Q1 2024 Hertz Global Holdings Inc Earnings Call
Okay.
Operator: Welcome to Hertz Glo Hldg's first quarter 2024 earnings call. Currently, all lines are in listen-only mode.
Welcome to Hertz Global Holdings first quarter 2024 earnings call. Currently all lines are in a listen only mode. Following management's commentary, we will conduct a question and answer session I would like to remind you that this morning's call is being recorded by the company I would now like to turn the call over to a house Johan.
Operator: Following management's commentary, we will conduct a question-and-answer session. I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to our host, Johann Rawlinson, Vice President of Investor Relations.
Clinton Vice President of Investor Relations. Please go ahead.
Unnamed Hertz Executive: And this creates a powerful platform that positions our company well for the future. It starts with having the right fleet, so balancing short-term decisions with long-term implications to drive a better return on assets. This includes making sure that we have the right supply and demand balance of our fleet at the appropriate capital.
Johan Clinton: Good morning, everyone and thank you for joining us by now you should have all of 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 would like to remind you that certain statements made on this call.
Johan Clinton: All contain forward looking information.
Johan Clinton: Forward looking statements are not a guarantee of performance and by their nature are subject to inherent risks and uncertainties.
Unnamed Hertz Executive: We have a broad understanding of the driver's pressure and performance over the last few years. Anomalies supply events in the auto industry have impacted our business in various aspects of the P&L. But in the interim, these events have exposed other opportunities in the business beyond the acute EV impact.
Johan Clinton: <unk> results may differ materially.
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, including factors that could cause our actual results to differ is contained in our earnings press release.
Unnamed Hertz Executive: We depleted throughout the quarter, and by March, our core rental fleet was tighter, up only 2% year-over-year. We plan to maintain tighter as we move into the summer season, which we expect to correlate with improved RPD performance. Elevated cab costs are the consequence of a relative vehicle shortage and higher trim levels and MSRPs, which characterized recent vehicle purchases, inclusive of pre-owned vehicles.
Johan Clinton: And in the risk factors and forward looking statements section in the filings, we make with the Securities and Exchange Commission.
Johan Clinton: The filings are available on the Sec's website, and the Investor Relations section of the Hertz website.
Johan Clinton: 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 believe that these non-GAAP measures provide additional useful information about our operations, allowing beta evaluation of our profitability and performance.
Johan Clinton: Otherwise noted our discussion today focuses on our global business.
Unnamed Hertz Executive: With our recent vehicle purchases, we have more influence on make and model mix and trim and option configurations, which is bringing down our cap costs. Upon completion, we anticipate that the remaining EV fleet will be better aligned with attractive demand for EVs with a priority for our rideshare business. First, we are focused on the creation of profitable incremental revenue by growing rideshare and improving our European and value brand businesses.
Johan Clinton: On the call. This morning, we have killed waste, our recently appointed Chief Executive Officer, Alex Brooks, Our Chief Financial Officer, and Justin <unk>, Our Chief operating Officer. We're also joined by Darren Arrington.
Johan Clinton: Executive Vice President for revenue management and fleet.
Johan Clinton: I'll turn the call over to Gil.
Gil: Well, thanks, and good morning, and thank you all for joining the call today.
Gil: I want to acknowledge right up front that this was a challenging quarter for Hertz, we have a lot of work still to do and I'll get to that shortly but.
Gil: Since I'm new to most of you I want to take a few minutes to introduce myself before we dive into the numbers. So let me start by saying that I'm excited to be here.
Gil: And Theres a lot of reasons for that first this is a great company with an iconic brand Hertz invented the car rental business and has introduced many innovations over the years.
Unnamed Hertz Executive: Second, starting with our value brands, we are focused on improving both MPS and RPD. In Q1, we launched new digital tools that enable skip-the-counter, reducing wait times, and improving customer satisfaction. Additionally, we anticipated that Q1 would be a period where we ramped up our productivity cost benefit activities, resulting in $250 million of savings realized in 2024, which are realized through the year, but are back-end weighted. We are seeing momentum building on these efforts, and I believe we are on track to achieve our 2024 target.
Gil: I've been looking at the brand data and talking to customers and I'm struck by how many of them have been fiercely loyal to the brand and I've been one of those customers for a long time customer loyalty is the key to success in a business like ours I'll come back to that 0.2nd.
Gil: I'm deeply impressed by the hurts people I've met.
Gil: At the airport rental counters and are behind the scene operations and our call centers and at our headquarters here in a stair Oh, they are committed to the business and want to win they are full of good ideas and have a deep desire to serve our customers.
Gil: Third I see enormous potential for the company.
Gil: Hertz is.
Gil: Over 100 years of experience managing physical assets and operations at scale, we acquire nearly 20 million unique customers a year operate over 11000 global locations drive, 80% utilization of assets and have over half a million.
Unnamed Hertz Executive: Our March DOE per day was $35, 5% lower than the quarterly result and 2.5% lower than Q1 of 2023. We're in the final stages of contract negotiations for providers of our major commodity categories and anticipate productivity as we consolidate the spend. We continue to reduce the size of our EV fleet, resulting in lower operating costs, specifically with a reduction in transportation costs associated with remote charging. All cost areas are being assessed, and new opportunities are being added to the pipeline. Now, let me turn it over to Alex.
Gil: Nichols.
Gil: And this creates a powerful platform that positions our company well for the future fourth and this is personal but I love cars.
Speaker Change: I got my start in my father's Autoparts store when I was a kid I've repaired traded collected in race cars as a hobby my whole life. So leading a company. That's in the business of cars is a dream come true for me.
Speaker Change: As I've said at the beginning of the call. We have a lot of work to do so getting ahead of our challenges is what we owe our customers our people to our investors and I look forward to leading the team to make it happen.
Speaker Change: As I'm settling into my new role there are a number of key priorities I'm focused on.
Speaker Change: It starts with having the right fleet, so balancing short term decisions with long term implications to drive a better return on assets. This includes making sure that we have the right supply and demand balance of our fleet at the appropriate capital cost decisions around our fleet.
Alex: We recorded an adjusted corporate EBITDA loss of $567 million, which is disappointing and unacceptable. For the first quarter, DPU was $592, of which $119 was due to incremental vehicle depreciation expense related to the EVs held for sale. We recorded a charge of $195 million to recognize a fair value adjustment for EVs remaining in our inventory at quarter end and to recognize losses on those units sold. DPU excluding the EV charge of $473 is elevated due to a declining forward residual estimate. Taking a closer look at revenue, revenue per day of $56.68 followed typical sequential seasonal trends.
Speaker Change: Or based on return on assets and the discipline of fleeting inside the projected demand curve to ensure we achieve favorable revenue per day in revenue per unit performance, along with better managing our residual value risk next is delivering operational excellence, which is fun.
Speaker Change: The mental and leads to best in class unit cost and a superior customer experience and in turn higher unit revenues, we must leverage our products our fleet, our brands and our customer experience to keep customers coming back and delivering a value proposition, which commands a higher.
Speaker Change: We also must deliver on our operational cost and productivity initiatives that you heard about on our last call and I'm an operations Geek and have been for most of my career for me operational excellence is essential and execution is the key so in my prior life at the airline.
Alex: We believe this rate performance to be the consequence of intra-quarter seasonality and the tightening of supply. Volume for the quarter increased by 9% compared to 2023, driven by higher volume in leisure and ride share. Exiting the quarter, our RAC fleet was up 2% compared to the prior year, which demonstrates the deliberate action we took to adjust our fleet level. With respect to our balance sheet, net corporate debt at the end of the first quarter was $3.25 billion.
Speaker Change: Since I was part of the team that transformed the industry from leveraging operational excellence and our products to deliver a better customer experience and through that customer loyalty, we were able to deliver unit revenue premium to the industry and combined with our obsessive cost management achieved unprecedented profits.
Speaker Change: Ability, putting those same pieces together here at Hertz will unlock premium revenue and put us in control of our PD to drive growth profitability and value.
Speaker Change: While it's early days for me I'm eager to look further down the road at more ways Hertz can compete and win.
Speaker Change: But none of that is to take our eyes off the short term operational priorities.
Alex: While this places us above our long-term leverage ambition, we intend to delever over time as our operational initiatives yield improved profitability. I would remind you that our net corporate leverage ratio is not comparable with our first lien covenant ratio, which only applies to our first lien debt, comprised of $465 million of unrestricted cash and the balance available under the First Lean Revolving Credit Facility.
Speaker Change: Our quarterly results were unacceptable and reflected the impact of a decline in four rig residual values used to determine vehicle depreciation coupled with our EV rationalization and elevated cost structure and to go a step further while overall demand for travel remains strong.
Speaker Change: R. R. P D remains well above pre COVID-19 levels. Our revenue performance is not fully capturing the opportunities available to US. This is also immediate focus area for the team and as we've said previously 2024 will be a transition year for us the necessary work.
Alex: Training to our Cash Flow. Despite the challenging quarter behind us, I believe we are pointing in the right direction, and we have credible plans to achieve success. We're operating in a constructive travel environment with demand showing continued year-over-year growth. However, we will not add vehicles to the fleet simply because they are less expensive. Instead, we strive to stay within projected demand because we know that the value of the business is enhanced by a disciplined approach to fleet management.
Speaker Change: <unk> is already underway and I know hurts people wake up every morning eager to run the best operations possible to delight, our customers when their loyalty create value manage cost and win in the marketplace and that's why that's really why I'm energized to be here and thats.
Speaker Change: Why I'm, so optimistic I look forward to your questions later in the call, but first I want just to bring you up to speed on our delivery against our operational commitments and then Alex will do the numbers so Justin over to you.
Alexandra Dawn Brooks: Thank you Jill and good morning, everyone.
Alexandra Dawn Brooks: Revenue for the quarter was $2 $1 billion, and we recorded negative adjusted corporate EBITDA of $560 million heavily impacted by higher than usual depreciation expense and EV charges.
Alexandra Dawn Brooks: Alex will go deeper into Q1 financial performance.
Alex: A final comment. We have outlined the meaningful initiatives that are in place to improve the financial results of the company. As we work through the implementation of those initiatives, we will hold off on formal quarterly guidance. I'm going to hand it back to Gil for a closing remark before we go to Q&A. Thank you.
Justin: As Gil stated we have challenges to address.
Justin: We have a broad understanding of the drivers pressuring performance over the last few years anomalous supply events in the auto industry impacted our business in various aspects of the P&L.
Justin: Including elevated maintenance higher cost or collision and damage and most recently elevated vehicle depreciation.
Justin: Coming off a peak residuals and new vehicle purchase prices of 2022.
Gil: Thanks, Alex. Yeah, before we go to questions, I'd like to leave you with a view of what a transition year means for us. And it's about setting ourselves up for long-term success in 2025 and beyond. It's about being great at the basics.
Justin: Used car prices have decreased over the last 12 months and new vehicle cap costs are only recently moderating.
Justin: We expect this moderation to continue and that the elevated P&L impacts will subside.
Justin: But in the interim these events exposed to other opportunities in the business beyond the acute EV impacts, which we are addressing with a concerted focus on rotating the flicks the fleet mix towards lower mileage and lower cat vehicles, which will have a direct positive impact on reducing vehicle depreciation and Doa.
Gil: So operational excellence, customer service, and using that as a springboard for productivity and revenue growth. This is also the year of growing premium revenue, getting dollar and thrifty on RPD and MPS parity with the marketplace, and creating a unit cost advantage. Lastly, it's about using technology and leveraging it as an enabler for all the things I just mentioned. Staying focused and executing on these things throughout the year positions Hertz for success going forward.
Speaker Change: On that note, let me share a few updates on our fleet and strategic initiatives prior to providing a status on our productivity progress.
Speaker Change: Starting with our fleet.
Speaker Change: As discussed in our Q4 earnings call, we enter January at an elevated level and.
Speaker Change: For the quarter, our global average fleet was up 9% year over year.
Speaker Change: We depleted throughout the quarter and by March our core rental fleet was tighter up only 2% year over year, we plan to maintain tighter as we move into the summer season, which we expect to correlate with improved RPT performance, coupled with easier year over year compares.
Gil: I'm energized to be leading Hertz. We know we have big opportunities, and we're attacking them in order to drive unit economic improvements for RPD, DOE per day, and DPU. As an operator, I'm going to be obsessed with execution as we move forward. So with that, let's open up the call for Q&A.
Speaker Change: Looking at the composition of our fleet, we are addressing the mix to lower the average cap cost and reduce the tail higher mileage vehicles.
Speaker Change: Elevated cap costs are the consequence of a relative vehicles shortage and higher trim levels, and msrp's, which characterize recent vehicle purchases inclusive of pre owned vehicles.
Speaker Change: As we refresh the fleet the cost an age profile is expected to reduce with corresponding improvements in vehicle depreciation and Doa.
Operator: We will now open up the lines for questions. Please limit your questions to one per speaker and one follow-up, if needed. To ask a question, please dial star 1 1 on your phone. If you wish to cancel your question, please dial star 1 1 again.
Speaker Change: With our recent vehicle purchases, we are having more influence on make and model mix and trim and option configurations, which is bringing down our cap costs.
Speaker Change: We expect this trend to continue and will continue to manage this critical input in line with our ROI focused approach to our vehicle purchase decisions.
Speaker Change: Within our rack fleet, we expect to reduce vehicles with higher mileage by 75% and complete the rotation out of pre owned vehicles by early 2025.
Chris: Hey, good morning, everyone. And Gil, welcome. Welcome to the company.
Gil: Okay, well, first, thanks for the welcome, Chris, and the questions. So, yeah, I, you know, first of all, I see a lot of potential for Hertz. And, you know, I think we've got to stay focused on unit economics for the business. So there are many inputs, of course, but the combination of the vehicle depreciation rate, unit cost, and unit revenues is the most influential on our earnings. So as we're sitting here, our DPU is over $400, our DOE per day is at $37, and our RPD is at $57, which is not where we want to be for our business.
Speaker Change: This fleet refresh is expected to result in lower vehicle depreciation lower direct operating expenses and deliver an improved customer experience.
Speaker Change: Turning to Evs.
Speaker Change: We previously announced our plan to reduce the EV fleet by 20000 units and by the end of Q1, we sold about half of them.
Speaker Change: Given this progress we increase the EV disposal plan by another 10000 units, bringing the combined reduction to 30000 vehicles, which we expect to complete by the end of the year.
Speaker Change: Upon completion, we anticipate that the remaining EV fleet will be better aligned with attractive demand for evs with a priority on a rideshare business alley.
Speaker Change: Alex will discuss the impact of these sales during the financial overview.
Alexandra Dawn Brooks: Now, let me transition to our profitability initiatives.
Alexandra Dawn Brooks: To Echo Gill our profitability initiatives are designed to improve unit economics to revenue as well as costs with an opportunity to generate an incremental $500 million of adjusted corporate EBITDA.
Gil: So, you know, we're highly focused on our operations and our customer experience and products, along with our go-to-market approach and our fleet management to achieve a more sustainable combination of these inputs. So we want to create a business that's resilient and can be successful in a wide range of macro and other economic scenarios.
Alexandra Dawn Brooks: They fall into three categories.
Alexandra Dawn Brooks: First.
Alexandra Dawn Brooks: We are focused on the creation of profitable incremental revenue by growing rideshare, and improving our European and value brand businesses.
Alexandra Dawn Brooks: Second.
Alexandra Dawn Brooks: Yield enhancement on existing assets.
Alexandra Dawn Brooks: These are initiatives designed to improve the yield on our core business and the assets deployed against it through a focus on improved revenue management.
Gil: And the best way to do that is to optimize our unit economics. So, and the way I'm looking at it is, And of course, I preface it by saying I've been here a little over three weeks, but the way I'm looking at it is, you know, RPD and DOE per day have the ability to improve faster than DPU. So even though residual values and vehicle prices can normalize quickly, as we've been seeing recently, DPU ultimately requires a fleet rotation, and then that's a function of our whole period, so timing is just naturally going to lag.
Alexandra Dawn Brooks: And third our relentless focus on productivity and cost, reducing both direct operating cost and SG&A.
Alexandra Dawn Brooks: Overall of the $500 million in recurring adjusted corporate EBITDA improvement, we expect expect approximately two thirds to be cost driven and one third to be revenue driven.
Alexandra Dawn Brooks: I will briefly highlight some of the progress on our revenue activities before going deeper into costs.
Alexandra Dawn Brooks: Starting with our value brands, we are focused on improving both NPS and RPT.
Alexandra Dawn Brooks: In Q1, we launched new digital tools that enable skip the counter reducing wait times and improving customer satisfaction.
Alexandra Dawn Brooks: We plan to roll this capability out to our top airports prior to peak season.
Gil: So from everything I've seen so far, and as I think about the business longer term, I think we've got to work towards kind of the following North Stars. So we've got to be able to pass through inflation and other cost pressures and revenue, so pushing RPD into the low 60s. And then, you know, as our fleet plan changes, start to land, as we've discussed, DPU reduces to the low 300s.
Alexandra Dawn Brooks: Direct booking momentum is building on our dollar dot com website and recently, we launched a non refundable prepaid booking option, which is gaining traction by our customers.
Alexandra Dawn Brooks: Our Q1 expansion of dollar Thrifty brands to our North America off Airport network is also showing promise and offers adjacent complementary growth beyond our airport locations.
Alexandra Dawn Brooks: Turning to our rideshare business, we are well positioned and I am pleased to report that we renewed our partnerships with both Uber and Lyft.
Alexandra Dawn Brooks: Rideshare presents an attractive demand for both Ev's and ice vehicles and offers an adjacent growth opportunity lessening the impact of seasonality in the core rack business.
Gil: And with the productivity initiatives that Justin updated us on, DOE per day should reach the low 30s. So, I mean, these are attractive unit economics that produce financial outcomes that are far better than where we sit today. So we've got to pull all the levers, you know, to achieve these metrics over time, of course. And we've got to be disciplined around the fleet and prioritize rate. And then I also think we've just got to run leaner and continue to improve utilization.
Alexandra Dawn Brooks: With revenue management, we saw double digit year over year improvements of our vas or value added services revenue through enhanced offerings with a focus on selling upgrades.
Alexandra Dawn Brooks: We expect that further innovation within our vast product offerings to be a tailwind going forward.
Alexandra Dawn Brooks: Lastly, we launched our Hertz dollar brands and T. Mobile's Magenta status program, and we re leased and renewed our long standing strategic relationships with air, France, KLM group and Marriott.
Alexandra Dawn Brooks: We're also excited about our expanding relationship with signature aviation and the private aviation space.
Gil: We've got to better align our fleet mix with core demand and, of course, grow retail vehicle sales through, I mean, one, our footprint, but the partnerships that we have. And beyond that, you know, I see additional growth opportunities beyond our core rack business, but we've got to stay focused, you know, on the basics first. So thank you.
Alexandra Dawn Brooks: Shifting to operating costs direct operating expense or <unk> <unk> per transaction day was $37 eight in the first quarter flat versus Q4, despite seasonally reduced transaction volume and inflationary pressures.
Alexandra Dawn Brooks: We anticipated that Q1 would be a period, where we ramped up our productivity cost benefit activities, resulting in a $250 million of savings realized in 2024, which are realized through the year, but our back end weighted.
Chris: Okay, thanks. Thanks, Gil. Very, very helpful.
Speaker Change: So where are we on the productivity cost benefit journey.
Chris: And then a follow up, and it might be maybe it's a little bit more for Justin or Darren, since it's a little more detailed on fleet, which is, you know, trying to square the, I think, the commentary that you exited March up 2% on fleet. I mean, if you're trying to grow the fleet less than demand, I mean, how should we look at that over the balance of the year at a high level?
Alexandra Dawn Brooks: We are seeing momentum building on these efforts and I believe we are on track to achieve our 2024 targets.
Alexandra Dawn Brooks: We have detailed action plans, our governance process and are in full execution mode.
Alexandra Dawn Brooks: During March we saw progress on these cost items and our D. O per day showed sequential monthly improvement.
Alexandra Dawn Brooks: Our margin per day was $35, 5% lower than the quarterly result, and two 5% lower than Q1 of 2023.
Chris: I mean, is there going to be less, you know, it almost implies like you would grow demand that you would have demand less than 2% just trying to square and then on the fleet, really, just how do you get there? You know, how do you get there?
Alexandra Dawn Brooks: I foresee the run rates on the actions initiated so far will account for more than half of our annual target.
Alexandra Dawn Brooks: But we are far from done and expect accelerating momentum into the second half.
Alexandra Dawn Brooks: To share some examples of progress across the business.
Alexandra Dawn Brooks: We have taken head count actions and reduced third party spend with line of sight to $100 million year over year improvement in.
Alexandra Dawn Brooks: In Q1, we closed a 125 underperforming locations.
Chris: If you're selling EVs, how many more? I guess ice cars? Is it a one for one, refresh, or, you know, any kind of color we could get on that just kind of square how you see the utilization playing out over the balance of the year. Thanks. Sure is it.
Alexandra Dawn Brooks: We are in the final stages of contract negotiation for providers of major commodity categories and anticipate productivity as we consolidate the spend.
Alexandra Dawn Brooks: We continue to reduce the size of our EV fleet, resulting in lower operating cost specifically with a reduction of transportation of costs associated with remote charging.
Darren: Sure. So, this is Darren.
Darren: Thanks, Chris. So you've got it right on the fleet. You know, we exited the quarter with our core fleet up only 2%, which we feel like we made really good progress through the quarter to get that fleet under control. You can expect that we will keep that tight and underneath what the indications are as to where travel is. We see travel indicators, including data from the airlines and ticketing data on advance bookings that are up in the mid-single digit range.
Alexandra Dawn Brooks: We rolled out enhanced workforce management tools to our top airports tightening our third party and over time by nearly 400 Ftes in North America.
Alexandra Dawn Brooks: Well damage collision are showing inflationary headwinds we are mitigating full impacts through digital vehicle incident reports and counter collections and we expect to start seeing benefits of the EV fleet and overall fleet rotation as we head into the second half.
Alexandra Dawn Brooks: All cost areas are being assessed and new opportunities are being added to the pipeline.
Alexandra Dawn Brooks: With March productivity exit rates, providing a good baseline to build from.
Darren: And you can expect that our fleet plans right now have a similar gap in terms of our growth relative to that as we go through the peak here. So we believe it's very important to keep the fleet well underneath where the demand's at. And that's going to give us the best chance to work our mix optimally so that we can get good yielding opportunities. And also, what I'd say, you know, on the fleet. You ask, how do we get there?
Alexandra Dawn Brooks: The entire organization has mobilized both on revenue and productivity to deliver improved profitability.
Alexandra Dawn Brooks: Now, let me turn it over to Alex.
Alexandra Dawn Brooks: Thank you Justin and good morning, everyone revenue for the quarter with $2 1 billion slightly up year over year, driven by an increase in volume we recorded an adjusted corporate EBITDA loss of $567 million, which is disappointing and unacceptable.
Alexandra Dawn Brooks: Although we continue to be impacted by elevated costs, which Justin covered the key driver of the loss is the increased vehicle depreciation which has increased $588 million year over year.
Darren: We're selling EVs. Are we replacing them one for one? We're not replacing them one for one as we take them out of the fleet. We realized lower utilization than what we really want to be at on the EV fleet that we have. And so as we think about the rotation of EVs out of the fleet, which were producing lower utilization, and replacing that with an ICE car, which we believe will run higher utilization on, we do not need to replace them one for one. We also receive a cap cost benefit from doing that as the prevailing cap costs on EVs are higher than what they would be on a replacement ICE car.
Alexandra Dawn Brooks: For the first quarter PPE with $592.
Alexandra Dawn Brooks: Which $119 with due to incremental vehicle depreciation expense related to the EV as held for sale.
Alexandra Dawn Brooks: We recorded a charge of $195 million to recognize a fair value adjustment for Evs remaining in our inventory at quarter end and to recognize losses on those units sold.
Alexandra Dawn Brooks: <unk>, excluding the <unk> charge of $473 is elevated due to declining alright, great. Thank you well estimates.
Alexandra Dawn Brooks: Taking a closer look at revenue revenue per day of $56 68.
Alexandra Dawn Brooks: Followed typical sequential seasonal trends the year over year decline narrowed as we moved through the quarter January RPT was down 10%, while March was down only 3% year over year and we see the March trends continuing through April.
Chris: Okay, very helpful. Thanks, guys. Thank you.
Operator: Thank you. One moment for our next question, and our next question will go to the line of Ian Zaffino from Oppenheimer. Your line is open.
Alexandra Dawn Brooks: We believe this rate performance to be the consequence of intra quarter seasonality and the tightening of supply.
Ian Alton Zaffino: I agree, Darren. Thank you very much.
Alexandra Dawn Brooks: Volume for the quarter increased by 9% compared to 2023, driven by higher volume and leisure and rideshare.
Ian Alton Zaffino: Let's go, let's ask you another question here, since you've been here for so long. But, you know, I guess, as the new CEO, you know, what are you going to be prioritizing as investors and analysts, you know, any type of major changes or shifts in strategy we should expect? You know, I know there was some talk in public comment about, you know, premium. What does that mean? How do you get there? What does it take to do that? Yeah, thanks.
Alexandra Dawn Brooks: Exiting the quarter, Iraq fleet was up 2% compared to the prior year, which demonstrates the deliberate action, we took to adjust our fleet level.
Alexandra Dawn Brooks: Fleet tightness improved month over month, as we systematically dispose of excess vehicles that we carried into the quarter.
Alexandra Dawn Brooks: As a result of early over fleeting in the quarter utilization was down 120 basis points year over year.
Alexandra Dawn Brooks: Overall for the quarter, our adjusted corporate EBITDA reflected elevated vehicle depreciation, which was further burdened by the nonrecurring charges and an elevated cost structure that does not yet include the benefit of our various cost initiatives.
Gil: Yeah, thanks, Ian. You were breaking up a bit.
Gil: But as I understood the question, really around priorities and strategies kind of as I come in. So, I'll talk about that a bit. I think, I mean, the focus I'm driving really starts with being what I would call great at the basics. So it's about operational excellence and customer experience. And then those two things really, again, unlock the unit cost and premium revenue opportunities. So we'll have a renewed focus on just rebuilding the foundation. Right. And that never ends.
Alexandra Dawn Brooks: In particular, the natural rotation of our fleet expected to occur fully over the next 18 to 24 months will allow us to materially reduce vehicle cap costs and better match vehicle type to demand.
Alexandra Dawn Brooks: Its rotation will drive a decrease in <unk> to the low three hundreds and a corresponding reduction to collision and damage expense as well as maintenance as well as maintenance expenses, both of which burdened DLA.
Alexandra Dawn Brooks: Turning to our capital structure and liquidity with respect to our balance sheet net corporate debt at the end of the first quarter with $3 billion to $5 billion. While this places us above our long term leverage ambition, we intend to de lever over time as our operational initiatives yield improved profitability I would remind you that.
Alexandra Dawn Brooks: Our net corporate leverage ratio with not comparable with our first lien covenant ratio, which only applies to our first lien debt and.
Gil: From my perspective, we can always do better and better and better and never be satisfied. And then I think there are the three pieces that we've touched on, but it's probably worth just reiterating them again. Fleet
Alexandra Dawn Brooks: In terms of the first lien debt earlier this week, we announced an amendment to the financial maintenance covenants in our credit agreement for the first lien revolving credit facility to temporarily increased our consolidated first lien leverage ratios, we took the opportunity to create additional operating flexibility for the company as we work through the fleet rotation and.
Gil: First of all, and to me, again, it's moving it from a headwind to a really competitive advantage. So, you know, we got to rotate out of our inflated vehicle cap costs, but do that in an orderly fashion, as the market normalizes and continues to move from what was a seller's market during COVID to a buyer's market. And, you know, rationalized our EV fleet, but then we also need to continue to work on the demand side of that and improve our product market fit.
Alexandra Dawn Brooks: Improved profitability initiatives.
Alexandra Dawn Brooks: Our available liquidity at March 31 was $1 $3 billion.
Alexandra Dawn Brooks: Comprised of $465 million of unrestricted cash and the balance available under the first lien revolving credit facility.
Alexandra Dawn Brooks: At March 31, we had $2 $7 billion of capacity under our vehicle debt facilities globally with a portfolio that with approximately 70% fixed rate.
Alexandra Dawn Brooks: We maintained sufficient equity cushion in our global ABS facilities.
Alexandra Dawn Brooks: Earlier this month, we extended the maturity on our $3 8 billion dollar U S. ABF variable funding note facility from June 2025 to April 2026, we believe we have sufficient liquidity to execute the fleet refresh discussed earlier.
Gil: So, we're, as Darren alluded to, we've got to optimize our EV allocations really into the right segment. So, we're fortunate, and we'll optimize those in terms of the ride-hail business, off-airport operations, and then the airport, really in that order.
Alexandra Dawn Brooks: Turning to our cash flow.
Alexandra Dawn Brooks: Adjusted free cash flow for the quarter with an outflow of $729 million, although the first quarter is seasonally a negative cash flow quarter. The size of the outflow was driven by the quarterly results.
Gil: And then, you know, we've got to continue to optimize our fleet mix more in line with the core customer demand as we rotate out the fleet. And then there are big opportunities to keep growing our retail sales channels. And as we're experiencing now, we've just got to mitigate our residual value risk as we go forward. So that's that.
Speaker Change: Despite the challenging quarter behind Us I believe we are pointing in the right direction and we have credible plans to achieve success, we're operating in a constructive travel environment with demand showing continued year over year growth, we will not add vehicles to the fleet simply because they are less expensive instead, we strive to stay inside projected demand.
Gil: Revenue, again, we just got to up our game in revenue management and grow premium revenues. So that starts, again, with the customer experience, so we can create that differentiated sticky customer experience. And then we just, we've also got to really elevate our RM tools and tech talent as needed. And then, as we talked about, we have got to elevate the value brands and dollar thrifty experience in that promoter score and achieve RPD parity with the marketplace.
Speaker Change: We know that the value of the business is enhanced by a disciplined approach to fleet management.
Speaker Change: A final comment.
Speaker Change: We have outlined the meaningful initiatives that are in place to improve the financial results of the company as we work through the implementation of those initiatives, we will hold off on formal quarterly guidance I'm going to hand back to Gill for closing remarks before we go to Q&A.
Gill: Thanks, Alex Yes, before we go to questions I'd like to leave you with a view of what a transition year means for us and it's about setting ourselves up for long term success and 2025 and beyond it's about being great at the basics, so operational excellence customer service.
Gill: And using that as a springboard for productivity and revenue growth.
Gill: We're setting up the fleet to move GPU.
Gil: It's a really big opportunity for us. We'll keep driving profitable growth and ride hail. We'll keep driving growth in international, in particular, in the EU, with Elias's leadership and then keep growing our value-added services. And then, of course, finally, costs. And as I mentioned earlier, you know, we've got to run excellent operations, continue to do that, and never be satisfied there. And then, you know, that really drives productivity. And then we've got, as Justin went through, an extensive and growing list of initiatives, and we got to keep accelerating those. And with me coming in, it's another set of fresh eyes.
Gill: <unk> being a headwind to a tailwind by rotating the fleet lowering vehicle cap cost optimizing fleet mix and increasing retail sales and mitigating residual value risk. This is also the year of growing premium revenue getting dollar and thrifty on RP.
Gill: And NPS parity with the marketplace and creating a unit cost advantage lastly, it's about using technology and leveraging it as an enabler for all of the things I just mentioned staying focused and executing on these things throughout the year positions Hertz for <unk>.
Speaker Change: Success going forward Im energized to be leading Hertz, we know we have big opportunities and we're attacking them in order to drive the unit economic improvements for our PD Doa per day and D. P U.
Speaker Change: As an operator I'm going to be obsessed with execution as we move forward so with that let's open up the call for Q&A.
Speaker Change: Well now open up the lines for questions. Please limit yourself. Please limit your questions to one question for speaker and one follow up if needed.
Gil: You know, I've seen a number of new opportunities that we're adding to the list. And then, of course, we have to leverage our tech as an enabler for those. The fleet rotation, too, will give us a tailwind on the direct operating costs that we need to take advantage of. And then we've got to also exploit our supply chain management; we've got $3 billion of spend there. So it is a big opportunity to go after.
Speaker Change: Ask a question. Please star one one on your phone.
Speaker Change: Wish to cancel your question. Please star one again.
Speaker Change: One moment for our first question.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: And our first question on coffee, Chris or rocker from Deutsche Bank. Your line is open.
Chris: Hey, good morning, everyone.
Chris: Youre welcome welcome to the company.
Gil: And I mean, the way I would sum up the cost piece up is that I'm a unit cost fanatic. You know, so I think we need to create a competitive cost advantage here and have the opportunity to do it. We've got to always look, I mean, there are always factors that we can control and those we can't, at least in the short run. I think you can control virtually anything over the long term. But we've obviously got to prioritize our focus around the factors more in our control, and cost is the variable we can control the most.
Chris: Yes look I know it is rough quarter and Gil Youre very near to CE <unk> been there I guess all over a month, but I wanted to start off with just kind of maybe you can give us a general overview of kind of where you see this business growing and if you want to draw parallels to the airline business or something else, but just your.
Speaker Change: Higher level views.
Speaker Change: Where this business can get to you that I have a follow up.
Gil: Okay, well first thanks for the welcome Chris in the questions. So yes.
Gil: First I see a lot of potential for Hertz.
Gil: I.
Speaker Change: I think we've got to stay focused on unit economics for the business. So there are many inputs of course.
Speaker Change: But the combination of the vehicle depreciation rate unit cost and unit revenues are the most influential oh.
Gil: So I'm confident we can bend that curve. But you know, everything comes down to execution. And you know that that really is a key part of my priorities, that we execute strongly here, and we over index there.
Speaker Change: On our earnings so.
Speaker Change: As we're sitting here right or D. <unk> is over $400 or D. O E per day is at 37, and our RP D at 57.
Speaker Change: Is not where we want to be for our business. So yes, we are.
Speaker Change: Highly focused on our operations and our customer experience and products along with our go to market approach and our fleet management to achieve more.
Ian Alton Zaffino: Okay, great. That was very helpful.
Ian Alton Zaffino: And then, you know, can you guys just maybe briefly talk about, you know, what you're seeing of ICE versus EV performance, maybe from a depreciation perspective, you know, direct optics, and how are they kind of tracking with each other? Are they not? And then, you know, as far as the divestiture of the incremental 10,000 vehicles, what kind of precipitate is that? Is it a more liquid market than you thought? Are you getting higher prices than expected? And maybe help us understand what's driving that? Thank you.
Speaker Change: Sustainable combination of the input so we want to create a business that's resilient and can be successful in a wide range of macro and other economic scenarios and the best way to do that is to optimize our unit economics. So.
Speaker Change: And the way I'm looking at it is.
Speaker Change: Of course, I'll preface it by Ben here, a little over three weeks, but the way I'm looking at it is art.
Speaker Change: D M D O per day have the ability to improve faster than <unk>, so even though the residual values in new vehicle prices can normalize quickly as we've been seeing recently.
Speaker Change: D. P. You ultimately requires a fleet rotation and then that's a function of our whole period so timing.
Speaker Change: Just naturally going to lag so.
Speaker Change: From everything I've seen so far and as I think about the business longer term I think we got to work towards kind of the following north star. So.
Alex: So why don't I, this is Alex, why don't I kick off with the question on ice versus EV residuals, and then we'll kind of tag team here and kick it over to Justin. So we did see EV residuals declining at a more severe rate than ICE vehicles during the quarter. And I think you saw that in the adjustments we made to the EVs held for sale. So we recognized a loss on the EVs that were disposed of during the quarter relative to what we marked them at at the end of the year.
Speaker Change: We've got to be able to pass through inflation and other cost pressures in revenue so pushing our PD.
Speaker Change: Into the low sixties.
Speaker Change: And then.
Speaker Change: As our fleet plan changes.
Speaker Change: Start to land as we've discussed.
Speaker Change: <unk> reduces to the low three hundreds.
Speaker Change: And with the product activity initiatives that Justin updated us on D O per day should reach the low thirty's. So I mean.
Speaker Change: These are attractive unit economics, it produce financial outcomes that are far better than where we sit today. So we've got to pull all the levers to achieve these metrics over time of course, and we've got to be disciplined around fleet and prioritize right.
Speaker Change: And I also think we've just got to run leaner.
Alex: And we also had to recognize a mark to market loss on the EVs that we were holding in inventory. The combination of those was about $81 million, and it was counted as a foreign depreciation expense for the quarter.
Speaker Change: And continue to improve utilization, yes, we've got a better align our fleet mix with a core demand.
Speaker Change: Of course grow our retail vehicle sales.
Speaker Change: Through one our footprint, but the partnerships that we have and beyond that and I see additional growth opportunities beyond our core rack business, but we've got to stay focused.
Speaker Change: On the basics first so thank you.
Alex: So that's the impact you see there. And of course, we would have, you know, made appropriate adjustments to the EV fleet that is part of our regular fleet and not held for inventory as we look at forward residuals. With that, I'll turn it over to Justin to comment on the movement of the 10,000 vehicles. Thanks. Thanks, Alex.
Speaker Change: Okay. Thanks, Thanks scale very very helpful. And then a follow up and it might be maybe it's a little bit more for Justin or Darren.
Speaker Change: A little more detailed on fleet related which is China.
Speaker Change: Trying to square the I think the commentary that you exited March up 2% on fleet.
Speaker Change: I mean is youre trying to grow fleet.
Speaker Change: Less than demand I mean, how should we look at that over the balance of the year at a high level I mean is there going to be less.
Speaker Change: It almost implies like you would grow demand that you would have demand less than 2% just trying to square and then on the fleet really just how do you get.
Justin: So, first of all, I'd like to say that we are about providing our customers with choice, and we do see attractive demand for EVs. You know, natural markets are the ride share, which continues to grow and is up over 50% year over year from a quarterly basis. And also, on the off airport as well as airport, we do see demand. That said, our mantra has been the ROA mindset and keeping supply inside of demand.
Speaker Change: How do you get there if youre, if youre selling evs, how many more I guess ice cars is it a one for one.
Speaker Change: <unk> or any kind of color, we could get on that just kind of square how you see the utilization playing out over the balance of the year. Thanks.
Speaker Change: Sure. So this is darin thanks, Chris So you've got it right on the fleet, we exited the quarter with our core fleet up only 2%, which we feel like we've made really good progress through the quarter to get that fleet under control you can expect that we will keep that tight and underneath what the indications are at.
Justin: And we're moving forward with the further right sizing, the incremental 10,000, bringing the total population of EVs that are being looked at to sell to 30,000. And kind of the decision point is why we have sold about 10,000, which puts us on track to certainly meet the 12 month hold for sale period and continue with that momentum.
Speaker Change: As to where travel as we see travel indicators, including data from the airlines and ticketing data on the advance that are up in the mid single digit range.
Speaker Change: And you can expect that our fleet plans right now have a similar gap.
Speaker Change: In terms of our growth relative to that as we go through the peak here. So we believe it's very important to keep the fleet well underneath where the demands and that's going to give us the best chance to work our mix optimally. So that we can get good yielding opportunities. We also what I'd say.
Justin: And as we right-size this EV fleet, we expect a couple of things. First, it'll be better aligned with demand, which we expect to improve both utilization as well as RPD as we align it with customers that are seeking out EVs. And also, it's going to eliminate a portion of collisions with renters that are not familiar with the operations of driving a new EV who otherwise would have chosen to take an ICE vehicle, but unfortunately, they were needing to take an EV based on the fleet mix.
Speaker Change: On the fleet you ask how do we get there we are selling evs are we replacing them one for one or not.
Speaker Change: Replacing them one for one as we take them out of the fleet.
Speaker Change: We realized lower utilization than what we really want to be yet on the EV fleet that we have and so as we think about.
Speaker Change: The rotation of Evs out of the fleet, which were producing lower utilization and replacing that with an ice car, which we believe will run higher utilization on we do not need to replace them. One for one we also receive a cap cost benefit from doing that as a prevailing cap at costs on evs are higher.
Justin: So, you know, again, with the benefit from the reduction of fleet carrying costs, the lower operating costs also are with maintenance and transport. If you think about things with remote charging, we see a combination of benefits by further taking down an additional 10,000 that will right-size demand with our supply. Thanks.
Speaker Change: Then what they would be on a replacement ice car.
Speaker Change: So.
Speaker Change: Okay very helpful. Thanks, guys.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question will come from the line of Ian Zaffino from Oppenheimer. Your line is open.
Ian Alton Zaffino: Well, thank you very much.
Ian Alton Zaffino: Okay.
Ian Alton Zaffino: One more question here.
John Plimpton Babcock: Thank you. Thank you very much. Thank you. One moment for our next question. Our next question will come from John Babcock from Bank of America. Your line is open.
Ian Alton Zaffino: Since you've been there for so long.
Ian Alton Zaffino: Uh huh.
Ian Alton Zaffino: Yes.
Ian Alton Zaffino: Oh.
Ian Alton Zaffino: <unk>.
Ian Alton Zaffino: What we will be prioritizing.
Ian Alton Zaffino: As investors and analysts.
Ian Alton Zaffino: Major changes or shifts in strategy, we should expect one level and talk on the comment about.
Ian Alton Zaffino: Morning.
Ian Alton Zaffino: What does that mean.
Ian Alton Zaffino: What is it.
Speaker Change: And then I will follow up.
Speaker Change: Yeah. Thanks, Ian you were breaking up a bit but as I understood. The question.
Speaker Change: Really around priorities and strategies kind of as I come in so I'll talk about that a bit I think.
Speaker Change: I mean, the focus on driving really starts with being what I would call a great at the basics. So it's about operational excellence and customer experience and then those two things really again unlock the unit cost and premium revenue opportunities. So.
John Plimpton Babcock: Good morning, and thanks for taking my questions. Um, you know, I guess, you know, my first question is just on the liquidity front. You know, I mean, we've gotten a lot of questions from investors on this, and I was wondering, first of all, if you could just talk about what tools you have to boost liquidity, that would be useful. And then also, you know, just generally how you're thinking about it, particularly in line with refreshing a fleet, you know, and how you'll execute on that, and whether that potentially entails, you know, reducing a fleet. You did talk about keeping supply below demand. So maybe that's the answer. But I think you should just talk broadly about that and how you guide investors, that would be great.
Speaker Change: We'll have a renewed focus on just rebuilding the foundation right and that never ends from my perspective, we can always do better and better and better and never be satisfied.
Speaker Change: And then I think there is the three pieces that we've touched on but it's probably worth just reiterating or began.
Speaker Change: Fleet.
Speaker Change: First of all and it's to me again, it's moving it from a headwind to really a competitive advantage. So.
Speaker Change: We got to rotate out over inflated vehicle cap costs, but do that in an orderly fashion as the market normalizes and continues to move from what was a seller's market during COVID-19 to a buyers market.
Speaker Change: And.
Speaker Change: Rationalized, our EV fleet, but then we also need to continue to work on the demand side of that and improve our product market fit.
Speaker Change: Uh huh.
Speaker Change: <unk>.
Speaker Change: As Darren alluded to we've got to optimize our EEV allocations.
Speaker Change: It really into the right segments. So were fortunate and we will optimize those in terms of ride hail business off Airport operations, and then airport real.
Alex: Yeah, John, this is Alex. Thanks for the question. I said it in my prepared remarks, but it's worth repeating that we believe we have sufficient liquidity to complete the refresh as we have planned for it. So, let me, you know, just put that out there.
Speaker Change: Really in that order.
Speaker Change: And then.
Speaker Change: We've got to continue to optimize our fleet mix more in line with our core customer demand as we rotate out the fleet and then Theres big opportunities to keep growing our retail sales channels and as were experiencing now we've just got to mitigate our residual value risk as we go forward. So that's a first bag.
Alex: In terms of our tools to manage liquidity, you're absolutely right in pointing to our fleet management as being the most pervasive tool we have. So we do have a plan for fleet rotation that includes, you know, deleting some of our higher cap cost vehicles that enables us to purchase new vehicles come in at a lower cap cost. When we do that, you know, that actually improves our liquidity because the debt that we take on during that will be less than the debt we have outstanding now on these higher-capital-cost vehicles. So that rotation improves liquidity. And we have a line of sight to, you know, what we need to do for the end of this year and maintain sufficient liquidity.
Speaker Change: One.
Speaker Change: Revenue again.
Speaker Change: We just got to up our game in revenue management and grow premium revenues.
Speaker Change: That starts again with a customer experience. So we can create that differentiated sticky customer experience and then we've just we've also got to elevate our really elevate our RM tools tag talent as needed.
Speaker Change: And then as we talked about we've got we got to elevate the value brands of dollar thrifty.
Speaker Change: Experienced net promoter score and achieve our PV parity with the marketplace, It's a really big opportunity for us.
Speaker Change: We will keep driving profitable growth in ride hail will keep driving growth in international in particular in the EU with Les's leadership in and keep growing our value added services and then of course finally cost.
Speaker Change: And as I mentioned earlier.
Speaker Change: We've got to run excellent operations continue to do that and never be satisfied there and then you know.
Speaker Change: And that really drives productivity.
Speaker Change: And then we've got as Justin went through an extensive and growing list of initiatives and we got to keep accelerating those.
Speaker Change: Me coming in it's another set of fresh eyes.
John Plimpton Babcock: Gotcha. And then the next question, you know, and I know you're not providing any sort of quarterly guidance, but I was wondering if you might be able to provide some, um, either qualitative or, ideally, quantitative, but ideally, but, at least, qualitative guidance on how we should think about, uh, fleet costs over the year. Um, you know, because it's very unpredictable from quarter to quarter, as we've seen, particularly in light of the decline in used prices.
Speaker Change: So I've seen a number of new opportunities that we're adding to the list and then of course, we got to leverage our Tac as an enabler for those the fleet rotation two will give us a.
Speaker Change: Tailwind on the direct operating cost that we need to take advantage of and then we've got to also exploit our supply chain management, we've got $3 billion of spend there so big opportunity to go after it.
Speaker Change: And I mean, the way I would sum the cost piece up is.
Speaker Change: I am a unit cost fanatic.
Speaker Change: So I think we need to create a competitive cost advantage here and have the opportunity to do it.
Speaker Change: We've got always.
Speaker Change: Look I mean, there's always factors that we can control and those we can at least in the short run I think you can control virtually anything over the long term.
John Plimpton Babcock: So any sort of color you could provide on that, um, you know, whether it's going to go up, whether it's going to go down, or if there are certain factors we should be paying attention to to get more color on that, that would be helpful.
Speaker Change: But we.
Speaker Change: Obviously got a prioritize our focus around the factors more in our control and cost is the variable we can control. The most so I'm confident we can bend that.
Alex: Yeah, I think you know, Darren's comments around where we expect fleet size to be relative to overall demand and how we're running a tight fleet should provide an overview of what we expect to happen just with the size of our fleet. So taking into account the size of our fleet, and as I mentioned, rotating out higher cap cost vehicles and replacing those with lower cap cost vehicles, we expect the expenditures on the fleet to be relatively stable through the end of the year.
Speaker Change: Curve, but you know.
Speaker Change: Everything comes down to execution and that really is a key part of my priorities is that we execute.
Speaker Change: <unk> here and we over index there so thank you.
Speaker Change: Okay, Great that's very helpful and then.
Speaker Change: Can you guys just maybe briefly talk about.
Speaker Change: What youre seeing.
Speaker Change: This versus the performance maybe.
Speaker Change: From a depreciation perspective direct opex and how are they kind of tracking with each other or are they not.
Speaker Change: And then.
Speaker Change: As far as the divestiture of the incremental 10000 vehicles.
Speaker Change: What kind of precipitated that is a more liquid market than you saw.
Speaker Change: What are you getting higher prices when expected.
Speaker Change: Maybe help us understand what's driving that thank you.
Speaker Change: Okay.
Speaker Change: This is Alex why don't I kick off with the <unk>.
Alexandra Dawn Brooks: Question on an ice versus EV residuals, and then we'll kind of tag team hearing kick it over.
Alexandra Dawn Brooks: Hey, Justin.
Justin: So we did see EV residual declining at a more severe rate than ice vehicles during the quarter.
John Plimpton Babcock: Okay, thank you. I'll pass it over.
Justin: And I think you saw that in the adjustments we made to the EV as held for sale that we recognized a loss on the Evs that were disposed of during the quarter relative to what we mark them out at the end of the year and we also had to recognize a mark to market loss on the Evs that we were holding inventory.
Operator: Thank you. One moment for our next question, and our next question will come from the line of John Healy from North Coast Research. Your line is open.
Justin: Combination of those was about $81 million and is accounted for and depreciation expense for the quarter. So that's impacting you see there and of course, we would have.
John Michael Healy: Thank you for taking my question. Alex, I wanted to ask you a question about fleet costs, maybe dig in a little bit deeper on just the American side of things. I think you reported $876 million in expenses there. I know you've called out the $81 million and the $195 million, which to me kind of gives us around a $600 million dollar number of expenses on the 450,000 cars, which to me suggests kind of a fleet cost number of around $440 or so a month.
Justin: It made appropriate adjustments to the EV fleet that is part of our regular fleet and not held for inventory and so you look at for <unk> with that I'll turn it over to Jonathan to comment on the App and the movement of the 10000 vehicles.
Jonathan: Alex So first of all I'd like to say that we're about providing our customers with choice and we do see attractive demand for Evs natural markets are the rideshare, which continues to grow and is up over 50% year over year from a quarterly basis and also on the off airport as well as airport.
Jonathan: Do you see demand.
Jonathan: Our mantra has been ROA mindset, and keeping supply and cited demand.
John Michael Healy: Can you help us understand like what else is in that number and maybe what the base level of depreciation is without the adjustments that you're kind of running through for the EVs? And then just help us understand maybe the ICE rate versus the EVs that are left in the fleet rate?
Jonathan: And we're moving forward with the further right sizing of the incremental 10000, bringing the total population of Evs that are.
Jonathan: <unk> looked at to sell to 30000.
Jonathan: And it's kind of a decision of why is our progress here in Q1, we sold about 10000, which puts us on track to certainly meet the 12 month hold for sale sell period.
Jonathan: And continue with that momentum and as we as we rightsize. This EV fleet, we expect.
Alex: Sure. Let me unpack it a little bit for you.
Jonathan: Couple of things, one it will be better aligned with demand, which.
Alex: So you're absolutely right. So we had $969 million in depreciation expense for the quarter, of which $195 million of that was related to the EV held for sale charge. So on a per unit basis, it was $592 all in, and $119 was related to the EV charge. So, therefore, the net debt per unit we had, excluding those EV charges, was $473 per unit.
Jonathan: We inspect to improve both utilization as well as RPT as we align that with customers that are seeking out the evs and also it's going to eliminate a portion of collision with renters that are not familiar with the operations of driving a new EV who.
Jonathan: Otherwise would've chosen to take an ice vehicle, which unfortunately was they were needing to take an EV based on the fleet mix.
Jonathan: So.
Jonathan: Again with the benefit from a reduction of fleet carrying costs lower operating costs also are with maintenance and transport.
Jonathan: As you think about things with remote charging we see a combination of benefits by further taking down an additional 10000 net.
Jonathan: We will rightsize demand with our supply.
Speaker Change: Thanks for the question.
Alex: And, you know, what is driving this increase in net DPU is our expected residual values at the time of disposition, as well as the increased losses we had on vehicles that were sold during the quarter. Just to kind of give an example of what we're seeing in Ford residual declines, you know, if we just focus in on gross DPU, which excludes the EV held for sale charge, it also excludes those losses on dispositions we had during the quarter. Our gross DPU for Q4 of 2023 was about $315 per unit. It went up to $423 per unit this quarter. So an increase of just over $100 quarter over quarter.
Speaker Change: Thank you. Thank you very much.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from line of John Babcock from Bank of America. Your line is open.
John Plimpton Babcock: Good morning, and thanks for taking my questions.
John Plimpton Babcock: I guess.
John Plimpton Babcock: My first question is just on the liquidity front.
John Plimpton Babcock: We've got a lot of questions from investors on this and I was wondering first of all if you could just talk about what tools you have to boost liquidity.
John Plimpton Babcock: That would be useful and then also just generally how you are thinking about it particularly in line with refreshing our fleet.
John Plimpton Babcock: Execute on that and whether that can potentially intel's, reducing the fleet you did talk about keeping supply below demand. So maybe that's the answer but I think it just talk talk broadly about that and how you'd guide investors that would be useful.
John Plimpton Babcock: Yes, John this is Alex thanks for the question.
Alexandra Dawn Brooks: In my prepared remarks, but it's worth repeating that we believe we have sufficient liquidity to complete the refresh as we have planned for it. So let me just put back out there in terms of our tour to manage liquidity Youre, absolutely right in pointing to our fleet management as being me.
Alex: In terms of the impact we saw on forward residuals on that number, if we have a vehicle with an average cap cost of $32,000 and the remaining holding period is about 18 months, and we're seeing about a 6% decline in forward residuals, we have to recognize another $1,900 or so of depreciation over our holding period for that vehicle, and that equates to about $107 per month. So that's what we're seeing in forward residuals, and that's what impacted our quarter.
Alexandra Dawn Brooks: Most pervasive tool we have so we do have a plan for our fleet rotation that includes.
Alexandra Dawn Brooks: Deleting some of our higher cap costs vehicles that enables us to purchase new vehicles come in at a lower cap cost when we do that that actually improved our liquidity because the debt that we take on during that will be less than the debt. We have outstanding now on these higher cap costs vehicles. So.
Alexandra Dawn Brooks: That rotation improves liquidity and we have line of sight to what.
Alexandra Dawn Brooks: We need to do for the end of this year and maintain sufficient liquidity.
Alexandra Dawn Brooks: Gotcha.
Speaker Change: And then next question and I know youre, not providing any sort of quarterly guidance, but I was wondering if you might be able to provide some.
Alex: As a reminder, our depreciation methodology is a combination of third-party data sources as well as our own sales experience that drives our forward view of residuals. So that's what we're seeing for the quarter. In terms of the ICE versus EV fleet and the differences between those, you know, EV vehicles continue to be a higher depreciating vehicle for us than our ICE vehicles. Again, as we continue to defleet for the 20,000 EV vehicles that were remaining in inventory at the end of the quarter that are determined to be held for sale, we'll continue to see improvement on that. But the residual decline we saw during the quarter on forward residual values was relative to both ICE vehicles and EV vehicles, so it's not a problem solely related to EV vehicles.
Alexandra Dawn Brooks: Either qualitative or ideally quantitative, but I do it but at least qualitative guidance on how we should think about the cost over the year.
Alexandra Dawn Brooks: Because it's very unpredictable from quarter to quarter as we've seen particularly in light of the decline in used prices. So any sort of color you could provide on that.
Alexandra Dawn Brooks: Whether it's going to go up whether it's going to go down or if there are certain factors, we should be paying attention to get more color on that.
Speaker Change: That would be helpful.
Speaker Change: Yes, I think Darren comments around where we expect <unk> to be relative to overall demand and how we're running a tight fleet.
Speaker Change: Yes, it should provide an overview of what we expect to happen just with our.
Speaker Change: The size of our fleet so taking into account the size of our fleet and as I mentioned rotating out higher cap costs vehicles, and replacing those with lower cost vehicles and we expect the.
Speaker Change: <unk> expenditures and fleet to be relatively stable through the end of the year.
Speaker Change: Okay. Thank you I'll pass it along.
Speaker Change: Alright.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of John Healy from Northcoast Research. Your line is open.
John Michael Healy: And then just one follow-up question for me, just kind of big picture thinking on the fleet rotation. I understand there's some things to do there.
John Michael Healy: Thank you for taking my question Alex.
John Michael Healy: I just wanted to ask a question about honestly cost maybe dig in a little bit deeper on just the Americas side of things.
John Michael Healy: I think you reported $876 million.
John Michael Healy: And it takes time to rotate that fleet. So that's what I was hoping to ask you, is this something that you think takes nine months to rotate the fleet before it's ideal? Or, you know, is this more of like an 18 to 24 month dynamic that we'll have to be thinking about to get the fleet to the ideal position where Hertz would like it to be?
John Michael Healy: Expense there I know you've called out the 81, you've called out the 195.
John Michael Healy: To me it kind of gives us around a 600 $600 million number of expense on the 450000 cars.
John Michael Healy: To me it suggests kind of a fleet fleet cost number of around 440 bucks or so a month.
John Michael Healy: Can you help us understand like what else is in that number and maybe even what.
John Michael Healy: Base level of depreciation is without the adjustments that you are kind of running through for the Evs and then.
Speaker Change: Uh huh.
Speaker Change: Help us understand maybe the ice rate versus the Evs that are left in the fleet right.
John Michael Healy: So John, this is Darren.
Darren: So, John, this is Darren. So the fleet rotation, I mean, based on our holding periods, will take us into 25. We look at it more like an 18 to 24 month rotation on our fleet to get it really cycled through 100%. Obviously, we're going to make progress every month and every quarter. So, you know, as we look at the pre-owned cars that we bought at peak values over the last couple of years, those will come out, and most of them will be gone by the early part of 2025.
Speaker Change: Sure let.
Speaker Change: Let me, let me unpack a little bit for you. So you're absolutely right, we had $969 million of depreciation expense for the quarter of which $195 million of that was related to the EV held for sale charge. So on a per unit basis.
Speaker Change: With $5 92, all in and $119 was related to the.
Speaker Change: The EV charge. So therefore, the net debt per unit, we had excluding those EV charges with $473 per unit and what is driving this increase in net GPU is our expected residual values at the time of disposition as well as the <unk>.
Speaker Change: Increased losses, we had on vehicles that were sold during the quarter.
Speaker Change: Just to kind of give an example of what we're seeing in Ford residual declines.
Speaker Change: If we just focus in on gross TPU, which excludes the EV held for sale charge. It also excludes those losses on dispositions, we had during the quarter.
Darren: Some other new cars that we bought at peak values will take a little bit longer to cycle through, but what we're really seeing in the rotation is the ability for us to get a better, lower cap cost vehicle into the fleet. And so that progress will happen, you know, consistently through the period. And, you know, the amount of cars that we'll have left to rotate will diminish, you know, in a significant way as we get into 2025. Thank you so much.
Speaker Change: Our growth GPU for Q4.
Speaker Change: 2023 was about $315 per unit it went up to $423 per unit. This quarter. So an increase of just over $100 quarter over quarter.
Speaker Change: In terms of the impact we found four four way to residuals on that number.
Speaker Change: If we have a vehicle with an average cap cost of $32000.
Speaker Change: And the remaining holding period is about 18 months and we're seeing about a 6% decline in forward residual we have to recognize another $9800 or so of depreciation over our holding period for that vehicle and that equates to about $107 per month. So that's what we're seeing in <unk>.
Operator: Thank you. One moment for our next question, and our next question will come from the line of Lizzie Dove from Goldman Sachs. Your line is open.
Speaker Change: Great. Thanks, <unk> and that's what impacted our quarter as a reminder, our depreciation methodology is a combination of third party data source as well as our own sales experience that drives our four in view of <unk>.
Elizabeth Dove: Hi, good morning. Thanks so much for taking the time to answer the question. I just wanted to go back to the liquidity point. You know, the cash burn was much higher than expected this quarter, and there's been focus on, you know, the equity cushion and the ABS and the potential injection of cash there. I believe there's also kind of a debt holiday you had over COVID, which you now have to pay. So could you just walk me through in a little more detail the moving pieces in terms of how to think about cash flow for this year and the liquidity piece a little bit more? Thank you.
Speaker Change: What we're seeing for the quarter in terms of ice versus EV fleet and the differences between those EV vehicles continue to be a.
Speaker Change: A higher depreciating vehicle for us than our ice vehicles again as we continue to deeply for any 20000 EV vehicles that were remaining in inventory at the ended the quarter there.
Speaker Change: That are determined to be held for sale will continue to see improvement on that but the residual decline we saw during the quarter on board with central values was relative to both ice vehicles and EV vehicles. So it's not a problem solely related to EV vehicles.
Alex: Yeah, sure, Lizzie. You know, so you are on the ABS. Let me maybe start with the ABS cushion. So we have a sufficient equity cushion today. We did at quarter end, and we will do again today. As a reminder, the way the ABS depreciation works is at a rate of 1.67% per month. So we're making payments in at 1.67, which exceeds our historical market depreciation rates by about 40 basis points a month. So in a flat residual environment, we expect to be building up an additional cushion of about 40 basis points a month. So where we're sitting today, we're comfortable, and we don't anticipate a required funding event in the foreseeable future.
Speaker Change: Thank you and then just one follow up question for me just kind of big picture thinking on the fleet rotation.
Speaker Change: Understand there is some some things to do there and it takes time to rotate that fleet. So that's what I was hoping to ask you is is this something that you think takes nine months to rotate the fleet before its ideal or is this more of like an 18 to 24 months dynamic that we will have to be thinking about to get the fleet to the ideal position.
Speaker Change: Where hertz would like it debate.
Speaker Change: So John this is Darren so the fleet rotation I mean based on our holding periods will take us into 'twenty five we look at it more like an 18 to 24 months rotation on our fleet to get it really cycled through a 100% obviously, we're going to make progress every every month and every quarter.
Speaker Change: So so as we look at the pre owned cars that we bought at peak values over the last couple of years those will come out and most of them will be gone by the early part of 2025.
Alex: So that's what we're thinking about ABS. In terms of liquidity and cash burn, we're laser focused on our liquidity. And so the ABS repayment was a higher than normal payment, and that includes the effect of the EVs that we sold during the quarter. You know, as we just talked about how EVs had declining residuals during the quarter, and that drove $81 million of additional incremental depreciation on the vehicles that were marked. For the portion of the vehicles that were sold, you know, they carried a much higher debt balance because of those declining residuals during the quarter, so that also impacted our cash flow during the quarter.
Speaker Change: Some other new cars that we bought.
Speaker Change: At peak values will take a little bit longer to cycle through.
Speaker Change: But what we're seeing really on the rotation is the ability for us to get a better lower cap cost vehicle into the fleet and so that progress will happen consistently through the period.
Speaker Change: And the amount of cars that will have left to rotate will diminish.
Speaker Change: In a significant way as we get into 'twenty five.
Speaker Change: Thank you so much.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Lizzie Dove from.
Elizabeth Dove: Goldman Sachs. Your line is open.
Elizabeth Dove: Hi, good morning. Thanks, so much for taking the question just wanted to go back to the liquidity point.
Elizabeth Dove: The cash was much higher than expected this quarter and then focus on the equity cushion in the ABS and potential injection of cash.
Alex: I would just add to Alex that as Darren describes the fleet rotation as it relates to the ABS and liquidity, the deals that we're seeing now really have a lower cap cost, right, and they tend to be more program vehicle-related, so that'll lower our cost as well going in. Yeah.
Elizabeth Dove: I believe there's also kind of a debt holiday you had of Covid, which you now have to pay so could you just walk me through in a little more detail kind of the moving pieces in terms of how to think about cash flow for this yea rend liquidity piece, a little bit more thank you.
Alex: Yeah, but just to be clear, we have sufficient liquidity to refresh our fleet, and we don't anticipate a required ABS funding event.
Speaker Change: Yes sure Lizzy.
Speaker Change: So.
Speaker Change: You are.
Speaker Change: The ABF, let me maybe start with ABF cushion. So we have sufficient equity question today, we did at quarter end than we do today as a reminder, the way the ABS depreciation works.
Elizabeth Dove: Got it. Thank you. That's very helpful. And then just on the, I think you mentioned on RPD, the exit rate for March, I think you said, was down 3%, which had continued into April. Was that a global or a US number?
Speaker Change: Array of 167% per month, so, we're making payments in at $1 67, which exceeds our historical market depreciation rates by about 40 basis points a month. So in a flat residual environment, we expect to be building up.
Elizabeth Dove: And what is driving that? I mean, across the board, it doesn't seem like there's any demand problem that's held up, held up really, really nicely. So the improvement through the quarter is that kind of defleeting, anything to kind of note in the industry there? I'm just curious what's driving that improvement. Sure. So, Lizzie.
Speaker Change: Additional cushion of about 40 basis points per month so.
Speaker Change: We're singing today, we're comfortable and we don't anticipate a required funding event.
Speaker Change: In the foreseeable future. So that's what we're thinking about ABS.
Speaker Change: In terms of liquidity and cash burn you know, we're laser focused on our liquidity.
Darren: Sure. So, Lizzie, a couple of things.
Speaker Change: And we are understanding the cash outflow that we had during the first quarter and.
Darren: That's a global number that we quoted as the exit rate, and the trends that we see as we get into April are very similar in terms of year-over-year decline to that number also globally. There are a couple of things. I think as soon as we saw our fleet tighten towards the end of March, we saw a very compelling improvement in our RPD numbers, and we saw that throughout the month of March as we really got our fleet tight. And I think it's a reflection of our ability to choose some mix that we're taking now that was not available to us when the fleet levels were looser. So, that helps.
Speaker Change: Some of that is as it relates to.
Speaker Change: The the vehicles that were sold during the quarter.
Speaker Change: The vehicles sold during the quarter had a higher advance rate on them and so the ABF repayment was a higher than normal payment and that includes the effect of the evs that we sold during the quarter.
Speaker Change: We just talked about how <unk> had declining residual during the quarter and that drove 81 million of additional incremental depreciation on the vehicles that were marked for the portion of the vehicles that were sold.
Speaker Change: They carried a much higher debt balance because of those declining residential will carry in the quarter. So that also impacted our cash flow during the quarter.
Speaker Change: Yes, I would just add too.
Speaker Change: As Darin describes the fleet rotation as it relates to the ABS and liquidity.
Darren: I think also from a point of view of you're asking about industry trends, well, Q1 was the hardest compare that we had for RPD last year. The comparisons were fairly hard early into Q2 and then got easier towards the back part of Q2 and then into Q3 and Q4. So, we are past the hardest compare for RPU in terms of what it means to our year-over-year numbers. And I think we, as we talked about with the fleet and tightening it down underneath, where the travel demand is indicating it will be, we expect to be able to yield and to choose segments that we really want to do business in versus not.
Speaker Change: The deals that we're seeing now.
Speaker Change: Really have a lower cap calls and they tend to be more program vehicle related so that will lower our cost as well going in.
Speaker Change: But just to just to be clear, we have sufficient liquidity to refresh our fleet and we don't anticipate a required ABS funding of that.
Speaker Change: Yes.
Speaker Change: Got it. Thank you that's very helpful.
Speaker Change: And then just on the I think you mentioned on RPT. The exit rate for March I think you said was down 3%, which should continue into April or was that a global or a U S number and what is driving that I mean across the board. It doesn't seem like there's any demand problem. It has held up really really nicely.
Speaker Change: The improvement through the quarter is that kind of de fleeting anything to kind of note in the industry that I am just curious what's driving that improvement.
Speaker Change: Sure So let's see a couple of things.
Speaker Change: That's a global number that we quoted as the exit rate and the trends that we see as we get into April are very similar in terms of year over year decline to that number also globally.
Elizabeth Dove: Thank you. One moment for our next question, and our next question will come from Stephanie Moore from Jeffries. Your line is open.
Speaker Change: I think a couple of things I think as soon as we saw our fleet Titan.
Stephanie Lynn Benjamin Moore: Yeah, thanks, Harold. This is Justin.
Speaker Change: Towards the end of March we saw a very.
Justin: I'll take that one. So on the maintenance cost, first of all, I will say on the positive side, we're about almost 250 basis points improved on our out-of-service cost if I look from a year-over-year comparison. So we did have a concerted effort driving down out-of-service vehicles. A bit of a headwind there with a little bit higher on the safety recall from a comparison. So without the safety recall, it'd be even better from that standpoint.
Speaker Change: Compelling improvement in our PD numbers and we saw that throughout the month of March as we really got our fleet tight and I think it's a reflection of our ability to choose some mix that we're taking now.
Speaker Change: That was not available to us when the fleet levels were looser.
Speaker Change: That helps I think also from a from.
Speaker Change: From a point.
Speaker Change: Point of view of you are asking about industry trends.
Speaker Change: Q1 was the hardest compare that we had for our PD last year.
Speaker Change: The compares were fairly hard early into Q2, and then got easier towards the back part of Q2 and into Q3 and Q4. So we are we are past the hardest compare for RP you in terms of what it means to our year over year numbers.
Justin: That said, on the productivity side, we have a top 10 list of our top spend categories, everything from body shops to glass to tires and the like. And we are consolidating spend and are in the final stages of finalizing these contracts, which we expect on the forward to be beneficial. Additionally, our field operations are out locally assessing body shop by body shop, both rates as well as time and material on repair aspects.
Speaker Change: And I think we as we talked about with the fleet and tightening it down underneath.
Speaker Change: Where the travel demand is indicating it will be we expect to be able to.
Speaker Change: To yield and to choose segments that we really want to do business in versus not.
Speaker Change: Thank you that's helpful.
Speaker Change: Thank you one moment for our next question.
Stephanie Lynn Benjamin Moore: And our next question comes from the line of Stephanie more from Jefferies. Your line is open.
Speaker Change: Oh this is harold onto on for staffing anymore.
Harold: I guess on.
Justin: And we are consolidating those negotiations where we have the ability from a local proximity standpoint, and we anticipate these negotiations to be complete here in Q2, realizing benefits into the second half. Secondarily, as we rotate the fleet, as older vehicles with longer miles go out, and newer vehicles come in, by definition, there's a lower ongoing maintenance burden as they're newer on the mileage side. So we'll continue to see benefits with the fleet rotation. So everything we've talked about today is very complementary. Thank you.
Harold: Higher repair and collision costs. These are just go into what are you doing there to mitigate those costs and I guess what.
Stephanie: Auctions under your leadership.
Speaker Change: On the drive.
Speaker Change: Savings, whether that's on track.
Speaker Change: To improve customer performance.
Jonathan: Jonathan that RFE RPT.
Jonathan: Okay. Thanks, Darryl this is Justin I'll take that one so on the maintenance cost first of all.
Justin: I will say on the positive side, we're about.
Justin: Almost 250 basis points improved on our out of service if I look from a year over year compare so we did have a concerted effort driving down out of service vehicles bit of a headwind there with the.
Justin: A little bit higher on the safety recall from a compare so it without the safety of your call it would be even better from that standpoint.
Justin: Said on the productivity side, we are we have a top 10 list of our top spin categories everything from body shops to glass.
Justin: And I think the second part of your question, sorry, is around broader cost reduction. So we are looking globally at all our costs, and we are talking about SG&A as well. It's in the full scope. And I can say that we put in motion projects that are expected to reduce our corporate spend by over $100 million here in 2024. And we haven't stopped. As Gil highlighted, he's also adding incremental ideas, which we expect to update here in Q2. (inaudible)
Justin: <unk> and alike, and we are consolidating spend and are in the final stages of finalizing these contracts, which we expect on the Ford to be beneficial.
Justin: Additionally, our field operations are out.
Justin: Locally assessing body shop by body shop, both rates as well as time and material.
Justin: On repair aspects and we are consolidating those negotiations where we have the ability from a local proximity standpoint, and we anticipate these negotiations to be complete here in Q2, realizing benefit go into the second half.
Justin: Secondarily as we rotate the fleet is older vehicles with longer miles go out and newer vehicles come in buy.
Operator: Thank you. One moment for our next question. And our last question for today will come from the line of Christopher Stathoulopoulos from Susquehanna. Your line is open.
Justin: Definitions theres, a lower ongoing maintenance burden as theyre newer on the mileage side. So we will continue to see benefits with the fleet rotation. So everything we've talked about today is very complementary.
Speaker Change: Thank you.
Speaker Change: Thank you.
Christopher Nicholas Stathoulopoulos: Morning, everyone. Thanks for taking my question. So Gil, I want to go back to your prepared remarks. You outlined four objectives. I realize this is still early days here.
Speaker Change: I think the second part of your question sorry.
Justin: Around broader cost reduction.
Justin: We are looking globally at all our costs and we are talking about SG&A as well it's in the full scope and I can say that we put in motion projects that are expected to reduce our corporate spend by over $100 million here in.
Christopher Nicholas Stathoulopoulos: But part of that, you spoke about a great opportunity to serve customers' brand strength. Dig into that a little, and how are you thinking about unlocking brand value across the portfolio? Is it about greater customer engagement or a more frictionless experience within the rental process? And then also, given that you spent a lot of time in the airline industry, you were at Delta, I'm curious if you have any thoughts around the fact that there's clearly been a change here within the industry, so far as post-pandemic demand patterns with blended travel and network changes. And perhaps if you see any opportunities around Hertz in that regard. Thank you.
Justin: In 2024, and we haven't stopped as Gil highlighted is also adding incremental ideas, which we expect to update here in Q2.
Speaker Change: Got it.
Speaker Change: Thanks, a lot.
Speaker Change: Thank you one moment our next question.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And our last question for Tony will come from the line of Christopher <unk> from Susquehanna. Your line is open.
Christopher: Good morning, everyone and thanks for taking my question. So I wanted to go back to your prepared remarks, you outlined four objectives I realize this is still early days here, but part of that you spoke about a great opportunity to serve the customer brand strength dig into that a little and how are you thinking about.
Speaker Change: Unlocking the brand value across the portfolio or is it about greater customer engagement or a more frictionless experience within the rental process and then also given that you spent a lot of time on the airline industry were at Delta.
Speaker Change: Curious if you have any thoughts around.
Speaker Change: Clearly been a changed here change here.
Speaker Change: Within the industry and so far as post pandemic demand patterns with blended travel and network changes and perhaps if you see any opportunities around hertz in that regard. Thank you.
Gil: Yeah, no, thanks for the question, Chris. Yeah, I think on the customer experience piece, you know, I think there's, there's strong evidence, certainly the airlines have done it. And I think if you look at the $1.30 Hertz dynamics, in terms of the correlation between that promoter score and RPD, there clearly exists a relationship between a better customer experience and the ability to generate pricing power. So in terms of the experience itself, I think we have opportunities there.
Speaker Change: Yes, no. Thanks for the question, Chris Yeah, I think.
Speaker Change: <unk>.
Speaker Change: I think on the customer experience piece.
Speaker Change: There is strong evidence certainly the airlines have done it and I think if you look at dollar thrifty herds dynamics in terms of.
Speaker Change: The correlation between net promoter score in our PD.
Speaker Change: They are clearly exists the relationship between better customer experience and the ability to generate pricing power. So.
Speaker Change: In terms of the experience itself.
Speaker Change: Yes.
Speaker Change: Thank.
Speaker Change: We have opportunities there first of all we've got great people on our team that are out there every day, serving our customers. So that by itself is a big advantage or as a number of initiatives that are people related customer service related that are all have been are ongoing or employ.
Gil: First of all, we've got great people on our team, you know, that are out there every day serving our customers. So that by itself is a big advantage. There are a number of initiatives that are people-related, customer service-related, that have been ongoing or in play. But ultimately, as we cut the NPS data, the biggest thing that stands out is time, right?
Speaker Change: But ultimately as we cut the NPS data the biggest thing that stands out as time right. We all value time, certainly our customers do.
Gil: We all value time. Certainly, our customers do. You know, I think one of the differences between the airlines and the rental car business is that we are at the very end of the travel ribbon, right, when you're flying into an airport. So all that pressure builds to the end. So if somebody's standing in front of a counter for a minute, it's going to feel like an hour, right?
Speaker Change: You know I.
Speaker Change: I think one of the differences between the airlines and the rental car business as well.
Speaker Change: We're at the very end of the travel ribbon right as you're flying into an airport. So.
Speaker Change: All that pressure builds to the yen. So if somebody standing in front of the counter for a minute, it's going to feel like an hour right. So we've really got a value our customers time and a big part of that is very similar I think to what the airline journey has been over the years is that is to create a dish.
Gil: So we've really got to value the customer's time. And a big part of that is, I think, very similar to what the airline journey has been over the years: to create a digital experience that's frictionless for our customers, so they can, you know, move through the process. And have a normal channel that just moves quickly, frictionlessly, and they can go.
Speaker Change: <unk> experience.
Speaker Change: Frictionless for our customers that they can move through the process.
Speaker Change: And have a normal channel that just moves quick frictionless and they can go.
Gil: And that will likely fit the majority of our customers over time. But there are some customers that need, you know, customer support from agents. Again, I think we've got the best people in the business, and we need to do an even better job giving them the tools to serve our customers, so those actions are in place as well. So one channel doesn't fit all, I think, is the lesson.
Speaker Change: And that debt.
Speaker Change: We'll likely fit the majority of our customers over time, but there are some customers that need.
Speaker Change: Customer support from agents again, I think we've got the best people in the business and we need to do even better job, giving them the tools to serve our customers, which those actions or are in work as well.
Speaker Change: So one channel doesn't fit all I think as the lesson, but we've got opportunities in both with an eye towards pulling cost out.
Gil: But we've got opportunities in both with an eye towards pulling cost out of the equation, or, excuse me, time out of the equation. So that'll be our focus. And there's no doubt in my mind that as we do that, net promoter scores will improve. We have ongoing proof of that. In particular, the momentum that we are creating with Dollar Thrifty; there's been a lot of focus on all the areas I've described around Dollar Thrifty.
Speaker Change: Cost out of the.
Speaker Change: Excuse me time out of the equation.
Speaker Change: That'll be our focus and there's no doubt in my mind that as we do that net promoter scores will improve.
Speaker Change: We have ongoing proof points of that in particular, the momentum that we are creating with dollar thrifty. There's been a lot of focus on all of the areas I've described around dollar thrifty and we are seeing in our net promoter scores improved substantially in that area. We still have work to do to get parity in the marketplace.
Gil: And we are seeing our net promoter scores improve substantially in that area. We still have work to do to get parity in the marketplace, and we know that, you know, with an improved customer experience, there's pricing power assumed with that experience. So that's been our focus.
Speaker Change: And.
Speaker Change: We know that with where the improved customer experience.
Speaker Change: There is pricing power assumed with that experience. So that's been our focus.
Operator: Thank you. And this concludes today's Q&A session. This also concludes the Hertz Global Holdings First Quarter 2024 Earnings Conference Call. Thank you for your participation. You may now disconnect. Everyone have a great day.
Speaker Change: Thank you and this concludes today's Q&A session. This also concludes the Hertz Global Holdings first quarter 2024 earnings Conference call. Thank you for your participation you may now disconnect everyone have a great day.
Speaker Change: Okay.
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