions you want to make about the broader market and the like, but there's $250 of EV, and there's $500 to be had. Of that $500, $250 is in the first year, namely 2024.

Speaker Change: So.

Speaker Change: Listen it's hard for me to sort of.

Speaker Change: Put myself in your place and understand the assumptions you want to make about the broader market and the like but there is $2 50 of EV and Theres 500 to be had of that $502 50 is in the first year, namely 2024, I think you then need to make assumptions about whether you believe that the deceleration in rate.

Stephen M. Scherr: I think you then need to make assumptions about whether you believe that the deceleration in rate decline and the extent to which we are 40% better than where we were pre-pandemic holds. I think that as it relates to residuals and how that weighs on the industry, no less ourselves. Again, you need to take stock of the fact that while we have seen a precipitous decline off of the very elevated levels that existed in 22, the reality is that the age of cars on U.S. roads right now was less than 10 years pre-pandemic. It's now at about 12 and a half years.

Speaker Change: <unk> and the extent to which we are 40% better than where we were pre pandemic holds I don't see reason why it shouldn't as we hit sort of a more normalized position.

Speaker Change: That as it relates to residuals and how that weighs on the industry no less ourselves again, there you need to you need to take stock of the fact that while we have seen precipitous decline off of the very elevated levels that existed in 2002. The reality is is that.

The age of cars on U S roads right now was less than 10 years pre pandemic. It's now at about 12 and a half years. Okay number two there's a structural short of good quality used cars because they werent made in the pandemic so off lease cars are lower.

Stephen M. Scherr: OK, number two, there's a structural shortage of good quality used cars because they weren't made during the pandemic. So off-lease cars are less. If you further believe that we will come upon a market toward the back half of the year where auto loans will be more attainable and at a lower price, you know, that cocktail of factors should lead you to believe that there's at the very least stability in residuals, if not an uptick that could come in the back half. Again, we're not gaming, if you will, or modeling necessarily for that. I'm just giving you, in response to your question, sort of a sense of where I think the rate is, and where I think residuals are kind of wholly independent of the tactical moves that we're making to reduce costs. Very helpful, thank you very much.

Speaker Change: If you further believes that we will come upon a market towards the back half of the year, where auto loans will be more attainable and at lower price.

Speaker Change: That cocktail of factors should lead you to believe that there is at the very least stability in residuals, if not an uptick that could come at the back half again, we're not gaming if you will or modeling necessarily for that I'm, just giving you in response to your question sort of a sense of where do I think rate is where do I think residuals are kind of.

Speaker Change: Holy independent of the tactical moves that we're making to reduce cost.

Speaker Change: Very helpful. Thank you very much.

Ryan Brinkman: Sure. Thank you. One moment.

Speaker Change: Sure.

Operator: Our next question comes from the line of Lizzie Dove of Goldman Satchelon. Hi, thank you for taking the question. You noted that you're prioritizing RPD over utilization this year, and you've also talked about, you know, stable RPD repeatedly during this call, but I wonder if you could just clarify how you're thinking about that, whether that reflects a change in strategy and what exactly you do mean by stable. I think, you know, if I look at the numbers this quarter, it was maybe down kind of mid-single digits Yeah, well. I guess the first principle is that we should continue to hold supply of cars inside where we expect demand to be, right? So that we can run at a respectable level of utilization.

Thank you one moment please.

Speaker Change: Our next question comes from the line of Lindsay Dab of Goldman Sachs. Your line is open.

Lindsay Dab: Pardon me.

Lindsay Dab: Hi, Beth.

Lindsay Dab: Hi, Thank you for taking the question and you've noted that you're prioritizing <unk>.

Lindsay Dab: And this year and you've also talked team stable op.

Lindsay Dab: Repeatedly during this call, but I'm wondering if you could just clarify how you're thinking about that whether that reflects a change in strategy and what exactly do you mean by stable I think if I look at the numbers this quarter will be down kind of mid single digits and so I just wanted to see kind of how you kind of think about it into 2024 and the kind of range of outcomes Bob today.

Bob: Yeah well.

Bob: I guess first principle is that we should continue to hold supply of cars inside where we expect demand to be right. So that we can run at a respectable level of utilization and I think we're not of a mind to have capital deployed against cars that are simply not going to be used okay. There are obvious obvious.

Elizabeth Dove: And I think we're not of a mind to have capital deployed against cars that are simply not going to be used. OK, there are obvious, obvious variations in demand, quick moves, troughs, and peaks. And so you need to hold cars for that.

Bob: Variations in demand quick moves troughs and peaks and so you need to hold cars for that our view has been not to chase.

Stephen M. Scherr: Our view has been not to chase low quality demand, even if it means that utilization sort of falls. So there's a baseline of holding supply inside demand. And then there's the execution at the moment where I'm not of a mind to sort of chase low quality demand that's not expressing sort of a sufficient RPD.

Bob: Low quality demand, even if it meant that utilization sort of falls. So there is there is a baseline of holding supply inside demand and then theres the execution in the moment, where I'm not of a mind to sort of chase.

<unk>.

Bob: Low quality demand thats, not expressing sort of a sufficient RP D and so the.

Elizabeth Dove: And so, you know, the combination of those two should hold us there in terms of the broader sort of optimism or confidence on stability. You know, candidly, I look at what you look at, which is whether there is, you know, a motive right to sort of drive prices down by any one of our competitors. I don't believe there is.

Bob: The combination of those two should hold us there in terms of the broader sort of optimism or confidence on stability.

Bob: Candidly I look at what you look at which is I look at whether there is.

Bob: Motive right to sort of drive price down by any one of our competitors I don't believe there is okay, there's no world in which <unk>.

Stephen M. Scherr: OK, but there's no world in which lowering prices brings more demand to the industry. It may split share, but share has been very stable across the majors, across a variety of markets. So there's not an embedded incentive.

Bob: <unk> priced brings more demand to the industry. It may split share, but share has been very stable across the majors across a variety of market. So there's not an embedded incentive.

Stephen M. Scherr: You know, nobody's making a decision to take a business trip or not or to take a vacation or not because the rate on the rental car is five dollars higher or lower. So there's no particular incentive across the industry to lower the rate as if it's going to generate industry-driven demand. And there doesn't seem to be a chase for share on that basis.

Bob: Nobody is making a decision to take a business trip or not where to take a vacation or not because the rate on the rental cars $5 higher or lower so there's no particular incentive across the industry to lower rate as if it's going to generate industry driven demand and there doesn't seem to be a chase for share on that basis.

Stephen M. Scherr: And then, again, sort of stability in what we're seeing across travel, in fact, growth that's being forecast by airlines and hotels, you know, these are to our left and right in the context of where they deposit their customers at the airport. And so to the extent that travel continues, you should see us rationalize, as Justin was saying, our off-airport locations, maintaining sufficiency of the network, which I think is very valuable to us, but redeploying cars to the airport where these travelers are coming from and optimizing the price, you know, at the same time. That's helpful. Thank you. And just one follow-up on the EVs.

Bob: And then again sort of stability in what we're seeing across travel in fact growth that's being forecast by airlines and hotels.

Bob: These are two are left and right in the context of where they deposit our customers at the airport and so to the extent that travel continues you should see us rationalize as Justin was saying our off airport locations, maintaining sufficiency of network, which I think is very valuable to us, but redeploying cars to the airport.

Bob: Are these travelers are coming and optimizing to price at the same time.

Speaker Change: That's helpful. Thank you and just one follow up on the <unk> I saw the headline yesterday clothing. The plan is to buy a 65000 emails on pulsar I was just curious if you have any outstanding kind of men amended agreement minimum purchase agreement. So this year with any of the others.

Elizabeth Dove: I saw the headline yesterday that you're porting the plans to buy the 65,000 EVs from Polestar. I was just curious if you have any outstanding kind of minimum agreement, minimum purchase agreements for this year with any of the others, whether that's, you know, GM or Tesla. I know you had the kind of initial kind of framework agreements. But I'm curious if there is any kind of purchase agreement you do have to hit, you know, this year.

Speaker Change: Got it.

We will test there I know you had the kind of initial kind of framework agreement I'm curious if there is any kind of purchase agreement you have to hit this year.

Stephen M. Scherr: You know, remember, generally speaking, the agreements that we have long had with the OEMs are sort of a broad understanding about an aggregate number of cars over some number of years. The commitment is not final until the model year when price and trim and the like are all decided. By the way, that runs both ways. They're not obligated to deliver any more than we're not obligated to buy under these broader agreements. And so, you know, we put the pause on obviously buying EVs, except to the extent that they are packaged with other ICE vehicles. But it's a de minimis amount that's there.

Speaker Change: Remember the.

Speaker Change: Generally speaking the agreements that we we are we have long had with the Oems is sort of a broad understanding about aggregate number of cars over some number of years. The commitment is not final until model year, when price and trim and the like is all decided by the way that <unk>.

Speaker Change: Both ways Theyre not obligated to deliver any more than we're not obligated to buy under these broader agreements and so.

Speaker Change: We put the pause on obviously buying evs, except to the extent that they were packaged with other ice vehicles, but it's a de minimus amount. That's there by and large we will be net lower for sure in the context of Evs based on the sale and based on a very diminished de minimis number of Evs that come in.

Elizabeth Dove: By and large, we will be net lower for sure in the context of EVs based on sales and based on a very de minimis number of EVs that come in. Thank you. That's helpful.

Speaker Change: Thank you that's helpful.

Operator: Sure. Thank you. Our next question comes from the line of... Thank you for taking my question. Good morning, everyone.

Speaker Change: Alright. Thank you one moment please.

Speaker Change: Our next question comes from the line of Christopher Staffa Lopolith.

Speaker Change: Your line is open.

Speaker Change: Thank you for taking my question good morning, everyone.

Christopher Nicholas Stathoulopoulos: Justin, on the $2.50 with the five areas that you've identified, I was wondering if you could get a little bit more of a finer point with respect to the dollar per category and your comment that you would be disappointed if you didn't do more. What should we think about? I guess it would be in the third category on operating collisions and things like that, but just for a little bit more detail as we think about the cost for those five categories you identified. Yeah, sure. Sure, Christopher. As you can imagine, we're building internal plans that are going to target a much higher cost that we see this benefit drop through as committed. That's the first one.

Justin on the $2 50, with the five areas that you've identified.

Speaker Change: Just wondering if you could give a little bit more of a finer point with respect to dollar per category and your comment that.

Speaker Change: You would be disappointed if you don't do more how should we think about.

Speaker Change: Potential upside there I guess it would be in the third category on operating collision.

Speaker Change: And things like that but.

For a little bit more details we think about it.

Speaker Change: Cost per those five categories you identified.

Speaker Change: Yes sure sure Christopher as you can imagine we're building internal plans that are going to.

Speaker Change: Target a much higher costs that we see this.

Chris Woronka: Benefit drop through as committed.

Speaker Change: So thats the first one and secondly, we are spending less time kind of marketing these things between categories. There's some accounting things for instance, sub Ro benefits are turned over a period of time, so why we're getting the immediate.

Justin Keppy: And secondly, we're spending less time kind of bucketing these things between categories. There are some accounting things, for instance, sub-row benefits are turned over a period of time. So while we're getting the immediate recoveries, it may bleed through for a portion of time before we fully recognize it in the benefits there. So my suggestion there would be, as we continue to solidify these plans and see real traction beyond the immediate kind of cost reduction and spend reduction, you have my commitment to provide further clarity and updates in future calls. Okay, thank you.

Speaker Change: Recoveries it may bleed through from.

Speaker Change: Portion of time before we fully recognize it and the benefits there. So my my suggestion there would be as we continue to solidify these plans and see real traction beyond the immediate kind of cost reduction spend reduction.

Speaker Change: You have my commitment to provide further clarity and updates in the future calls.

Christopher Nicholas Stathoulopoulos: And then second question, Stephen, so your comments around, I guess would be, you alluded to a healthy demand outlook. We've heard similar comments here from the airlines as we wrap up earnings season, but it sounded like you were pointing to some confidence around the second half. Curious to hear your thoughts on that.

Speaker Change: Okay. Thank you and then second question Stephen So youre.

Speaker Change: Your comments around.

Stephen M. Scherr: I guess would be.

Speaker Change: You alluded to a healthy demand outlook.

Speaker Change: Heard similar comments here from the airlines as we wrap up earning season, but it sounded like you were pointing to some confidence around the second happened.

Stephen M. Scherr: And then potentially sort of a nuanced question here is, return to office mandates accelerate and potentially or arguably could drive a change in non-peak versus peak demand for the airlines. Any thoughts around that, whether how that might affect length of rentals or is it sort of net neutral as this leisure travel phenomenon, if you will, starts to normalize? Thank you.

Stephen M. Scherr: Curious to your thoughts around there and then potentially sort of a nuance question here as these return to office mandates accelerate and potentially where arguably could drive a.

Stephen M. Scherr: Change in non peak versus peak demand for the airlines.

Stephen M. Scherr: Any thoughts around that whether how that might affect length of rentals or is that sort of net neutral as this leisure travel.

Stephen M. Scherr: Amazon if you will starts to normalize.

Stephen M. Scherr: So let me take the second one first, which is that we've always tried to sort of manage leisure and corporate so as to manage the intra-week, right, trophy period. So, you know, the corporate contracts we have need to stand as profitable in their own right, but they do put the car to better, more normalized, smoother use, if you will, over the course of the week. To the extent that there's a return to what was in terms of normal sort of, you know, employee and corporate behavior, that inevitably will benefit us as it does the airlines and others. So we shouldn't track differently than they do in the context of the benefit of returning to, you know, what's otherwise defined as normal.

Speaker Change: Yeah. So let me take the second one first which is I think that.

Speaker Change: <unk>.

Speaker Change: We've always tried to sort of manage leisure and corporate so as to manage intra week right Trophy period. So.

Speaker Change: The corporate contracts, we have need to stand as profitable in their own right, but they do put the car to better and more normalized smoother use if you will over the course of the week to the extent that that there is a return to what was in terms of normal sort of employee and corporate behavior that any.

Speaker Change: Evidently will benefit us as it does the airlines and others. So we shouldn't track differently than they do in the context of the benefit of returning back to whats otherwise defined as normal.

Speaker Change: In terms of optimism for the second half I mean here I'm, just referring to kind of more macroeconomic trends that would benefit sort of various components of our business. Obviously, the first one is demand and the proclivity and inclination to travel so if things if if if inflation comes down in interest rates come down.

Stephen M. Scherr: In terms of optimism for the second half, I mean, here I'm just referring to kind of more macroeconomic trends that would benefit sort of various components of our business. [inaudible] The second component of that was the comment I was making around residual pricing of used cars, which is, you know, December into January is historically a low period in the context of volume of activity and the like. Typically, Presidents Day weekend and then as you move into spring is a more kind of buying period, if you will, around residuals. The comment I was making was, well, what are the factors that drive that? So we'll see seasonal movement. The question is whether the curve lifts up or stays sustained, elevated at the back end. And I think the positive drivers of that, as to whether or not they happen, we'll see will be lower interest rates.

Speaker Change: And there is a higher degree of consumer confidence that springs from it that inevitably will be better for the travel industry not limited to us the.

The second component of that was the comment I was making around residual pricing of used cars, which is.

Speaker Change: December into January is historically, a low period in the context of volume of activity and alike.

Speaker Change: Typically Presidents' day weekend, and then as you move into spring is a more kind of buying period. If you will around residuals. The comment I was making was well what are the factors that drive that so we will see seasonal movement. The question is whether the curve lifts up or stay sustained elevated at the back end and I think the.

Speaker Change: Positive drivers of that as to whether or not they happen, we'll see will be lower interest rates structural short in the used car market and the extent to which the average age of the car is getting old and people will be compelled to recycle their car. If you will on the forward those are positive lead.

Stephen M. Scherr: Structural shortfalls in the used car market and the extent to which the average age of the car is getting old, and people will be compelled to recycle their car, if you will, you know on the forward. Those are positive leading indicators in the context of what you think or should think that the market will do, and if that happens, That will be a benefit to us. Okay, thank you. No problem. Okay, we want to thank you all for your... Sorry, we want to thank you all for your participation today. Before we close the call, I'd like to thank our employees for their continued hard work and dedication over the year. And without whose efforts, none of this would be possible.

Speaker Change: The indicators in the context of what you think or should think that market will do and if that happens that will be a benefit to us.

Speaker Change: Okay. Thank you.

Speaker Change: No problem.

Speaker Change: Okay, we want to thank you all for you sorry.

Speaker Change: Sorry, we want to thank you all for your participation today.

Speaker Change: Sure we close the call I'd like to thank our employees for their continued hard work and dedication over the year and without who whose efforts. None of this would be obviously possible in closing we look forward to sharing further updates with you on our next call and with that I'll turn it back to the operator. Thank you. This concludes the Hertz Global Holdings' fourth quarter 2023.

Johann Rawlinson: In closing, we look forward to sharing further updates with you on our next call. And with that, I'll turn it back to the operator. Thank you. This concludes the Hertz Global Holdings fourth quarter 2023 earnings conference call. Thank you.

Speaker Change: <unk> conference call. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.