Q2 2024 Hertz Global Holdings Inc Earnings Call

Welcome to the Hertz Global Holdings second quarter 2024 earnings call.

Operator: We will conduct a question and answer session. I would like to remind you that this morning's call has been recorded by the company.

Johan Rawlinson: 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 our host, Johann Rawlinson, Vice President for Relations. Please go ahead.

Johann Rawlinson: I would like to turn the call over to our host, Johan Rawlinson, Vice-President Relations. Please go ahead.

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

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

Johann Rawlinson: I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance, and by their nature are subject to inherent risks and uncertainties. Actual results make different materially. Any forward-looking information relayed on the call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect change circumstances.

Johan Rawlinson: I want to remind you that certain statements made on this call contain forward-looking information.

Johan Rawlinson: Forward-looking statements are not a guarantee of performance and by their nature are subject to inherent risks and uncertainties.

Actual results may differ materially.

Johann Rawlinson: Additional information concerning these statements, including factors that could cause our actual results to differ, is contained in our earnings press release and in the risk factors and forward-looking statement section of the filing that we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hurts website.

Johann Rawlinson: Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentations available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless, otherwise noted, our discussion today focuses on our global business.

Operator: Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentations available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing a better evaluation of our profitability and performance. On the call this morning, we have Gil West, our Chief Executive Officer, Scott Harrelson, our recently appointed Chief Financial Officer, and Sandeep Dubey, our newly appointed Chief Commercial Officer.

Gill West: On the call this morning, we have Gill West, our Chief Executive Officer; Scott Harrelson, our recently appointed Chief Financial Officer; and Cindy Dubé, our newly appointed Chief Commercial Officer. We are also joined by Darren Errington, our Executive Vice President for Revenue.

Operator: We are also joined by Darren Arrington, our Executive Vice President for Revenue. I'll now turn the call over to Gil. Our fleet, our revenue, and cost management, our recent additions to the executive team, investments in our technology and product innovation, and the talent and hard work of our people, coupled with process rigor and how we manage the business, are key enablers. First, strengthen the balance sheet and ensure a more stable liquidity position so that we can accelerate the rotation of our fleet and take a longer view of how we manage the business. Both are essential parts of our transformation strategy. Sackett

Speaker Change: On the call this morning we have Gil West, our Chief Executive Officer, Scott Harrelson, our recently appointed Chief Financial Officer, and Sandeep Dubey, our newly appointed Chief Commercial Officer.

Gill West: I'll now turn the call over to Gill.

Gill West: Morning. Thank you all for joining our second quarter earnings call. We've accomplished a lot as a team over the past quarter, and we look forward to walking you through our Q2 results and the actions we've taken to advance our strategic priorities, enhance our operational capabilities, and drive long-term and sustainable shareholder value. As I said on our last call, we're in the midst of a critical transformation for our company, and our priority is getting back to the basics, operational excellence, and unmatched customer service, and using these springboards for value creation and earnings growth.

Speaker Change: Morning. Thank you all for joining our second quarter earnings call.

Gil West: We've accomplished a lot as a team over the past quarter, and we look forward to

Speaker Change: to walking you through our Q2 results and the actions we've taken to advance our strategic priorities, enhance our operational capabilities, and drive long-term and sustainable shareholder value.

Gill West: Our strategy to get there has three building blocks: our fleet, our revenue, and cost management. Our recent additions to the Executive Team, investments in our technology, and product innovation, and the talent and hard work of our people, coupled with process rigor and how we manage the business, are key enablers.

Gill West: First, to advance these strategic priorities, two things needed to be accomplished. First, strengthen the balance sheet and ensure a more stable liquidity position so that we can accelerate the rotation of our fleet and take a longer view of how we manage the business; both are essential parts of our transformation strategy. Second, build a team and organizational design that ensures we can execute our strategy with speed, rigor, and excellence. We've quickly done both of these things. On the financing side, we strengthen our balance sheet and improved our liquidity. With the additional capital buffer we secured in June, we are accelerating our fleet rotation, enabling us to lower our depreciation and maintenance cost, improve our customer experience, and increase pricing power.

Speaker Change: To advance these strategic priorities, two things needed to be accomplished.

Speaker Change: First, strengthen the balance sheet and ensure a more stable liquidity position so that we can accelerate the rotation of our fleet and take a longer view of how we manage the business. Both are essential parts of our transformation strategy.

Gil West: On the financing side, we strengthened our balance sheet and improved our liquidity. With the addition, On the leadership front, all the seasoned leaders we've recently announced come to Hertz with a track record of driving commercial success across complex, customer-facing operations in the travel and transportation industry. Starting with Scott, he brings deep expertise in financial and cost management and leveraging the capital markets to drive business transformation. He has a history of turning challenges into opportunities, and I know he's the right person for the job.

Speaker Change: With the additional capital buffer we secured in June , we are accelerating our fleet rotation

Gill West: I'm pleased with the progress we're making and look forward to completing the fleet rotation as soon as practical.

Gill West: Our new CFO, Scott Haralson, will get into more detail on the financing, the actions we've taken to bolster the balance sheet to support our strategic plan. On the leadership front, all the season leaders we've recently announced come to hurts with a track record of driving commercial success across complex customer facing operations in the travel and transportation industries. I've known and worked with all of them, and I'm thrilled that they share my optimism for the value creation potential here at Hurts. Starting with Scott, he brings deep expertise in financial and cost management and leveraging the capital markets to drive business transformation.

Speaker Change: On the leadership front, all the seasoned leaders we've recently announced come to Hertz with a track record of driving commercial success across complex, customer-facing operations in the travel and transportation industries.

Gill West: He has a history of turning challenges into opportunities, and I know he's the right person for the job. Sandeep Dubay, our new Chief Commercial Officer, who you will also hear from on the call today, brings a comprehensive and customer-centric approach across our commercial and revenue-generating activities. He understands what customers desire and are willing to pay for, puts these customer expectations at the center of the business operation in innovative ways, and converts the resulting customer satisfaction into revenue.

Gil West: Sandeep Dubey, our new Chief Commercial Officer, who you will also hear from on the call today, brings a comprehensive and customer-centric approach across our commercial and revenue-generating activities. He understands what customers desire and are willing to pay for, puts these customer expectations at the center of the business operation in innovative ways, and converts the resulting customer satisfaction into revenue. Having one executive taking a holistic view of all the commercial aspects is a novel approach at Hertz, and I'm thrilled to have him on the team.

Sandeep Dubey: Sandeep Dubey, our new Chief Commercial Officer, who you will also hear from on the call today, brings a comprehensive and customer-centric approach across our commercial and revenue-generating activities.

Gill West: Having one executive, taking a holistic view of all the commercial aspects, is a novel approach at Hurts, and I'm thrilled to have him on the team. We've also brought in additional senior asset management and operational expertise, with Greg May leading all aspects of Hurts Fleet Management, including Fleet Procurement and Strategy, Analytics, and Vehicle Remarketing; Henry Kikandall overseeing our airport and off-airport car rental operations in North America; and Mike Moore, who will lead all aspects of Fleet Maintenance.

Sandeep Dubey: Having one executive taking a holistic view of all the commercial aspects is a novel approach at Hertz, and I'm thrilled to have him on the team.

Gill West: We've also asked Catherine Martin to take on the permanent role of General Counsel. The new leadership structure will enable Indiana oversight and accountability of key components of the business, which complement our existing dedicated teams who have deep institutional knowledge of the car rental industry.

Gill West: Restroom. With these changes now in place, I believe we have a transformative and achievable strategy, along with the right team and organization. So now more than ever, our focus is on execution. While we will remain nimble on the exact timing of key milestones, I'm confident that the execution of our strategy will render superior unit economics for the company.

Gil West: With these changes now in place... I believe we have a transformative and achievable strategy, along with the right team and organization. So now more than ever, our focus is on execution. Let's move on to the other building blocks, unit revenue and cost management. Sandeep, over to you.

Sandeep Dubey: With these changes now in place, I believe we have a transformative and achievable strategy, along with the right team and organization, so now more than ever, our focus is on execution.

Gill West: Let me focus the remainder of our comments. Let's focus on our strategy, particularly around belief.

Speaker Change: Let me focus the remainder of our comments on our strategy, particularly around BLEE. Then Sandeep will cover what we are actioning around revenue and customers. After that...

Sandeep Dube: Then Sandeep will cover what we are actioning around revenue and customers.

Scott Haralson: After that, Scott will cover our Q2 financial performance, our cost management, and balance sheet position.

Gill West: As I mentioned, a fundamental component of our strategy is our fleet, and completing our fleet refresh and rotation is one of our highest priorities. Of substantial portion of our fleet consists of vehicles with inflated cap calls that were acquired from OEMs during a period in which both volume discounts and trim packages befitting our rental car fleet were constrained. Our fleet also consists of high-cost pre-owned vehicles we acquired from the spot market at peak pricing. Most vehicles purchased in that environment have experienced declines and resell value as the market normalized, resulting in an elevated monthly depreciation rate.

Gill West: This primarily applies to vehicles 12 months in age or older.

Gill West: As we announced in June, we have accelerated our refresh and currently expect higher depreciation vehicles to be rotated by the end of 2025. As a result, by early 2026, we expect average depreciation per unit or DPU in the low 300s per month. My confidence is driven by the fact that we are already seeing lower vehicle costs manifest, and the purchase prices recently negotiated with OEMs already reflect our targeted DPU. Scott will talk more about the operating cost and productivity, but it's worth mentioning here that another tailwind of completing our fleet rotation will be savings generated by reduced maintenance and collision costs.

Speaker Change: Scott will talk more about the operating cost and productivity, but it's worth mentioning here that another tailwind of completing our fleet rotation will be savings generated by reduced maintenance and collision costs, which will decrease our direct operating expenses.

Gill West: Which will decrease our operating direct operating expenses.

Gill West: Let's move on to the other building blocks: unit revenue and cost management.

Sandeep Dube: Sandy, over to you. Thanks, Gil, and good morning everyone. I'm extremely pleased to join Hurts as chief commercial officer. As Gil pointed out, my goal here is to bring a cohesive and customer-centric approach to our revenue generation efforts. From revenue management and pricing e-commerce to corporate sales and strategic partnerships. I'll also be focusing on demand creation through strategic marketing and the experience of our customers throughout their rental journey.

Sandeep Dubey: Thanks, Gil, and good morning, everyone. Let me outline our approach. Our goal is to grow unit revenue by focusing on how we generate the revenue we collect and ensuring it enhances the bottom line. As we tighten the fleet, we will benefit from culling low RPD, low contribution demand, and serving through discretionary, low-price channels, and contract-rate business. We are committed to remaining disciplined on capacity and will seek to manage our fleet levels in response to demand. Additionally, we are utilizing new optimization tools to improve paid media strategies.

Sandeep Dubey: from remedy management and pricing, e-commerce, to corporate sales and strategic partnerships.

Speaker Change: I'll also be focusing on demand creation through strategic marketing and the experience of our customers throughout their rental journey. Let me outline our approach.

Sandeep Dube: Let me outline our approach. Our goal is to grow unit revenue by focusing on how we generate the revenue we collect and ensuring it enhances the bottom line. As we tighten the fleet, we will benefit from calling low RBD, low contribution demand, serve through discretionary, low price channels, and contract freight business. These changes are highly actionable, and removal from our book of business will improve our overall profitability. We are committed to remaining disciplined on capacity and will seek to manage our fleet levels in response to demand. In line with the strategy, we intend to counter any headwind in yield with an appropriate tightening of the fleet to maintain return on assets and overall profitability.

Speaker Change: Our goal is to grow unit revenue by focusing on how we generate the revenue we collect and ensuring it enhances the bottom line.

Speaker Change: As we tighten the fleet, we will benefit from culling low RPD, low contribution demand, serve through discretionary, low-price channels, and contract-rate business.

Sandeep Dubey: These changes are highly actionable and removal from our book of business will improve our overall profitability.

Sandeep Dubey: In line with the strategy, we intend to counter any headwind in yield with an appropriate tightening of the fleet to maintain return on assets and overall profitability.

Sandeep Dube: We are also focused on driving more quality revenue through our direct booking channels. We are utilizing new optimization tools to improve paid media strategies, as well as making structural improvements to the websites themselves.

Sandeep Dubey: We are also focused on driving more quality revenue through our direct booking channels. We are utilizing new optimization tools to improve paid media strategies.

Sandeep Dube: While we have work to do around growing our volumes, the trends are encouraging. Another key component of our revenue strategy is an improved customer experience, enabled by a self-service digital platform, where appropriate. This means that customers, both loyalty and non-loyalty, can skip the counter and go directly to their vehicles, receiving faster, better service throughout their rental journey. We are already seeing the fruit of our efforts in the positive trend in net promoter scores across our brands. A reflection of our team's hard work and dedication, and validating our commitment to investing in our customers. Providing an unmatched customer experience leads to loyalty and creates purchasing power.

Sandeep Dubey: While we have work to do around growing our volumes, the trends are encouraging, a reflection of our team's hard work and dedication. Lastly, we are focused on growing value-added service revenue. June RPD is marginally down year over year by 2%, an encouraging exit rate for the quarter and consistent with our expectations that year over year declines are narrowing. With global RPD rate parity expected in the third quarter, year over year, the demand and revenue outlook remains strong. With that, I'll turn it over to Scott.

Sandeep Dubey: Providing an unmatched customer experience leads to loyalty and creates purchasing pricing power, and we are pursuing rate parity with competitor value brands across an increased number of locations. Lastly, we are focused on growing value-added service revenue.

Sandeep Dube: And we are pursuing rate parity with competitor value brands across an increased number of locations.

Sandeep Dube: Lastly, we are focused on growing value added service revenue. Currently, most of our products have static pricing. We are beginning to leverage smarter dynamic pricing tools and new ways of merchandising the products. We continue to further upgrade our forecasting and pricing tools with modern technologies to enable us to yield higher rates at each point in the booking curve. During the quarter, we deliberately prioritized rate over volume. This is especially true in the America segment. Collectively, our revenue initiatives are showing early promise, and global RPD, while down year over year as we guided, was up 5% sequentially.

Sandeep Dubey: Currently, most of our products have static pricing. We are beginning to leverage smarter dynamic pricing tools and new ways of merchandising the products.

Sandeep Dubey: We continue to further upgrade our forecasting and pricing tools with modern technologies to enable us to yield higher rates at each point in the booking curve.

Sandeep Dubey: This is especially true in the America segment. Collectively, our revenue initiatives are showing early promise, and global RPD, while down year over year as we guided, was up 5% sequentially.

Sandeep Dube: June RPD is marginally down year over year by 2%, and encouraging exit rate for the quarter is consistent with our expectations that year over year declines are narrowing. With global RPD rate parity expected in the third quarter year over year, the demand and revenue outlook remains strong.

Sandeep Dubey: June RPD is marginally down year-over-year by 2%, an encouraging exit rate for the quarter and consistent with our expectations that year-over-year declines are narrowing.

Scott Harrelson: With global RPD rate parity expected in the third quarter year-over-year, the demand and revenue outlook remains strong. With that, I'll turn it over to Scott.

Scott Haralson: With that, I'll turn it over to Scott. Thanks, Sandeep. And good morning, everyone. First, I want to thank the Hertz team members who have been so welcoming in my short time here. It's been great to see the pride in the Hertz brand and the desire to win throughout the organization. It's an honor to join a global company with such a recognized and valuable brand and be part of the team to help bring Hertz back to its historical prominence and performance.

Scott Harrelson: Thanks Sandeep and good morning everyone. First, I want to thank the Hertz team members who have been so welcoming in my short time here. It's been great to see the pride in the Hertz brand and the desire to win throughout the organization.

Scott Haralson: I knew coming in that we had a good bit of work to do, but it's now been over a month since I started, and some real themes are starting to come together for me. So before I cover some of the financial results for the quarter, let me highlight a few things. The post-transformation view of the business is bright. Our North Star metrics are very attainable, and we will continue to push the business to be a data driven, high performance business with an efficiency mindset and a heroic base discipline.

Scott Harrelson: The post-transformation view of the business is bright. Our North Star metrics are very attainable, and we will continue to push the business to be a data-driven, high-performance business with an efficiency mindset and a heroic-based discipline. That's one side of the coin.

Scott Harrelson: The post-transformation view of the business is bright. Our North Star metrics are very attainable, and we will continue to push the business to be a data-driven, high-performance business with an efficiency mindset and heroic-based discipline.

Scott Haralson: That's one side of the coin. The other side is that it could take us through 2025 to get where we need to be. Since my arrival, we've conducted further analysis and continued to refine our view of the financial impact and the timeline of the business transformation, particularly the fleet rotation, and there are a few items to call out. First and foremost, our fleet, a critical piece of our P&L repair, is transforming the fleet. Our primary objective, in its simplest form, is to limit the difference between what we buy our car for and what we sell it for.

Scott Harrelson: The other side is that it could take us through 2025 to get where we need to be. Since my arrival, we've conducted further analysis and continue to refine our view of the financial impact and the timeline of the business transformation, particularly the fleet rotation, and there are a few items to call out. First and foremost, our fleet. A critical piece of our P&L repair is transforming our fleet. In its simplest form, our primary objective is to limit the difference between what we buy a car for and what we sell it for.

Sandeep Dubey: That's one side of the coin. The other side is that it could take us through 2025 to get where we need to be.

Speaker Change: First and foremost our fleet. A critical piece of our P&L repair is transforming the fleet. Our primary objective in its simplest form is to limit the difference between what we buy a car for and what we sell it for.

Scott Haralson: This translates to our North Star DPU metric of the low $300 range. As of June 30, over 30% of our global fleet was at a DPU of $325 or less, and the remainder of our fleet was at a DPU of about $660. The deals we are consummating today for vehicles to be delivered later this year and in 2025 have DPU rates below $325. We are executing the refresh at the utmost urgency, and we will accelerate this as fast as economically and logistically possible.

Scott Harrelson: This translates to our North Star DPU metric in the low $300 range, and the remainder of our fleet was at a DPU of about $660. The deals we are consummating today for vehicles to be delivered later this year and into 2025 have DPU rates below $325. The timing of that excess depreciation may be a bit lumpy, depending on how quickly we can rotate. But we want that to happen as soon as possible.

Scott Haralson: With the speed of rotation as an objective, it may be helpful to clarify some important concepts about the rotation, the concepts of the total P&L impact of the rotation and the cash impact of the rotation, what they are and why they are different. Based on current residual estimates, we expect that the fleet refresh will push through a little more than $1 billion of non-cash depreciation through the P&L from Q3 of this year through probably the end of 2025. Obviously, it could be higher or lower depending on where residuals come out. The timing of that excess depreciation may be a bit lumpy depending on how quickly we can rotate, but we want that to happen as soon as possible.

Sandeep Dubey: Based on current residual estimates, we expect that the fleet refresh will push through a little more than $1 billion of non-cash depreciation through the P&L from Q3 of this year through probably the end of 2025.

Sandeep Dubey: Obviously it could be higher or lower depending on where residuals come out.

Sandeep Dubey: The timing of that excess depreciation may be a bit lumpy, depending on how quickly we can rotate. But we want that to happen as soon as possible.

Scott Haralson: Although a bit counterintuitive, larger near-term depreciation amounts are the desired outcome. That means we are exiting high depreciation cost vehicles and bringing in lower ones quicker.

Sandeep Dubey: Although a bit counterintuitive, larger near-term depreciation amounts are the desired outcome.

Scott Harrelson: That means we are exiting high depreciation cost vehicles and bringing in lower ones quicker.

Scott Haralson: Now the confusion for some people is how can we push through that large of a P&L impact without it having a similar cash impact going forward. The answer lies in how we amortize the debt on the vehicles in our ABS facility. We amortize our vehicle financing facility typically quicker than we depreciate the assets on our P&L. In other words, the majority of the cash impact has already been felt through the ABS facility. When we sell the vehicles, we will unlock the initial equity we invested, as well as any amounts gained through the amortization of the debt, if any.

Sandeep Dubey: Now, the confusion for some people is how can we push through that large of a P&L impact without it having a similar cash impact going forward. The answer lies in how we amortize the debt.

Scott Harrelson: We amortize our vehicle financing facility typically quicker than we depreciate the assets on our P&L, and that money will be reinvested to acquire new vehicles at lower purchase prices or cap costs. We may need to use some of our liquidity for new car purchases, but the amount of that is not firm yet, given the number of variables at play. We will try to give you a better sense of that amount on future calls. Now the other side of the coin I mentioned is that this fleet rotation will take place through 2025.

Scott Haralson: The cash release from the sale of the vehicles left to be rotated will likely amount to more than $1.5 billion, and that money will be reinvested to acquire new vehicles at lower purchase prices or cap costs. Depending on the number of vehicles and the types, it will likely cover most of the new car buys. We may need to use some of our liquidity for new car purchases, but the amount of that is not firm yet given the number of variables out playing.

Sandeep Dubey: The cash released from the sale of the vehicles left to be rotated will likely amount to more than $1.5 billion, and that money will be reinvested to acquire new vehicles at lower purchase prices or cap costs.

Scott Haralson: We will try to give you a better sense of that amount on future calls.

Scott Haralson: Now the other side of the coin I mentioned is that this fleet rotation will take through 2025. So we must be realistic about the cash generation capabilities of the business between now and then. We are still refining the inputs to this, but it looks like we'll probably use some cash on the operating side through the first half of 2025. Given the cash burn on the operating side and the cash required for the fleet refresh, right now we expect the low point of liquidity will likely be at the end of the second quarter of 2025.

Sandeep Dubey: Now the other side of the coin I mentioned is that this fleet rotation will take through 2025. So we must be realistic about the cash generation capabilities of the business between now and then.

Scott Harrelson: So we must be realistic about the cash generation capabilities of the business between now and. Given the cash burn on the operating side and the cash required for the fleet refresh, right now, we expect the low point of liquidity will likely be at the end of the second quarter of 2025. The good news is that we believe we have plenty of liquidity to handle. With our recent capital raise, we have bolstered liquidity to a place where we are comfortable that we can complete the transformation, even if residuals decline at a faster rate than we have conservatively forecast. DOE per transaction day for Q1 was $37, and Q2 was $36.

Scott Haralson: I'm not at a point yet where I can give you the specifics on the cash balance levels of that date, but we'll look to provide that information on future calls as well. The good news is that we believe we have plenty of liquidity to handle this. With our recent capital raise, we have bolstered liquidity to a place where we are comfortable that we can complete the transformation, even if residuals decline at a faster rate than we have conservatively forecasted.

Speaker Change: I'm not at a point yet where I can give you the specifics on the cash balance levels at that date, but we'll look to provide that information on future calls as well.

Scott Haralson: Next is our cost structure or DOE and SG&A expenses. Becoming more efficient and reducing our operating cost is an important component of our transformation. We've made some good progress so far, but overall this is more than just managing initiatives. It's managing the entire cost structure within an efficiency mindset. We have some wood to chop here, but we made good progress quarter over quarter. Again, though, we have to be realistic about the timing of the reductions. DOE per transaction day for Q1 was $37, and Q2 was $36. While directionally positive, insurance and labor rates were higher than expected, which partially offset the value of the benefits we achieved.

Speaker Change: Next is our cost structure or DOE and SG&A expenses.

Sandeep Dubey: We've made some good progress so far, but overall, this is more than just managing initiatives. It's managing the entire cost structure with an efficiency mindset.

Sandeep Dubey: DOE per transaction day for Q1 was $37 and Q2 was $36.

Sandeep Dubey: While directionally positive, insurance and labor rates were higher than expected, which partially offset the value of the benefits we achieved.

Scott Haralson: That's why I say we have to continue to manage the entire P&L, not just initiatives. There are a lot of areas to address, and some require process and technology enhancements, or addressing out of market contracts, and some have delayed benefits, like those tied to the fleet rotation. So these impacts will be layered in over time, but you should measure us on seasonally adjusted DOE and SGNA metrics sequentially.

Scott Harrelson: That's why I say we have to continue to manage the entire P&L, not just an issue. So these impacts will be layered in over time, but you should measure us on seasonally adjusted DOE and SGNA metrics sequentially. With the new team we have, I am extremely confident that we will get there, but it will be a gradual progression. Revenue for the quarter was $2.4 billion, and our adjusted corporate EBITDA was a loss of $460 million, coming in at about the midpoint of the range we updated in mid-June.

Sandeep Dubey: That's why I say we have to continue to manage the entire P&L, not just initiatives.

Sandeep Dubey: There are a lot of areas to address, and some require process and technology enhancements, or addressing out-of-market contracts, and some have delayed benefits, like those tied to the fleet rotation.

Sandeep Dubey: So, these impacts will be layered in over time, but you should measure us on seasonally adjusted DOE and SGNA metrics sequentially. With the new team we have, I am extremely confident that we will get there, but it will be a gradual progression.

Scott Haralson: With the new team we have, I am extremely confident that we will get there, but it will be a gradual progression.

Scott Haralson: So now let's cover Q2 results. Revenue for the quarter was $2.4 billion, and our adjusted corporate EBIDA was a loss of $460 million, coming in at about the midpoint of the range we updated in mid-June. The results for the quarter were significantly impacted by the year-over-year increase in depreciation expense of about $700 million. Revenue was driven by our desire to maintain pricing integrity in the quarter, with particular strength in the America segment, which saw a 5% increase quarter to quarter. This provides strong evidence of pricing discipline across our business and the desire to manage capacity at a level that supports rate.

Sandeep Dubey: So now let's cover Q2 results. Revenue for the quarter was 2.4 billion dollars and our adjusted corporate EBITDA was a loss of 460 million, coming in at about the midpoint of the range we updated in mid-June.

Sandeep Dubey: The results for the quarter were significantly impacted by the year-over-year increase in depreciation expense of about $700 million.

Scott Haralson: DPU was elevated, driven by our plans to accelerate the fleet refresh. As I mentioned earlier, higher DPU in the short run, driven by our fleet refresh acceleration, is a good thing because we will get to our target DPU faster. We've renegotiated several national contracts from parts and labor while also exercising more centralized oversight of vehicle repair and maintenance expense. Refreshing the fleet will also contribute to the reduction of direct operating expenses per transaction day through reduced maintenance and lower losses on salvaged vehicles. As a result, maintenance and collision have declined quarter to quarter by 12% on a volume-adjusted basis, and we've only just begun.

Sandeep Dubey: DPU was elevated, driven by our plans to accelerate the fleet refresh. As I mentioned earlier, higher DPU in the short run, driven by our fleet refresh acceleration, is a good thing, because we will get to our target DPU faster.

Sandeep Dubey: We've renegotiated several national contracts for parts and labor, while also exercising more centralized oversight of vehicle repair and maintenance expense. Refreshing the fleet will also contribute to the reduction of direct operating expenses per transaction day, through reduced maintenance and lower losses on salvaged vehicles.

Scott Harrelson: SG&A decreased on a year-over-year basis as a result of headcount and third-party spend reductions taken both last year and this year, as well as higher efficiency and lower marketing spend. Excluding non-EBITDA impacting items, SG&A decreased 9% year-over-year.

Scott Haralson: SGNA has decreased on a year-over-year basis as a result of headcount and third-party spend reductions taken both last year and this year, as well as higher efficiency on lower marketing spend. Excluding non-evident impacting items, SG&A decreased 9% year-over-year.

Sandeep Dubey: SG&A has decreased on a year-over-year basis as a result of headcount and third-party spend reductions taken both last year and this year, as well as higher efficiency and lower marketing spend.

Scott Haralson: We believe there is still more opportunity to tighten third-party expense, which we will be able to realize over time as centralized procurement works through our $3 billion base of contracted spend.

Scott Haralson: So now let me talk about liquidity in cash flow. We ended the quarter with $1.8 billion of liquidity, comprised of over $500 million of unrestricted and $1.3 billion of available capacity under the senior revolving credit facility. We raised $1 billion of liquidity in June by issuing $750 million of first-lane notes and $250 million of exchangeable second-lane pick notes, both maturing in 2029. In addition, we issued $750 million of ABS securities for our US ABS program, which will refinance part of our near-term maturities coming due this year. Our committed VFN will more than cover the remaining amounts of those maturities.

Scott Harrelson: We believe there is still more opportunity to tighten third-party expenses. So now, let me talk about liquidity and cash flow. We ended the quarter with $1.8 billion of liquidity comprised of over $500 million of unrestricted cash and $1.3 billion of available capacity under the Senior Revolving Credit Facility. We raised $1 billion of liquidity in June by issuing $750 million of first-lien notes and $250 million of exchangeable second-lien pick-ups. In addition, we issued $750 million of ABS securities for our U.S. ABS program, which will refinance part of our near-term maturities coming due this year. Our committed VFN will more than cover the remaining amounts of those maturities. We used the net proceeds to pay down our senior credit facility and ended the quarter with a $160 million draw.

Sandeep Dubey: We raised $1 billion of liquidity in June by issuing $750 million of first-lien notes and $250 million of exchangeable second-lien pick notes.

Scott Haralson: We used the net proceeds to pay down our senior credit facility and ended the quarter with $160 million drawn. We have no meaningful non-vehicle debt maturities until mid-2026. The capital raise will help offset further expected cash burn as well as future liquidity contributions needed for the fleet refresh. It's also a buffer against unforeseen macro challenges and helps ensure stability throughout the transformation.

Sandeep Dubey: We used the net proceeds to pay down our senior credit facility and ended the quarter with 160 million dollars drawn.

Scott Harrelson: The capital raise will help offset further expected cash burn, as well as future liquidity contributions needed for the fleet refresh. It's also a buffer against unforeseen macro challenges and helps ensure stability throughout the transformation. Regarding our vehicle debt, our ABS facilities are designed to amortize the loans faster than the vehicles are depreciating. As a result, the fair market values of our vehicles are typically greater than their ABS values. However, we have seen vehicle residuals decline at a higher rate than usual this year. For example, in June, the Mannheim Rental Risk Index dropped by 5%.

Sandeep Dubey: The capital raise will help offset further expected cash burn as well as future liquidity contributions needed for the fleet refresh. It's also a buffer against unforeseen macro challenges and helps ensure stability throughout the transformation.

Scott Haralson: Regarding our vehicle debt, our ABS facilities are designed to amortize the loans faster than the vehicles are depreciating. As a result, the fair market values of our vehicles are typically greater than their ABS values. However, we have seen vehicle residuals climb at a higher rate than usual this year. In June, the Mannheim Rental Risk Index dropped by 5%. We currently have sufficient fair market value cushion in our ABS facilities, but to the extent the current volatility in the residual market negatively impacts that metric, we could expect to make incremental lease payments to maintain a positive cushion.

Sandeep Dubey: However, we have seen vehicle residuals decline at a higher rate than usual this year. In June , the Mannheim Rental Risk Index dropped by 5%.

Scott Harrelson: We currently have sufficient fair market value cushion in our ABS facility. Over the remainder of the year, we intend to manage our fleet levels below the same periods in 2023. We expect DPU to be elevated through 2024 before sequentially improving through 2025 until we near the end of the rotation, and I come to the CFO position confident about our future. Now, I will hand it back to Gil for a closing comment.

Sandeep Dubey: We currently have sufficient fair market value cushion in our ABS facilities, but to the extent the current volatility in the residual market negatively impacts that metric, we could expect to make incremental lease payments to maintain a positive cushion.

Scott Haralson: Deception. Our liquidity position provides the flexibility to do so.

Scott Haralson: Saying on our fleet rotation for a moment, during Q2, we increased the fleet size ahead of the peak rental season, largely driving our adjusted free cash outflow of $553 million. As for the $2 billion in vehicle debt maturing at the end of the year, we have the option to refinance or to redeem the debt using the variable funding notes within the USABS.

Sandeep Dubey: Our liquidity position provides the flexibility to do so.

Scott Haralson: Before I turn it back over to you all for closing remarks, let me summarize comments made regarding our outlook. For Q3, demand is strong, but we're intentionally calling low RPD business, so we don't expect days to grow materially year-over-year, and we expect RPD to be flat to slightly up 1%. Over the remainder of the year, we intend to manage our fleet levels below the same periods in 2023. We expect DPU to be elevated through 2024 before sequentially improving through 2025 until we near the end of the rotation. When we get to the other side of the fleet rotation and have fully executed our transformation, we are targeting the following.

Scott Haralson: RPD in the low 60s, DPU in the low 300s, and DOE per day in the low 30s.

Scott Haralson: I echo Gil in that this is a critical phase for our company. Transformations are never easy, but we are putting the right pieces in place and believe the company's long-term unit economics and overall financial profile are appealing and achievable, and I come to the CFO position confident about our future.

Sandeep Dubey: I echo Gil in that this is a critical phase for our company. Transformations are never easy, but we are putting the right pieces in place and believe the company's long-term unit economics and overall financial profile are appealing and achievable.

Gill West: Now let me hand it back to Gil for a closing comment. Thanks, Scott. Looking ahead, we're optimistic about our prospects. I've been here before, and so is the team. We've got a lot of things going for us. Global travel demand remains strong, and inflation is tempering. Supply chain constraints have abated, and OEM production is on the rise. The macro-environment for our business, combined with our operational strategy, means that we have more opportunities than challenges ahead of us. Our executive team is experienced with executing transformations committed to our strategy. Our employees are also highly dedicated to serving our customers, and I can't thank them enough for their heroism during the CrowdStrike software outage.

Gil West: Thanks, Scott. Looking ahead, we're optimistic about our prospects. We had contingency plans in place that operated as intended.

Speaker Change: Our employees are also highly dedicated to serving our customers, and I can't thank them enough for their heroism during the CrowdStrike software outage. While some companies in the travel industry face challenges from the outage,

Gill West: While some companies in the travel industry face challenges from the outage, we had contingency plans in place that operated as intended. This minimized disruptions and allowed us to continue to go above and beyond for our customers to get them to their destinations.

Gil West: This minimized disruptions and allowed us to continue to go above and beyond for our customers to get them to their destinations. Coming back to our operational strategy, as we mentioned previously, it's likely going to take the rest of the year and through 2025 to fully implement our plans and achieve our desired state of unit economics. Once we do that, I believe the financials of our business will be strong. I'm confident that we have the right strategy, the right team, and the liquidity to get there.

Gill West: Coming back to our operational strategy, as we mentioned previously, it's likely going to take the rest of the year through 2025 to fully implement our plans and achieve our desired state of unit economics. Once we do that, I believe the financials of our business will be strong and confident that we have the right strategy, the right team, and the liquidity to get there.

Sandeep Dubey: Coming back to our operational strategy, as we mentioned previously, it's likely going to take the rest of the year and through 2025 to fully implement our plans and achieve our desired state of unit economics.

Operator: With that, let's open it up for Q&A. We will now open the lines up for questions. Please submit your questions to one question per speaker and one follow-up, if needed. If you wish to remove yourself from the queue, please dial star 1 1 again.

Operator: With that, let's open it up for Q&A. We will now open the lines up for questions. Please send me your questions to one question per speaker and one follow-up if needed. To ask a question, please dial one, start one, one on your phone. If you wish to remove yourself from the queue, please dial start one, one again. One moment for a first question.

Speaker Change: We will now open the lines up for questions. Please submit your questions to one question per speaker and one follow-up if needed. To ask a question, please dial 1-star-1-1 on your phone. If you wish to remove yourself from the queue, please dial star 1-1 again.

Chris Woronka: Our first question of the line of Chris Woronka from Deutsche Bank. Your line is open. Hey, good morning, guys. Thanks for all the details so far and for taking my time on my questions. I guess first one, it's a liquidity question and appreciating what Scott just mentioned about how you took a lot of the, you know, you're actually taking a lot of the cash impact from the, from the excess depreciation already, you know, prior to now.

Chris Woronka: Our first question comes from the line of Chris Woronka from Deutsche Bank. Your line is open. Hey, good morning, guys. Thanks for all the details so far and for taking my questions. Okay. Thanks, Gil.

Speaker Change: Yeah, I guess first one, it's a liquidity question and appreciating what Scott just mentioned about how you took a lot of the...

Scott Haralson: And so, you know, the question is kind of, as you look back, you raised the capital about two months ago. You know, was that the right amount to raise, you know, more or less than, and what are your thoughts on any future liquidity needs?

Gill West: Thanks. Yeah, well, let me start. This is skill.

Scott Haralson: I'll turn it over to Scott, though. I'm sure you'll add more color, but let me just first say, I mean, we quickly built what I would call an all-star executive team with the skills and an execution track record needed for the road ahead. And, you know, with the team in place and then beginning to get momentum, we talked about the transformation strategies and the initiatives we got underway to improve the business. You know, we secured the additional capital to first strengthen the balance sheet and then ensure a more stable liquidity position and then just enhance our flexibility in executing our transformation.

Sandeep Dubey: Yeah, well let me start. This is Gil. I'll turn it over to Scott though. I'm sure he'll add more color, but let me just first say

Scott Harrelson: I mean, we quickly built what I would call an all-star executive team with the skills and an execution track record.

Scott Harrelson: to improve the business.

Scott Harrelson: for Strengthen the Balance Sheet, and then ensure...

Scott Haralson: Should any, I mean, really, should any risk arise, whether, you know, whether those risks are anticipated or unexpected, but the additional capital also allows us to accelerate the fleet rotation that we described. So, man, it also gives us just a longer view to manage the business going forward.

Scott Harrelson: You know, whether those risks are anticipated or unexpected, but the additional capital also allows us to accelerate the fleet rotation that we described, so, and it also gives us just a longer view.

Scott Haralson: Scott. Yeah, and I think flexibility is the key word here. You know, I said in my preparatory marks, my expectations on operating cash flow, you know, through the first half of 25 slightly negative, and then we should generate about 1.5 billion of proceeds from the sale of the vehicles, you know, that we have left to rotate. So, this should cover, you know, most of the needs for the new corporate purchases. You know, there are a number of variables that will influence the cash inflow from the sale, you know, and the outflow required for the new car buy.

Scott Harrelson: to manage the business going forward. Scott. Yeah, no, thanks, y'all. Look, I think flexibility is the key word here. You know, I said in my prepared remarks, my expectations on operating cash flow,

Scott Harrelson: You know, through the first half of 25, slightly negative, and that we should generate about $1.5 billion of proceeds from the sale of the vehicles, you know, that we have left to rotate. So this should cover, you know, most of the needs for the new car purchases. You know, there are a number of variables that will influence.

Scott Harrelson: The cash inflow from the sale, you know, and the outflow required for the new car buy. I mean, the residuals, and number of cars, and type or mix, and...

Scott Haralson: I mean, if residuals and number of cars and type or mix and, you know, cab costs or risk versus program and even the ABS values will influence. So, as we sit today, while it is difficult to predict, it's possible that we're going to require some cash, you know. But now that we have the capital raise, we have the liquidity to evaluate all of our options and not to be pinned into any particular outcome. I mean, that's the liquidity benefit. That's the flexibility. Thank you, Scott.

Scott Harrelson: and not to be pinned into any particular outcome. I mean, that's the liquidity benefit. That's the flexibility.

Chris Woronka: Thanks, Scott. As a follow-up, another fleet question, and this is really, you talk a lot about the discounts that you're getting on the new car buys. You're already in the low 300s of VPU on vehicles you're bringing into the fleet. So, looking forward, do you expect that to hold? Is that a sustainable level?

Scott Haralson: As a follow-up, another fleet question, and it's really, you talk a lot about the discounts that you're getting on the new car buys, and you're already in the low 300s of the VQ vehicles you're bringing into the fleet. So, looking forward, I mean, do you expect that to hold? Is that a sustainable level? Be expected if use car prices continue to moderate or normalize? Do you think that the discounts, potentially, get even larger?

Scott Harrelson: Okay, thanks, Gil. Thanks, Scott. As a follow-up, another Fleet question, and it's...

Speaker Change: Really, you talk a lot about the, you know, discounts that you're getting on the new car buys. You're already in the low 300s of VPU.

Speaker Change: Looking forward, I mean, do you expect that to hold? Is that a sustainable level? Do you expect if used car prices continue to moderate or normalize?

Scott Harrelson: Do you expect, if used car prices continue to moderate or normalize, do you think that the, you know, the discounts could potentially get even larger? And does the fact that you're getting these discounts again make you want to, you know, accelerate your purchases? And also, how do hold periods look on these new purchases versus what you did historically? Thanks. Yeah, no, thanks, Chris.

Scott Haralson: And this is the fact that you're getting these discounts again, make you want to accelerate your purchases, and also how do hold periods look on these new purchases versus what you did historically? Thanks. Yeah, no thanks, Chris. Great question. Well, just to re-emphasize, you know, we're already seeing the deals that get us to the North Star unit economics on DPU. You know, of course, it's always a little hard to predict the dynamics, but I think at least the way that I see it is, you know, most importantly, we're going to be disciplined on the buy side and selective and make sure that the economics work for us.

Scott Harrelson: Great question. Well, um, look, I just want to reemphasize that we're already seeing the deals that get us to North Star unit economics on DPU. You know, of course, it's always a little hard to predict the dynamics. But I think, at least the way that I see it is, you know, most importantly, we're going to be disciplined on the buy side and selective and make sure that the economics work for us.

Speaker Change: what you did historically. Thanks.

Scott Harrelson: So we, you know, we've got, I think, a number of deals in the pipeline, we continue to evaluate, we'll just work with the OEMs. But, you know, I think going forward, the macro environment, my view is, is normalized back to what we've seen historically. So Darren, I don't know if you've got any other comments relative to what you've seen.

Scott Haralson: So, we, you know, we've got, I think, a number of deals in the pipeline. We continue to evaluate; we'll just work with the OEMs. But, you know, the, I think going forward, you know, the macro environment, my view is normalized back to what we've seen historically. So, Darren, I don't know if you've got any other comments relative to what you've seen. The other part of your question was around hold periods, and I think the industry has been pushed into higher hold periods, and I think what is historically normal for us. And as those discounts are coming back into place, the math would tell you to bring the hold period back in line or closer to in line with where things have been before.

Speaker Change: I think a number of...

Speaker Change: The macro environment, in my view, is normalized back to what we've seen historically. So, Darren, I don't know if you've got any other comments relative to what you've seen. The other part of your question was around hold periods. And I think the industry has been pushed into higher hold periods than I think what is historically normal for us. And as those discounts are coming back into place,

Darren Arrington: The other part of your question was around hold periods, and I think the industry has been pushed into higher hold periods, and I think what is historically normal for us.

Darren: The math would tell you to bring the hold period back in line or closer to in line with where things have been before. So we're seeing a lot of deals right now that would benefit from a shorter rotation than what we've been pushed into as an industry. And we look forward to that because that carries a number of benefits.

Scott Haralson: So, we're seeing a lot of deals right now that would benefit from a shorter rotation than what we've been pushed into as an industry. And we look forward to that because that carries a number of benefits beyond just appreciation, but also in terms of the customer and the product that we can offer to the customer, the damage and the maintenance expenses that go along with that. So, I think those aspects of it, besides just the depth, help really transform our business into something that's well said, because I think as the supply side is normalized and we rotate out the fleet, then we can focus on the optimal cell point at a vehicle level, of N number level, I top demise that.

Darren Arrington: And as those discounts are coming back into place, the math would tell you to bring the whole period back in line, or closer to where things have been before. So we're seeing a lot of deals right now that would benefit from a shorter rotation than what we've been pushed into. As an industry, and we look forward to that, because that carries a number of benefits, beyond just depreciation, but also in terms of the customer and the product that we can offer to the customer, damage, and the maintenance expenses that go along with that.

Darren Arrington: So I think those aspects of it, besides just the depth, help really transform our business into something that's healthier. Yeah, so well said because I think as the supply side is normalized, and we rotate out the fleet, then we can focus on the optimal sell point at a vehicle level or in the number level, right to optimize that. So that'll the hold periods may vary, but between vehicle types, but we'll look to optimize that we'll have the luxury of doing it with a supply side and a. Thank you. One moment for our next question. I don't know, Darren, if there's anything you'd like.

Speaker Change: As the supply side is normalized and we rotate out the fleet, then we can focus on the optimal sell point at a vehicle level, a VIN number level.

John Haley: So, that whole period may vary, but in between vehicle types, but we'll look to optimize that, and we'll have the luxury to do it then with the supply side. Okay, very good. Appreciate it. Thanks, guys. Thank you. One moment for our next question.

Speaker Change: to optimize that. So the whole periods may vary between vehicle types, but we'll look to optimize that. We'll have the luxury to do it then with the supply side normals.

John Haley: Our next question will come from John Haley from North Coast Research. Your line is up. Kevin. Thanks for that question. One of the dive in a little bit on RPD. I think it's Slide nine. I think it's pretty important in the deck where you guys talk about kind of getting to that low $62 RPD potential. You talk about kind of moving away for some contractual business. Can you talk to what type of contractual business that is and, you know, how much you need to move away from? And did your RPD this quarter also get the benefit of some of that moving away?

Speaker Change: Thank you. One moment for our next question.

Speaker Change: Our next question comes from John Healy from North Coast Research. Your line is open.

John Healy: where you guys talk about kind of getting to that low $62 RPD potential.

John Haley: So I'm trying to think about just kind of like pure market RPD. And then, you know, what you're kind of moving away from is it the, you know, the PNC business, is it insurance, is it corporate, just trying to understand that?

John Haley: Yeah, John, thanks for the question. So, as you outlined, are not stars to get to the low 60s RPD. In terms of our progression through that over the quarter, basically what we've done is try to call out some of the lower RPD yielding segments. And some of that is a detail and of what comes through from an insurance perspective. Some of them are basically some of the opaque fares that we see coming through. So that's that's primarily what we've kind of deprioritized. That's the low RPD pieces in equation. Now, as we look ahead, we're going to continue to build on customer demand through higher RPD channels.

John Haley: So whether that's direct booking and whether that's other sources that deliver higher RPD back from a customer demand perspective, we're going to dial in on those factors. So that should be a factor that basically continues to enable us to refine our RPD and drive in more premium RPD values. The other factor that I'll bring in place is basically a focus on value added service. So we're doubling down our focus on value added service, which is a, of course, a high margin product offering for us. There is significant scope of optimization in that space. And that's another lever we're going to pull on significantly as we look into the future. Part of your question was whether it had in-quarter impact.

John Haley: Yes, those actions did have an in-quarter impact. And we continue to expect those to have impact over the upcoming quarters. I don't know if there's anything.

John Haley: And then just one question I want to ask just about kind of longer-term fleet plans. I think you've talked about these: the phrase higher cap costs are more expensive cars rotating those out. You know, previously, I think a lot of us were viewing those as the electric vehicles and your fleet. You know, what's your thought about having electric vehicles in the fleet, you know, probably in the medium term here over the next three or four years. Does it make sense for her and the year itself doing that at size, or is an experiment that, you know, the conclusion is it's way too early and maybe not for rental, just kind of what your big picture thought is on the category itself.

Gil West: Um, you know, Gil, what's your thought about having electric vehicles in the fleet, probably in the medium term here over the next three or four years? Does it make sense for Hertz? And do you see yourself doing that at all?

Speaker Change: Probably in the medium term here over the next three or four years.

Gil West: Or was this an experiment that, you know, the conclusion is, is way too early and maybe not for rental? Just kind of what your big picture thought is on the category itself. Yeah, sure. I know, you know, it tends to make a lot of headlines, but I'll just start by saying, you know, EVs are less than 10% of our fleet as it stands today, just to frame it. But and I'll confess, I was born and bred an internal combustion engine enthusiast, growing up in my dad's auto parts store in the 1970s.

Speaker Change: Does it make sense for Hertz.

Speaker Change: And the yourself doing that size or was this an experiment that.

Speaker Change: The conclusion is it's way too early and maybe not for rental just kind of what your big picture thoughts on the category itself.

John Haley: Yes, sure, I know, you know, it tends to make a lot of headlines, but I was just start by saying, you know, EVs are less than 10% of our fleet as it stands today. I'm just a frame at, but I know all come fast. I was born and bred up a internal combustion engine enthusiast growing up in my dad's all the part stores and in the 70s. So, but I do believe EVs are key for the future; the transition and adoption curve is the real question there. So the whole automotive industry, including the OEMs, you know, had been impacted by the headwinds of the mainstream EV buyer adoption.

Speaker Change: Yes, sure I know.

Speaker Change: It tends to make a lot of headlines, but I'll just start by saying.

Speaker Change: Evs are less than 10% of our fleet as it stands today just to frame it but now I'll confess I was.

Speaker Change: Born and bred.

Speaker Change: <unk> combustion engine enthusiasts growing up in my Dad's auto parts stores in the 7% you so but I do believe.

Speaker Change: Evs are key for the future.

Gil West: So, but I do believe EVs are key for the future. The transition and adoption curve is the real question there, right? So the whole automotive industry, including the OEMs, you know, has been impacted by the headwinds of mainstream EV buyer adoption. So just make sure that it points out that this isn't a Hertz-only issue. This is widespread.

Speaker Change: The transition and adoption curve is the real question there so the whole automotive industry, including the Oems.

Speaker Change: Have been impacted by the headwinds of the mine.

Speaker Change: Extreme EV buyer adoption so.

John Haley: So, just make sure that it pointed out that this isn't a hurts-only issue. This is widespread, you know, trying to predict the and match supply and demand the EV adoption curve. So it has slowed that curve with consumers, and most OEMs, of course, are adjusting their production plans for EVs. So, you know, predicting that I would argue probably the whole automotive industry went just too far too fast relative to what the actual adoption curves were. It hurts. We've been adjusting for that, as you know. So, but ultimately, you know, our aim is to really give customers a choice of what vehicles they want and drive, and that includes EVs.

Speaker Change: And just make sure that.

Speaker Change: Wanted out that this isn't a hertz only issue this is widespread.

Gil West: You know, trying to predict the and match supply and demand for EV adoption curves. So it has slowed that curve with consumers, and most OEMs, of course, are just in their production plans for EVs. So, you know, predicting that I would argue the whole, the whole automotive industry went just too far, too fast relative to what the actual adoption curves were. It hurts.

Speaker Change: Trying to predict the end match supply and demand to EV adoption curve. So it has slowed that curve with consumers and most Oems of course are just in there.

Speaker Change: Production plans for Evs so.

Speaker Change: Predicting that I would argue probably the whole the whole automotive industry went too far too fast relative to what the actual adoption curves were.

Gil West: We've been adjusting for that, as you know, but ultimately, you know, our aim is to really give customers a choice of what vehicles they want and drive, and that includes EVs. So, you know, we've gone through and rationalized our EV fleet, and then we're allocating it across our businesses to maximize, of course, RPD, but also get the right product market fit to do that with our customers. And so, you know, we've got three channels to optimize that with, right? So we've got airports, we've got our off-airport operations, and then we've got our ride hail business. And all three have different product market fits and RPD profiles.

Speaker Change: Hertz, we'd been adjusting for that as you know so.

Speaker Change: But ultimately.

Speaker Change: Our aim is to really give customers a choice of what vehicles, they want and drive and that includes EV. So we've gone through and rationalized, our EV fleet and we're allocating it across our businesses and to maximize course, our PD, but also.

John Haley: So, you know, we've gone through and rationalized our EV fleet, and then we're allocating it across our businesses and to maximize, or sorry, PD, but also get the right product market fit to do that with our customers. And so, you know, we've got three channels to optimize that with, right? So, we've got, we've got airports, we've got our all fair port operations and then we've got our ride help business, and all three have different product market fits and RPD profiles. So, we have the ability to find that natural demand for EVs and then, you know, in terms of, you know, how our EV fleet looks going forward, the ins and outs of that, ins and outs of that, then we just look to ensure that our fleet matches that natural demand and then adjust accordingly and that that will just be a normal course of business for us going forward.

Speaker Change: Get the right product market fit to do that with our customers and.

Speaker Change: So.

Speaker Change: We've got three channels to optimize that with right. So we've got we've got airports. We've got our off airport operations and then we've got our ride hail business and all three have different product market fit in our PD profiles. So we have the ability to find that.

Gil West: So we have the ability to find that natural demand for EVs. And then, you know, in terms of how our EV fleet looks going forward, the ins and outs of that, then we'll just look to ensure that our fleet matches that natural demand and adjust accordingly. And that that, that'll just be a normal course of business for us going forward. It's the same as any, any of our other fleets.

Speaker Change: Natural demand for Evs and then.

Speaker Change: In terms of.

Speaker Change: How are you be fleet looks going forward, the ins and out of that ins and outs of that then we just look to ensure that our fleet matches that natural demand and adjust accordingly.

Speaker Change: That'll just be a normal course of business for us going forward. It's the same as any any of our fully so.

John Haley: It's the same as any of our fleet. So, you know, that's that's how we see these. Thank you.

Gil West: So, you know, that's, that's, that's how we see it. Thank you. One moment for our next question. Our next question comes from the line of John Babcock from Bank of America. Your line is open.

Speaker Change: That's how we see these.

John Babcock: One moment for our next question.

Speaker Change: Thank you one moment for our next question.

John Babcock: Our next question comes from line of John Babcock from Bank of America. Your line is open. Hey, come on in. Thanks for taking my questions. Just quickly on the fleet, since we've been discussing that a little bit, I was just wondering if, you know, as you're completing the fleet refresh, that's going to lead to any sort of notable change in mix, you know, with relative to how Hertz has been operating recently. Yeah, I think, yeah, it will, I think, is the conclusion or that would that would be our desire because I think if you go back during the COVID production period when there was a limited supply of vehicles to acquire, our mix effectively was skewed outside the core demand, and as we're rotating out the fleet, you know, we're focused to try to rectify that from a mix standpoint.

Speaker Change: Our next question comes from the line of John Babcock from Bank of America. Your line is open.

John Babcock: Hey, good morning, and thanks for taking my questions. Um, just quickly on fleet, since we've been discussing that a little bit, I was just wondering if, you know, as you're completing the fleet refresh, if that's going to lead to any sort of notable change in mix relative to how Hertz has been operating. And there are some of those mixes, you know; some of those mixes candidly stand out more than others.

John Babcock: Hey, good morning, and thanks for taking my questions.

John Babcock: Just quickly on fleet since we've been discussing that a little bit I was just wondering if either.

John Babcock: Completing the fleet refresh that that's going to lead to any sort of notable change in mix.

Speaker Change: Relative to how Hertz has been operating recently.

Speaker Change: Yes, I think yes. It will I think is the conclusion of that would that would be our desire because if.

Speaker Change: If you go back during the.

Speaker Change: Covid production period, when there was a limited supply of vehicles to acquire.

Speaker Change: Our mix effectively was skewed outside the core demand and as we are rotating out of fleet.

Speaker Change: We're focused.

Speaker Change: To try to try to rectify that from a mix standpoint, so yes, I think as we rotate the fleet that will our mix will more normalize around where the core demand profiles are.

John Babcock: So yeah, I think as we rotate the fleet, that will, our mix will more normalize around where the core demand profiles are.

John Babcock: Are you able to detail what you know, if you was kind of that core demand? I mean, is that more C of the SUV related, you know, with, you know, based on kind of where the market's gone, or does that stand more in this, at hand side? You know, any details you can provide there? Yeah, we prefer not to kind of tip our hand relative to the specifics of the fleet mix, but just know where, you know, we certainly see the booking patterns of our customers. We, of course, measure their desires in terms of fleet preferences.

Speaker Change: Are you able to detail what you view as kind of that core demand I mean is that more CV SUV related.

Speaker Change: Based on kind of where the market's corner does that stand more on the sedan side.

Speaker Change: Any details you can provide there.

Speaker Change: Yeah, we prefer not to kind of tip, our hand relative to the specifics of the fleet mix, but just know were.

Speaker Change: We certainly see the booking patterns of our customers we of course measure there.

Speaker Change: Their desires in terms of fleet.

Speaker Change: Preferences and then.

John Babcock: And then, you know, we've, we've modeled that, you know, across the board, literally at a, you know, at a, not just classification type, but, you know, within the subclassifications, what our ideal state would be. And then we overlay the supply side purchasing opportunities on top of that, really, to make the selections of what vehicles will require. So, in terms of methodology, that's how we're looking at it. And there are some of those mixed, you know, that, some of those mixes, candidly, stand out more than others, and those are the ones we emphasize on the buy side.

Speaker Change: We modeled that across the board literally.

Speaker Change: Not just classification type, but within the sub classifications, what our ideal state would be and then we overlay.

Speaker Change: On the supply.

Speaker Change: Syed purchasing opportunities on top of that really to make the selections of what vehicles. We acquire so in terms of methodology. That's how we're looking at.

Speaker Change: And there are some of those and maybe I missed that.

Speaker Change: Some of those mixes candidly stand out more than others and those are the ones we emphasize on the buy side.

Gil West: And those are the ones we emphasize on the buy side. Yeah, in terms of markets, do you mean specific locations, then having the right allocations? Yeah, that's, and then, of course, with Sandeep coming on board and Scott, I think as we move forward, and especially as we plan the business and plan for the seasonal adjustments, which we're in the middle of right now, thinking about it at a market level, to your point, is very important. And understanding the kind of economics of those markets, both on the revenue side, as well as on the cost side, and then the customer demand patterns within those markets, right?

John Babcock: Okay, that's helpful.

Speaker Change: Okay. That's helpful.

John Babcock: You know, and then just the next question. I mean, you talked about trying to, you know, rather than efforts to improve our PD and also some of the efforts on the cost-cutting side, you know, within the business. You know, but one of the other things that we've heard in and totally, you know, is that that hurts ultimately has room to improve in terms of getting the right vehicles into the right markets. So, I'm just wondering what you are doing to address that side of the business, you know, especially since that can have a lot, a lot of impact on the supply, demand dynamics.

Speaker Change: And then just next question I mean, you talked about trying to.

Speaker Change: Rather the efforts to improve our PD and also some of the efforts on the cost cutting side within the business.

Speaker Change: But one of the other things that we've heard anecdotally.

Speaker Change: Is that hurts ultimately has room to improve in terms of getting the right vehicles into bright markets. So I was just wondering what you are doing to address that side of the business.

Speaker Change: Especially in a sense.

Speaker Change: Have a lot of a lot of impact on the supply demand dynamics.

John Babcock: Yeah, in terms of markets, you mean specific locations, then having the right allocations. Yeah, that's right. Yeah. Yeah, so, um, yeah, there's, um, and then, of course, with CND coming on board and Scott, I think, as we move forward, and especially as we plan the business and plan for the seasonal adjustments, which we're in the middle of right now, thinking about it at a market level, to your point, is very important. And understanding and of the economics of those markets, the, both on the revenue side as well as on the call side, and then the customer demand patterns within those markets, right?

Speaker Change: Yes in terms of markets, you mean specific locations than I have in the right allocations.

Speaker Change: Yes, that's right.

Speaker Change: Yes.

Speaker Change: Yes so.

Speaker Change: Yes, there is.

Speaker Change: And then of course with Sandeep coming onboard and Scott I think as we move forward.

Speaker Change: Especially as we plan the business.

Speaker Change: And plan for the seasonal adjustments, which were in the middle of right now.

Speaker Change: Thinking about it at a market level to your point is very important.

Speaker Change: Understanding the economics of those markets.

Speaker Change: Both on the both on the revenue side as well as on the cost side and then the customer demand patterns within those markets right. The mix as we were talking about earlier varies from market to market of course, and then getting those allocations right.

Gil West: The mix, as we were talking about earlier, varies from market to market, of course, and getting those allocations right without trying to minimize the amount of movements that we have within our fleet because there's a cost associated with that. So there's definitely a lot of focus around that to try to optimize it. Now, we have the ability, of course, as we acquire and dispose of vehicles, to do that naturally when we take delivery.

John Babcock: The mix, as we were talking about earlier, varies from market to market, of course, and then getting those allocations right, without, you know, trying to minimize the amount of movements that we have within our fleet, because there's a cost associated with that. So, there's definitely a lot of focus around that to try to optimize it. Now, we have the ability, of course, as we acquire and dispose of vehicles to do that naturally, where we take delivery. So, um, that, that ultimately is the lever to execute around those points.

Speaker Change: Without trying to minimize.

Speaker Change: The amount of movements that we have within our fleet because theres a cost associated with that.

Speaker Change: So there is definitely a lot of focus around that to try to optimize it now we have the ability of courses we.

Speaker Change: As we acquire and dispose of vehicles that do that naturally when we take delivery. So that that ultimately is the lever to execute around those plants.

Gil West: So that ultimately is the lever to execute on those plans. Hey, yeah, thanks, John. This is Scott.

John Babcock: And then, I'm sorry if you don't mind, just one more question, just with everything you've talked about.

Speaker Change: Okay, and then sorry, if you don't mind just one more question just.

Speaker Change: Sure.

Scott Haralson: Are you sticking to the same cost-cutting goals that you've laid out previously? Hey, yeah, thanks, John. This is Scott. So, I hinted to this sort of a little bit in my prepare to march, but I think maybe best to sort of unpack the philosophy a bit. So, my overall cost management philosophy will be to sort of manage the entire P&L. I know initiatives were discussed in the past. And then those items are obviously still being worked along with many other items across the business. And so I think it's just good cost management to think about it that way.

Speaker Change: You've talked about or are you sticking to the same cost cutting goals that you've laid out previously.

Scott Harrelson: So I hinted at this sort of a little bit in my prepare to march, but I think maybe it's best to sort of unpack the philosophy a bit. So my overall cost management philosophy will be to sort of manage the entire P&L. I know initiatives have been discussed in the past, and those items are obviously still being worked on along with many other items across the business. And so I think it's just good cost management to think about it that way. I mean, we view it as a lifestyle change.

Scott Harrelson: Hey, Thanks, John This is Scott.

Speaker Change: So I hinted to this sort of a little bit in my prepared remarks, but I.

Speaker Change: I think maybe best to sort of unpack the philosophy a bit so I mean, my overall cost management philosophy philosophy will be to sort of manage the entire P&L.

Speaker Change: I know initiatives were discussed in the past and those items are obviously still being worked along with many other items across the business and so I think it's it's.

Speaker Change: It's just good cost management to think about it that way I mean, we view it as a lifestyle change.

Scott Haralson: I mean, we view it as a lifestyle change. It's not just about managing initiatives or projects. So, I think, as I mentioned in the remarks, measure us on sort of DOE. We'll probably get away from identifying specific things. Specific projects and itemizing those things. I think it's just tough to reconcile. So, I think, look, the two important takeaways are: the North Star metric on DOE in the low 30s is sort of our target. It's attainable, but given the items that we have to address, I think it's going to take us a year or so. So, it's going to be a gradual move, but measure us on that DOE metric.

Scott Harrelson: You know, it's not just about managing initiatives or projects. So, you know, I think, as I mentioned in the remarks, measure us on the sort of DOE will probably get away from, you know, identifying specific projects and itemizing those things. I think it's just tough to reconcile.

Speaker Change: Not just about managing initiatives or projects so.

Speaker Change: I think as I mentioned in the remarks, you to measure us on sort of dose will probably get away from.

Speaker Change: Identifying specific projects in Itemizing those things I think it's just tough to reconcile.

Scott Harrelson: So I think the two important takeaways are, you know, the North Star metric on DOE in the low 30s is sort of our target. It's attainable, you know, but given the items that we have to address, I think it's going to take us a year or so. So, you know, it's going to be a gradual move, but measure us on that DOE metric. Our next question will come from Stephanie Moore from Jefferies. Your line is open.

Speaker Change: So I think look the two important takeaways are the north star metric on D. O in the low Thirty's is sort of our target it's attainable.

Speaker Change: But given the items that we have to address I think it's going to take us a year or so so.

Speaker Change: It's going to be a gradual move but measure us on that on that metric.

Scott Haralson: Okay. Thank you. Appreciate it. Thank you.

Speaker Change: Okay. Thank you appreciate it.

Stephanie Moore: One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Stephanie Moore: Our next question will come from I know Stephanie Moore from Jeffries. Your line is open. Hi, good morning. Thank you. I appreciate the other incremental color on the fleet refresh and the actions that you're taking over the next year plus. I wanted to get your opinion and kind of your appetite. I'm potentially increasing the number of program cars in the US as a percentage of your fleet. Clearly, it was much higher pre-COVID; it's higher in the higher internationally. So, we'd love to get your thoughts in terms of being able to move forward with that and kind of your appetite as well as OEM related.

Speaker Change: Our next question will come from the line of Stefan anymore from Jefferies. Your line is open.

Stefan anymore: Hi, good morning, Thank you.

Scott Harrelson: I appreciate that you're giving me incremental color on the fleet refresh and the actions that you're taking over the next, you know, year plus. You know, I wanted to get your opinion and kind of your appetite on potentially increasing the number of program cars in the U.S. as a percentage of your fleet. Clearly, it was much higher pre-COVID, it's higher in the higher international rankings, so I would love to get your thoughts in terms of being able to move forward with that and your kind of appetite as well as OEM willingness.

Stefan Armore: I appreciate the incremental.

Stefan anymore: Color on the fleet refresh in the actions that you're taking over the next year plus.

Stefan anymore: I wanted to get your opinion and kind of your appetite on potentially increasing the number of program cars in the U S. As a percentage of your fleet clearly it was much higher pre COVID-19 is higher and higher internationally. So I'd love to hear your thoughts in terms of being able to move forward with that and kind of your appetite as well as OEM Molina. Thanks.

Stephanie Moore: Thanks. Yeah. Thanks, Stephanie. I appreciate that question. I mean, we certainly recognize the program cars is a lever to help us manage the fleet rotation domestically and internationally. So, as we think about it, the dynamics, of course, are typically the financing in terms of how much equity is required to finance the vehicles less on a program car. Some trade also and kind of total vehicle carrying cost with it, but it also, as you know, helps us mitigate the residual risk exposure. So, we do want to think of it as a balanced profile, but I would also say that the markets or the dynamics are different internationally versus domestically.

Speaker Change: Yes, Thanks, Stephanie I appreciate that question, Yeah, I mean, we certainly.

Speaker Change: Recognize the program cars as a as a lever to.

Speaker Change: To help us manage the fleet rotation domestically and internationally.

Speaker Change: Yes, as we think about the dynamics of course are typically.

Speaker Change: Financing in terms of how much equity is required to finance the vehicles, whilst on a program car. Some tradeoffs on kind of total vehicle carrying cost with it but it also.

Speaker Change: It helps us mitigate the residual risk exposure here. So we do want to think of it as a balanced profile, but I would also say that the markets are the dynamics are different international versus domestically. So we'll likely tend to use more program cars internationally than.

Stephanie Moore: So, we'll likely tend to use more program cars internationally than domestically. But, I also think the supply side's important in that, you know, generally we're seeing more supply availability with program cars than we have in over the last couple of years. So, we do have the luxury of that kind of tool is, you know, available to us as we manage the rotation of the fleet.

Speaker Change: Equally but I also think the supply side is important in that.

Speaker Change: Generally we're seeing.

Speaker Change: More supply availability with program cars and we have over the last couple of years. So we.

Speaker Change: We do have the luxury of of that kind of tool.

Speaker Change: Available to us as we manage the rotation of the fleet. So we will look to we will look to play some of that in that as we move forward.

Stephanie Moore: So, we'll look to play some of that in as we move forward. Thank you.

Stephanie Moore: Thanks. Thank you. And then, maybe, one for you, Scott, here.

Scott Haralson: And then maybe one for you, Scott, here, in terms of kind of up your updated liquidity profile. I think you did call out in your prepare remarks the possibility of having to make incremental lease payments to your ABS, just given the movement that we've seen in residual values. I think you know if we look at where man high and another third party sites have kind of reported declining use car values on a monthly basis, it does seem to be a little bit greater than greater than you guys would be planning here. So maybe if you could just expand on that likelihood of having to make those incremental lease payments and kind of your positioning and able to do so.

Speaker Change: Thank you and then maybe one for you Scott here.

Scott Harrelson: In terms of kind of your updated liquidity profile.

Stephanie Moore: In terms of the kind of your updated liquidity profile, I think you did call out in your prepared remarks the possibility of having to make incremental lease payments to your APS, just given the movement that we've seen in individual values. I think, you know, if we look at where Mannheim and other third-party sites have kind of reported declining used car values on a monthly basis, it does seem to be a little bit greater than, you know, greater than you guys would be planning here. So maybe if you could just expand on that likelihood of having to make those incremental lease payments and your kind of position to do so. Thanks.

Speaker Change: I think you did call out in your prepared remarks that possibility of having to make incremental lease payments.

Scott Harrelson: Just given the movement that we've seen in residual value I think if we look at where Mannheim. Another third party site has kind of reported declining used car values on a monthly basis. It does seem to be a little bit greater than.

Speaker Change: Greater than you guys would be planning here. So maybe if you could just expand on that likelihood of having to make those incremental lease payments and kind of your positioning and able to do so.

Scott Haralson: Thanks. Yeah, Stephanie, thanks. Thanks for the question. Yeah, and I think, you know, I mentioned I hinted at it in the prepared remarks that, you know, we're obviously have a bit of cushion today and compliance. I think as we look forward, you know, I think there is, you know, a likelihood that on the US side of the ABS facility, given the decline of residuals, we do estimate that we're probably going to have to make, you know, sort of clean up there and that facility, probably a payment in the city. Sort of 50 to $100 million range, which again, you know, the liquidity, you know, enhancement does provide us that ability to do that.

Scott Harrelson: Yeah, Hey, Stephanie thanks, Thanks for the question.

Speaker Change: Yeah, and I think mentioned I hinted at it in the prepared remarks that we're obviously haven't been a cushion today and then compliance I think as we look forward I think there is.

Scott Harrelson: A likelihood that on the on the U S side of the ABS facility given the decline in residuals.

Scott Harrelson: We do estimate that we're probably going to have to make.

Scott Harrelson: Sort of clean up there in that facility, probably a payment in the sort of $50 million to $100 million range, which again the liquidity enhancement does provide us that ability to do that.

Scott Haralson: And we do hope that that's temporary, sort of given, given where things will move to over time as well. But there was a likelihood that we do have to do that.

Scott Harrelson: We do hope that that's temporary sort of given given where things will move to over time as well, but there is a likelihood that we do have to do that.

Operator: All right. Thank you, everybody. Thank you. One moment for next question.

Operator: All right. Thank you, everybody. Thank you.

Speaker Change: Alright, Thank you everybody.

Ian Zaffino: One moment for our next question. Our next question comes from the line of Ian Zaffino from Oppenheimer. Your line is open.

Speaker Change: Thank you one moment for our next question.

Ian Zaffino: Our next question is going to the line of Ian Zafino from Oppenheimer. The line is open. Thank you very much. I know you talked in the past about some some premiumization, the fleet, et cetera, and the business. Can you tell us how that's progressing? You know, what are you trying to do on that side? And then also how does that kind of square with, you know, just bringing in a lower cost fleet, or does that not matter? Thank you. Yeah. If I understand your question right, feel free to follow up if needed. But, you know, I think as we think about the fleet rotation.

Speaker Change: Our next question comes from the line in <unk>.

Speaker Change: Zaffino from Oppenheimer. Your line is open.

Gil West: Gil, I know you talked in the past about some premiumization of the fleet, etc., and the business. Can you just tell us how that's progressing? You know, what are you trying to do on that side?

Zaffino: Thank you very much.

Zaffino: I know you talked in the past about some some premium amortization and the fleet et cetera in the business can you maybe tell us how that's progressing what are you trying to do on that side and then also how does that kind of.

Gil West: And then also, how does that kind of... square with, you know, just bringing in a lower cost fleet, or does that not matter? Okay, and then, you know, maybe as a follow-up, I just kind of wanted to get your sense of commitment to managing the fleet as far as trying to keep RPDs up. Is it a matter of you'll just shrink the fleet to whatever it takes to keep RPDs up? Is there any point where there's somewhat of a trade-off between price and transaction fees? Okay, great. Thank you very much.

Speaker Change: Square wave just for.

Speaker Change: In our lower cost fleet or does that not matter.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah, if I understand your question right feel free for a follow up if needed but.

Speaker Change: I think as we think about the fleet rotation.

Gill West: As we talked about earlier, the mixes is important to get right and trying to align that with, you know, our customer demand patterns is important. And then that ultimately optimizes, you know, our return on assets. So that's at a macro level, how we're thinking about it. I think that the, and that's a mix from everything in vehicle types, right? From you know, luxury SUVs to compact. So the other piece of it though, and I think probably where your point was, is, as we rotate the fleet, you know, with a new fleet. And then likely adjust our whole periods.

Speaker Change: As we talked about earlier the mix is important to get right and trying to align that with our.

Speaker Change: Our customer demand.

Speaker Change: Patterns is important and then that ultimately optimizes.

Speaker Change: Return on assets. So that's at a macro level, how we're thinking about it I think.

Speaker Change: And Thats a mix from everything of vehicle types right from.

Speaker Change: Luxury S.

Speaker Change: <unk> two.

Speaker Change: Compact so.

Speaker Change: The other the other piece of it though and I think probably where you are.

Speaker Change: Was is as we rotate the fleet.

Speaker Change: With a new fleet, and then likely adjust our whole periods.

Gill West: To short our whole periods and what we've done, you know, over the last few years, at least. That, that provides an improvement from a customer experience standpoint because of the condition of the vehicles at an aggregate level. It's right. It's lower mileage, newer vehicles, as we rotate out the fleet. So there is a premium experience associated with that. And in turn, you know, we, we, you know, we see, we see in the marketplace that the better the experience, the more pricing power that we create. And loyalty that's generated. So we're able to monetize that. So, you know, we see the benefit we think on the revenue side, but certainly also on the call side, because the newer fleet requires, you know, less maintenance cost associated with it.

Speaker Change: Two shorter hold periods and what we've done over the last few years at least.

Speaker Change: That that provides.

Speaker Change: An improvement from a customer experience standpoint, because of the condition of the vehicles at an aggregate level right. It's lower mileage newer vehicles as we rotate out the fleet. So there is a premium experience associated with that and in turn.

Speaker Change: We.

Speaker Change: We see we see in the marketplace that the better the experience more pricing power that we create.

Speaker Change: And loyalty that's generated so we're able to monetize that so.

Speaker Change: We see the benefit we think on the revenue side, but certainly also on the cost side because the newer fleet requires less maintenance cost associated with it. So there is.

Gill West: So there's, there's other benefits to rotating the fleet beyond just DPU that we see as tailwinds that are generated as part of the fleet rotation.

Speaker Change: There is other benefits to rotating the fleet beyond just <unk>.

Speaker Change: With that we see as tail winds that are generated as part of the fleet rotation.

Sandeep Dube: Okay, and then maybe as a follow-up, I just kind of wanted to get your sense of commitment to managing the fleet as far as trying to keep RPDs up. Is it a matter of you'll just shrink the fleet or whatever it takes to keep RPDs up? Is there any point where there's some sort of a trade-off between price and transaction fees? Thank you.

Speaker Change: Okay and then.

Speaker Change: Maybe as a follow up I, just kind of wanted it.

Speaker Change: Get your sense of commitment to managing the fleet as far as.

Speaker Change: Trying to keep Rpgs.

Speaker Change: Is it a matter of Youll, just shrink the fleet to whatever it takes to.

Speaker Change: Keep our PD up is there any point, where there is somewhat of a trade off.

Speaker Change: But between price and transaction days. Thank you.

Sandeep Dube: Ian, this is Sandeep here. I think we talked earlier in the call about calling at the lower end from an RPD perspective. That being said, there's a huge focus on generating greater customer demand, right? And we're actually focusing on that from multiple, multiple, multiple angles, whether it's going after greater direct booking channel demand, whether it's actually defining and elevating the value proposition of our dollar brand. The other element that I'll mention is actually improved ability using technology in terms of our revenue management, pricing, and forecasting tools. There are multiple angles; there's a multi-pronged approach we're taking in basically elevating customer demand and our ability to forecast that demand.

Ian: Okay Ian.

Speaker Change: Is this on the Pierre.

Speaker Change: I think we talked earlier in the call about calling at the lower end from an RPT perspective that being said, there's a huge focus on generating greater customer demand.

Speaker Change: And we are actually focusing on that from multiple multiple multiple angles, whether it's it's.

Speaker Change: Going out there greater direct booking.

Speaker Change: Channel demand, whether it's actually.

Speaker Change: Defining and elevating the value proposition of our dollar brand.

Speaker Change: The other element that I'll I'll mentioned is actually an improved ability using technology.

Speaker Change: In terms of our revenue management pricing and forecasting tools there are multiple angles.

Speaker Change: Multi pronged approach, we're taking in basically elevating customer demand and our ability to forecast that they model. So I think all of that should lead to basically our ability to basically.

Sandeep Dube: So I think all of that should lead to basically our ability to basically continue to expand demand for our brand, and that should kind of counter what we're doing in terms of calling at the lower end. Okay, great. Thank you very much. Thank you. One moment for our next question.

Speaker Change: And you're going to expand demand for our brands and that should kind of counter what are you doing in terms of calling at the lower end.

Speaker Change: Okay, great. Thank you very much.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yes.

Christopher Stathoulopoulos: Our next question of line of Christopher Stathopoulos from SIG. Elan is open.

Operator: One moment for our next question. Our next question comes from the line of Christopher Stathoulopoulos. Good morning, everyone.

Speaker Change: Our next question comes from the line of Christopher startup Lewis from <unk>. Your line is open.

Scott Haralson: Good morning, everyone. Gil, congrats on getting the team in place here. So this was originally a two-part question, but I'm going to combine this into one. So Gil or Scott, appreciate all the detail on the algo, if you will, as we think about the vehicle sales and costs, how that ties into the ABS facility, and the cash impact here. But I'm wondering if you put, I think you have some sort of soft targets out here. The second quarter, next year, is one year and the next. I just want to better understand kind of the assumptions around demand, and of course, the second area used to car market.

Speaker Change: Good morning, everyone.

Christopher Stathoulopoulos: Gil, congrats on getting the team in place here. So this was a. Sales and cost, how that ties into the ABS facility and the sort of cash impact here. But I'm wondering if you put, I think, you know, you have some sort of soft targets out here. The second quarter of next year is one, year end of next. I just wanna better understand kind of the assumptions around demand and, of course, the secondary or used car market.

Gil West: Gil congrats on getting the team in place here.

Speaker Change: So this was.

Christopher Lewis: Originally a two part question, but I'm going to combine this into one so giller Scott.

Speaker Change: Appreciate all the detail on the Algo, if you will as we think about.

Speaker Change: The vehicle.

Speaker Change: Sales and cost how that ties into the ABS facility.

Speaker Change: And sort.

Speaker Change: The cash impact here, but I'm wondering if you put I think.

Speaker Change: Have some sort of soft targets out here in the second quarter next year is one year end of next I just wanted to better understand kind of the assumptions around demand and of course secondary or used car market. Scott as you know theres a lot of influx here.

Scott Haralson: Scott, as you know, there's a lot of flux here with the airlines today and, by extension, certain airport locations. I guess, the short of it is, is there a scenario where you could get to these desired unit economics or road before year and 25? I mean, is there sort of some cushion contemplated in here? I just want to better understand kind of the core assumptions or KPIs that you have baked into these timelines. Thanks.

Scott Harrelson: Scott, as you know, there's a lot in flux here with the airlines today, and by extension, you know, certain airport locations. I guess, you know, the short of it is, is there a scenario where you could get to these desired unit economics or ROIC before? Yeah, hey, Chris. Good to see you again under different colors this time, or the same colors, but a different brand. So good to talk to you again.

Speaker Change: With the airlines today and by extension certain airport locations.

Speaker Change: The short of it is there a scenario where you could get to these desired unit economics or ROIC before year end 25, meaning is there sort of some cushing contemplated in here I just wanted to better understand.

Speaker Change: Core assumptions, our kpis that you have baked entities.

Speaker Change: Thanks.

Scott Haralson: Yeah, hey, Chris. Good to see you again, under different colors this time or same colors, but different brand. So good to talk to you again. No, I think, look, I mean, I think what we're doing now is we're trying to take, you know, a new eye to the analysis here. And I think what we're doing is laying out a very methodical, realistic, achievable plan. But there are a lot of variables here, Chris. I mean, you can imagine the number of components here. So we're creating flexibility. We're thinking about this in a way that obviously has a bent towards acceleration because that obviously has the most benefit to us: to get out of the high cost cars into lower cap cost cars as quickly as possible.

Speaker Change: Yeah, Hey, Chris good to see you again under different different colors. This time, where same colors, but to have brand.

Scott Harrelson: No, I think, look, I mean, I think what we're doing now is we're trying to take a new eye to the analysis here. And I think what we're doing is laying out a very methodical, realistic, achievable plan. But there are a lot of variables here, Chris. I mean, you can imagine the number of components here.

Chris Woronka: So good to talk to you again.

Speaker Change: No I think look I mean.

Speaker Change: What we're doing now is we're trying to take.

Speaker Change: Our new <unk> to the analysis here and I think what we're doing is laying out a very methodical realistic achievable plan.

Speaker Change: But there are a lot of variables here, Chris I mean, you can imagine the number of components here, so we're creating flexibility.

Scott Harrelson: So we're creating flexibility where we think about this in a way that obviously has the most benefit to us to get out of the high cost cars into lower cost cars as quickly as possible. But there are constraints to that. So we have to manage all the ins and outs of that. So I mean, right now, look, we're sort of putting those sorts of metrics out at the end of 2025.

Speaker Change: Where we're thinking about this in a way that that obviously has a bit towards acceleration because that obviously has the most benefit to us is to get out of the high cost cars into lower cap calls cars as quickly as possible, but there are constraints of that so we have to manage all the ins and outs of that.

Scott Haralson: But there are constraints of that. So we have to manage all the ins and outs of that. So I mean, right now, look, we're sort of putting out those sort of metrics at the end of 2025. And as we go through and get more game film, you know, what will update you along the way, but that's sort of what we're looking at today. I mean, there's always the possibilities that things will change for good or for worse. But, but I think right now that's that's our plan. And we're going to go and execute to it.

Speaker Change: I mean, right now look we're sort of putting out those sort of metrics at the end of 2025.

Scott Harrelson: And as we go through and get more game footage, you know, we'll update you along the way. But that's sort of what we're looking at today. I mean, there's always the possibility that things will change for good or for worse. But I think right now, that's our plan. And we're going to go and execute it on it. So, you know, I'll pause there, Gil. I don't know if you want to add some or Cindy, but you know.

Speaker Change: And as as we go through and get more game film, we'll update you along the way, but but that's sort of what we're looking at today I mean, theres always the possibility that things will change for good or for worse, but but I think right now that's our plan and we're going to go and execute to it so ill pause there I don't know if you want to add some or sandy but.

Sandeep Dube: So, you know, I'll pause there. I don't know if you want to add some, or Cindy. But, you know, no, I think that summarized it. Well, I mean, I just double up that to the degree. I think the pace of all this will be on the supply side. So we would want to lean into that, you know, if possible. But I mean, that ultimately will pace every time. Yeah, no good call out there.

Sandy: No I think so.

Gil West: No, I think that summarized it. Well, I just doubled that to the degree that I think the pace of all this will be on the supply side. So we would want to lean into that, you know, if possible. But I mean, that ultimately will pace everything. No good call out there.

Sandy: <unk> well.

Speaker Change: They'll go up to the degree I think.

Speaker Change: <unk> of all of those will be on the supply side. So we would we would want to lean into that.

Speaker Change: If possible, but I mean that ultimately or pace of refunds if no good call out there.

Sandeep Dube: Okay, it's the follow-up for Sandeep, and congrats on the role.

Speaker Change: Okay, and just a follow up for Sandeep Congrats on the road so.

Sandeep Dube: So you spoke about sizing the fleet within demand.

Speaker Change: You spoke about.

Operator: Sizing the Fleet Within Demand. And my question, one of my questions was, you know, what that would entail in terms of fleet composition. I think, Gil, you said you didn't want to, quote, tip your hand on that. But if we move to the value-added services piece, as it was moving before, we're pursuing this more frictionless customer experience. So if you could, could you kind of give a little bit more color or detail, if you will, on what this value-added services piece might be?

Sandeep Dubey: Sizing the fleet within demand.

Sandeep Dube: My question, one of my questions, was on, you know, what that would entail in terms of fleet composition. I think you said you didn't want to quote, tip your hand on that, but if we move to the value added services piece, I'm assuming a big piece of that has to do with technology. Priorit was moving or pursuing this more frictionless customer experience.

Speaker Change: My question one of my questions was on what that would entail in terms of fleet composition I think you.

Speaker Change: You said you didn't want to tip your hand on that but if we move to the value added services piece.

Speaker Change: Assuming a big piece of that has to do with technology.

Speaker Change: Prior it was moving we're pursuing this more frictionless customer experience. So if you could could you kind of give a little bit more color.

Sandeep Dube: So if you could, could you kind of give a little bit more color or detail, if you will, on what this value-added services piece might look like? Thank you. Yeah, absolutely. Christopher, thank you. Yeah, on the value of the piece, I'd say that they're basically two specific aspects I would call out, right? Merchandising and pricing. I think, and look at merchandising, value added services about basically matching up the right product with the right customer at the right time. And even if you take a look at our direct channel, and then there are other channels where we sell value added service as well, primarily at the counter, being a big one.

Speaker Change: Detailed if you will on what this value added services piece might look like thank you.

Speaker Change: That's super Thank you.

Speaker Change: Yes on the value added piece I would say the basically.

Speaker Change: Two specific aspects that I would call out right merchandising and pricing.

Speaker Change: I think.

Speaker Change: Look at merchandising value added services about basically matching up the right product with the right customer at the right time.

Speaker Change: And even if you take a look at our direct booking channel and then there are other channels that we sell value added services as well primarily at the counter being a big one.

Sandeep Dube: There's significant, the significant opportunity in terms of putting that right product in front of the right customer. A lot of that is technology enabled both on our direct booking channel as well as at the counter. So that's basically one piece that we're working on. The other piece that you that I mentioned was basically the pricing element, right? And it's about finding basically the customer's ability to pay and then ensuring that our products basically meet a significant part of that demand. So that's the other component that basically we are taking a look at from a value-added service perspective.

Speaker Change: There is significant.

Speaker Change: This significant opportunity.

Speaker Change: In terms of us putting that right product in front of the right customer a lot of that is technology enabled boat.

Speaker Change: On our direct booking channel as well as at the counter so.

Speaker Change: That's basically one piece that we are working on the other piece that deal that I mentioned was basically the pricing element right in and.

Speaker Change: It's it's about finding.

Speaker Change: Basically the customer's ability to pay and then ensuring that our products basically.

Speaker Change: A significant part of that demand. So that's the other component that basically where we are.

Operator: Taking a look at it from a value added service perspective.

Sandeep Dube: Okay, thank you. Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Operator: And with that, this includes the Hertz Global Holdings Second Quarter, 2024 earnings conference call. Thank you for your participation. You may now disconnect. Everyone have a great day.

Speaker Change: And with that that concludes the Hertz Global Holdings second quarter 2024 earnings Conference call. Thank you for your participation you may now disconnect everyone have a great day.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].