Q1 2025 Hertz Global Holdings Inc Earnings Call
Speaker Change: Welcome to Hertz Global Holdings, first quarter, 2025 earnings call. Currently, all lines are in 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 of investor relations. Please go ahead.
Speaker Change: 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 sections in the filings we make with the Securities and Exchange Commission filings are available on the Sec's website.
Speaker Change: And the Investor Relations section of the Hertz website.
Speaker Change: Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing beta evaluation of our profitability and performance.
Speaker Change: Unless otherwise noted our discussion today focuses on our global business.
Speaker Change: On the call. This morning, we have Gil West our Chief Executive Officer, who will discuss operational highlights and our fleet.
Sandeep: Chest, Chief commercial officer, Sandeep debate will then shape insights on our commercial strategy, followed by Scott Haralson, Our Chief Financial Officer, who will discuss our financial performance and liquidity. We are also joined by Darryn Arrington, all the executive Vice President for revenue management, who will be available.
Speaker Change: To answer questions during the Q&A session.
Gil West: I'll turn the call over to Gil.
Gil West: Thank you Johan good morning, everyone.
Speaker Change: The first quarter of 2025 was dynamic.
Gil West: For hertz or the travel industry, but across the broader business landscape. This.
Gil West: This company has evaluated the near and long term effects of macroeconomic events.
Gil West: <unk> tariffs, while these shifts continue to influence the operating environment. Our strategy was designed to navigate uncertainty.
Gil West: Our success does not rely on tariff related benefits, but we are pulling the right levers to capitalize on them. We remain focused on what we can control.
Gil West: It's that discipline.
Gil West: And a clear understanding of what drives this business that guides US forward. These past few months have only reinforced something ive known since day. One Hertz is at its core an asset management company, we buy rent and sell cars and we've sharpened.
Gil West: Our focus on that flywheel.
Gil West: Not just to drive performance, but to stay agile in any environment.
Gil West: Fleet as the economic engine of the company and our greatest lever that's why transforming it from a headwind to a tailwind isn't just a goal it's essential.
Gil West: Through the relentless execution of our back to basics roadmap.
Gil West: We are building momentum reshaping hertz and delivering long term value for our customers and shareholders.
Gil West: Our strategy is anchored around three financial pillars.
Gil West: Disciplined fleet management revenue optimization and rigorous cost management, we set clear North star metrics D. P. You below $300 RP, you above $500 and Doa per day in the low thirties.
Gil West: I'm proud of the progress our teams have made and I'm grateful for their hard work and perseverance.
Gil West: Because of their efforts that we're beginning to see foundational improvements take hold.
Gil West: With that let's dive into the results.
Gil West: Let's start with our most dominant economic lever the fleet.
Gil West: One year ago, we established a disciplined end to end fleet management strategy and recognize the urgent need for a refresh.
Gil West: At that time, we were managing and older high cost fleet with a suboptimal mix of vehicles within a declining residual value market Guy.
Gil West: <unk> by our buy right hold right and sell right strategy.
Gil West: We acted swiftly to reposition ourselves and rapidly execute our fleet rotation.
Gil West: Today I'm pleased to share we've made progress in our strategy and our investment is beginning to pay off.
Gil West: With over 70% of our core U S. Rack fleet now 12 months old are newer and we have a younger fleet, that's well equipped to navigate today's uncertainty.
Gil West: Thanks to our early and deliberate effort to lock in vehicles at highly favorable economics ahead of tariff implementation. Our model year 2025 fleet is shaping up to be transformative for Hertz as those vehicles currently have a D. P U of sub 300 prior to.
Gil West: The benefits associated with tariffs.
Gil West: To make this happen we worked closely with Oems to accept vehicle deliveries in Q1 ahead of schedule to avoid tariff exposure.
Gil West: While we continue to aggressively rotate out older higher cost vehicles, the timing of new vehicle deliveries was suboptimal at the local market level impacting utilization and pricing. However, we view this as a deliberate short term trade off that better positions us for the remainder of.
Gil West: The year.
Gil West: With approximately two thirds of our model year 2025 fleet already delivered the long term benefits are taking shape. Our proactive by REIT strategy has also enabled us to diversify our supply chain reduced reliance on any single OEM and build a fleet mix that.
Gil West: <unk> enhances our ability to quickly respond to market dynamics.
Gil West: While I mentioned the younger fleet is already driving measurable improvements in our norstar metric of D. P U.
Gil West: It is also delivering on Doa, we're seeing lower maintenance cost and we expect these efficiencies to continue improving our P&L throughout the year.
Gil West: As the.
Gil West: Dual values rise supported by early market indicators and analyst forecast a significant residual value increases.
Gil West: Well positioned to benefit in this environment to put it simply every 1% increase in residual value generates more than $100 million and economic benefits to our fleet.
Because of our early actions were not just adapting to market dynamics, we're out in front of them.
Gil West: Through our disciplined fleet rotation.
Gil West: We're now managing the lower cost fleet with a more optimal mix and a rising residual value environment, putting us in nearly the inverse position of where we were when I joined the company.
Gil West: This is a clear sign that our strategy is working.
Gil West: While overall demand remains solid we recognize that there may be potential macro economic headwinds and uncertainty still we remain disciplined on capacity management to that end, we plan to run a smaller fleet year over year and sweat the assets to drive higher utilization to <unk>.
Gil West: All set some of the reduction in capacity.
Gil West: We remain disciplined in our capacity, we do however have flexibility to adjust our fleet up or down as we move through the year as we better engage the macro environment.
Gil West: Model year, 'twenty, six vehicle supply and pricing remain an unknown at this point historically vehicle supply chain disruption has supported stronger pricing as well as increases in used vehicle residual values. If this is again the case we're ready.
Gil West: To respond quickly we have a number of levers to pull to remain agile as we manage through the macro environment looking beyond 2025, I would expect fleet growth in line with demand growth improved unit economics, as we exit the year earn us the right to grow again as.
Gil West: One of the world's largest used car dealers, we recognize the value of Hertz car sales and last quarter, we highlighted our sell right strategy to prioritize retail as our primary car selling channel.
Gil West: We took proactive steps earlier in the year to raise awareness of this channel.
Gil West: Timing that proved advantageous for our business.
Gil West: We began to see this play out in March where our average selling price through retail channels strengthen.
Gil West: Positively impacting depreciation per unit in fact.
Gil West: This was a record quarter for retail car sales as part of this strategy. We are focused on increasing our net margins by better managing reconditioning cost and capturing more finance and insurance commissions on the transaction.
Gil West: Leveraging the strong residual market, we continue to drive awareness through heart Hertz car sales and expand our retail partnerships.
Gil West: In addition, we just launched AI pricing capability for our vehicle sales through a partnership with Cox automotive.
Gil West: These efforts through our buy right hold right and sell right strategy are turning our fleet from a headwind to a tailwind for our business.
Gil West: Another highlight this quarter was our ability to manage cost as our strategy contributed to nearly $100 million year over year improvement in total direct operating expense.
Gil West: We also achieved sequential improvement in D O per day.
Gil West: Despite lower volumes and we estimate that the newer fleet drove almost one dollar of Doa benefit year over year.
Gil West: These results are one off.
Gil West: We remain disciplined and committed to continuous improvement and cost management as we build a more sustainable business.
Gil West: As we transform Hertz, we're focused on leveraging technology to improve our results in more strategically partnering with the world's leading tech companies as we shared last quarter, we're leveraging palin tiers foundry platform to improve our fleet management and workforce planning.
Gil West: This quarter, we announced our partnership with U V. I, a global leader in AI powered vehicle inspection systems. This collaboration will enhance the speed and accuracy of our vehicle inspections and damage assessments.
Gil West: While also creating a more transparent digital first experience for our customers.
Gil West: We're also working with Amadeus a best in class Global travel Tech solutions provider on advanced capabilities designed to modernize our revenue management system and significantly enhance our pricing strategies and execution.
Gil West: We've expanded our customer service AI agent capabilities, and we are working with decagon, the conversational AI platform to deliver a more reliable personalized customer interactions at speed greater scale.
Gil West: Scale and lower cost.
Gil West: Transformations like ours take time, but above all it depends upon unwavering commitment to executing the strategy, we established with our back to basics roadmap. Despite today's uncertain environment, we remain confident steadfast and fully committed to this plan we.
Gil West: We're beginning to see the tangible results and as we chart. Our path forward, we will maintain our disciplined focus on what we can control, while remaining agile and responsive to changing conditions.
Gil West: I'll turn now to Sandeep to comment on capacity management and our commercial strategy.
Sandeep: Thank you Gail good morning, everyone.
Sandeep: Let me start by saying how proud I am of what the commercial team is accomplishing.
Sandeep: As we execute our strategy and work towards our North star metric of <unk> greater than $500.
Sandeep: Driving the transformation that will deliver greater durability and margins for our business.
Sandeep: Let's start with what we saw during the quarter.
Sandeep: Revenue was down year over year, driven primarily by reduced fleet capacity, we continue to manage our fleet prudently, which was down 8% year over year in the first quarter.
Sandeep: Given macro demand uncertainties, we intentionally ran a tighter fleet year over year, while capitalizing on the strong regional value environment to accelerate that.
Sandeep: Rotation of its remaining older vehicles.
Sandeep: On a monthly per unit basis.
Sandeep: Our revenue would have been flat year over year, excluding the impact of leap year.
Sandeep: And a margin accretive yet rps dilutive decision to Orient, our fleet mix towards lower depreciating, Waco's, which is more in line with consumer booking behavior.
Sandeep: The impact of this fleet mix change will largely annualize, but the first quarter of 2026.
Sandeep: We continue to focus on sweating assets through better fleet utilization, which showed improvement in Q1 utilization was up 240 basis points year over year and would have been even higher without temporary headwinds of accelerated in fleeting.
Sandeep: This is a journey we started in late 2024, and we foresee continuous progress on our ability to fund those sweat with fleets.
Sandeep: Pricing for the quarter was down 5% year over year, partly driven by fleet mix.
Sandeep: Breaking down pricing a bit further while January and February performed better March in the first couple of weeks in April came in lower part of it was expected with Easter shifting into Q2. This year and the fact that there was no way eclipse, which helped drive rate last year.
Sandeep: We have a nimble in taking delivery of some model year 2025 vehicles earlier than planned ahead of tariffs.
Sandeep: This decision put us in an advantageous position pertaining to our fleet rotation, we were temporarily overheated in certain markets in a seasonally lower demand period.
Sandeep: Impacted RPT and utilization.
Sandeep: All told we didn't get the utility out of these additional waco's that we normally would have and probably less some price on the table, but we view this as temporary and isolated to Q1.
As we look ahead, we see macroeconomic uncertainty, but we also see opportunities we are seeing demand moderate for corporate government and U S inbound segments.
Sandeep: But I'll forward bookings for her at leisure are up year over year. Our approach is to stay prudent by going into the summer with a tighter fleet.
Sandeep: Thereby also leveraging the rising residual values as we train them to stay on the demand.
Sandeep: We will stay nimble as we continue to assess the changing demand environment.
Gil West: The macro economic opportunity lies in the upside revenue potential that Gil mentioned in the form of Waco constraints, which may bring a tailwind to our BD historically supply constraints such as the 2008 financial crisis and the most recent COVID-19 period.
Gil West: We've consistently driven significant RPT gains in our industry.
Gil West: Beyond the characterization of the macroeconomic environment, let's talk about the things that we get excited about the most which are the outcomes we want to deliver for the rest of 2025 and into 2026 and the commercial team is focused on fundamentally improving the durability and margins of our biz.
Gil West: They need the initiatives, which underpin our strategy are as follows first improving our revenue management systems. We are in the early stages of a multiyear transformation journey leveraging our newly signed partner Amadeus will provide best in class at EM.
Gil West: Systems, two airlines and hotels.
Gil West: We are enhancing the ability of our revenue management system to deliver higher margins through an iterative process that will deliver incremental EBITDA on a regular basis. This improvement will be in the pricing and demand selection of non contractual demand which constitutes the.
Gil West: Majority of what we book and any improvement will likely apply to a large revenue base, hence providing significant gains we kick started the project in earnest in late Q4 and early initiatives that have already been executed are exceeding our expectations.
Gil West: Second we are optimizing the foundation for improved demand generation within our off airport and mobility business units.
Gil West: While the airport business has higher RPE DS.
Gil West: The off airport business in the mobility business benefit from more consistent utilization and a longer length of keep thereby driving lower direct operating expenses per transaction day, leading to healthy margins. They also have greater resiliency in demand and our P. DS during periods of low economic.
Gil West: During recent quarters, given our smaller fleet, we skewed a fee to airports looking ahead, we intend to feed our off airport and mobility businesses heavier than in prior periods.
Gil West: The diversity diversification of our revenue stream over time should lead to greater resilience and improve margins for our business.
Gil West: Third we are improving the mix of our German segments durable segments like direct sales through our own websites or segments that we arent directly competing with our competitors on shared platforms are where competition is limited we continue to enhance the mix of durable segments, and lastly, I want to touch.
Gil West: On driving customer preference by the end of Q1, our net promoter scores improved by 11 points year over year. A result that displays the strength of this team to execute operationally across our global footprint.
Gil West: Just as encouraging.
Gil West: Our LTM pro enrollments were up 11% year over year and are up even higher so far in Q2.
Gil West: Also we are starting to see this translate into increased loyalty bookings in summary, the current market conditions present risks and opportunities. We are focused on capacity discipline to derisk our feed investments.
Improving our utilization to process improvements and delivering on our commercial strategy to build a more durable and margin accretive business.
Scott: Let me now turn the call over to Scott for a detailed review of our financial performance and liquidity.
Scott: Thank you Sandeep and good morning, everyone. Let me walk you through our financial performance for the first quarter of 2025 and also provide an update on some recent transactions revenue was $1.8 billion for the quarter and adjusted EBITDA was a loss of $325 million versus a loss of 567 million.
Scott: In the prior year period as a result, our margin improved by 9% year over year.
Scott: We saw good movement in depreciation per unit or GPU, and we hit our internal cost targets for the quarter. However, the early delivery of vehicles from Oems and an unpredictable macroeconomic backdrop made pricing optimization a bit tricky on the revenue side.
Scott: We also saw lower levels of industry supply in the quarter.
Scott: All in all our EBITDA results were in line with the guidance, we gave during last quarter's earnings call.
Scott: Our fleet is now shifted from a significant headwind to our prominent tailwind for the business. The primary objective of the rotation is lower vehicle depreciation and now that we are more than 70% rotated you can see this play out in our P&L and metrics.
Scott: Q1, depreciation expense decreased 45% year over year and GPU for the quarter was $353 per month.
Scott: A meaningful improvement both sequentially and year over year.
Scott: This reflects the rotation benefits and improving residuals Q.
Scott: Q1, 2024 also included the unfavorable impact of EV as held for sale we.
Scott: We have previously said, we would reach sub 300 GPU by the end of 2025 and now we expect it to be below $300 in the second quarter.
Scott: Our accelerated fleet rotation as well as some expected benefits from improved residuals should drive our gross depreciation per unit below $300. We will also benefit from additional gains from car sales, which should drive net D. P. You even further below $300 per month.
Scott: During the quarter, our continued focus on productivity and lowering our direct operating costs continued to yield positive results.
Scott: On a per day basis D O E was down 4% quarter over quarter, notwithstanding lower volume.
Scott: Year over year was down 1% on a volume adjusted basis. Despite continued headwinds from insurance and rent expense as we discussed on our prior calls.
Scott: In Q1, excluding the impact of stock based compensation awards forfeited in the prior year quarter, our selling general and administrative costs also decreased year over year since we structurally removed cost from the business.
Scott: This is our first quarter of hitting our budgeted cost targets and we expect to do that in <unk> as well.
Scott: That may sound like an innocuous statement, but this is an important internal indication that our efforts of driving improved predictability in our forecast and better execution on our productivity and cost are working.
Scott: The execution across our business is bearing fruit and we expect these trends to continue as we move forward.
Scott: In terms of liquidity, our position remains strong at $1 $2 billion at the end of Q1 a.
Scott: A couple of important transactions that were recently concluded.
Scott: First as we announced in our recent 8-K, we amended our revolving credit facility facility last week.
Scott: The amendment provides for the extension of the maturity date of approximately 1.7 billion of commitments under the existing $2 billion facility from June of 2026 to March of 2028 subject to a springing maturity date.
Scott: This means we have access to up to $2 billion until June of 2026, and thereafter, the amounts of commitments is approximately $1 $7 billion until March of 2028.
Scott: In financial terms are unchanged from the prior facility and we have flexibility to replace the reductions if we choose to.
We received very strong support from our lending banks that points to confidence in our transformation.
Scott: Second our asset backed securities programs continued to perform well providing efficient funding for our fleet requirements. We successfully completed several business as usual ABS transactions, including an extension of our H B F. Three variable funding notes demonstrating strong market acceptance and competitive pricing.
Scott: These funding channels remain a cornerstone of our fleet financing strategy and we anticipate continued access to ABS markets unfavorable terms.
Scott: Our ABS facilities have been buoyed by favorable U S rack fleet values, whereas the three month average fair market value of $9 $2 billion is 105% of the net book value of $8 8 billion as of March 2025.
Scott: Overall, these transactions improve our capital structure and maturity ladder and derisk the balance sheet, providing flexibility to continue transforming the company.
Scott: We are also pursuing several transactions, which may generate liquidity through optimization of our letters of credit and real estate portfolio.
Scott: These are not splashy financings, but rather tactical strategies designed to improve liquidity at a more effective cost of capital.
Scott: Although discussions to date have been productive we cannot provide any assurance that any transaction will be completed.
Scott: But giving effect to some of these that are currently in process and expected to close in the quarter. We expect to end the second quarter with over $1 billion of liquidity, even if we are required to pay for our make whole litigation during the quarter.
Scott: We also have other capital capacity and reserve totaling well north of $500 million Inc.
Scott: Including debt capacity allowed under our credit facilities if needed.
Scott: Lastly, our board of directors recently authorized the launch of an ATM.
Scott: Or at the money equity offering.
Scott: We expect to file a shelf registration statement and prospectus in the coming days.
Scott: With a successful fleet rotation largely behind us and the summer peak ahead. It is time to begin working on deleveraging.
Scott: To that end, we have authorized up to $250 million of shares for the ATM, but the timing total proceeds and final number of shares offered will be determined as we progress.
Scott: These potential proceeds are not included in the over $1 billion of liquidity, we expect to end the second quarter with and are intended to be used to start deleveraging the balance sheet.
Scott: While we are certainly price sensitive we generally see the equity for debt trade here to be P&L cash flow and shareholder accretive.
Scott: As the reduced interest and lower risk contributes to equity value.
Scott: We also expect to generate free cash flow from operations in the back half of the year the.
Scott: The combination of an improved earnings profile refinancing levers and the ATM Optionality gives us a number of alternatives for addressing upcoming maturities.
Scott: During Q1, we utilized $210 million of cash for continued fleet rotation and will continue to use cash as we fleet up for the peak and continue our rotation.
Scott: Despite the tariffs that went into effect in April we continued to take delivery of model year 2025 vehicles at the previously negotiated prices.
Scott: It's too early to provide color on our model year 2026 buys as we have only recently begun those negotiations.
Scott: Looking at the remainder of 2025, we're maintaining a balanced approach, while we see encouraging trends for both the industry and the company, we're mindful of potential headwinds, including consumer sentiment and possible tariff impacts.
Scott: We will continue to be prudent with our fleet, which was down 8% in Q1.
Scott: We expect the full year to be down about the same level.
Scott: We do however expect to make up some of the reduction in utilization. So we expect our transaction days for the full year to be down less than the fleet.
Scott: We believe this reduction in supply should be supportive of better pricing across our geographies.
Scott: Overall, we continue to expect Q2 EBITDA to be approximately breakeven Q3, EBITDA to be a sizable profit and even positive from a net income basis, producing our first positive EPS since 2023, and Q4 to be a positive EBITDA result, as well.
Scott: All of this should produce a full year EBITDA margin in the low single digits consistent with our prior expectations.
Scott: Our north star targets continue to be GPU below 300, RP you above 500 in BOE per day in the low Thirty's, which we believe together could produce an EBITDA of more than $1 billion by 2026.
Gil West: With that I will hand, it back to Gil for his closing comments.
Gil West: Thanks Scott.
Speaker Change: I'd like to close by sharing while remain incredibly bullish about the future of hurts when I joined the company just over a year ago I immediately saw the enormous potential of transforming our core business.
Speaker Change: And that belief has only deepened achieving our norstar metrics is expected to unlock over $1 billion of EBITDA core business run rate and the potential extends well beyond that as we unlocked value creation beyond our core business through retail car sales and our mobility business.
Speaker Change: We continue to build momentum in our transformation.
Speaker Change: Our fleet strategy is working Terra.
Speaker Change: Tariffs are an added tailwind, we're making excellent progress on better managing cost sweating, our assets elevating our revenue management and continued to action and expansive list of opportunities.
Speaker Change: Our liquidity position remains strong and the team has worked to Derisk the business.
Speaker Change: The setup for the future bodes well.
Speaker Change: Outlook is strong with reside with rising residual values demand remained solid, especially leisure and we're building durable counter cyclic demand beyond our core airport business, we have a young and tight fleet, which gives us leverage for utilization and our PD as well.
Speaker Change: Well as flexibility to manage through uncertainty model year 'twenty six supply chain disruption has the potential to create further tail wins for residual values in our PD Ulta.
Speaker Change: Ultimately everything comes down to execution and we've assembled assembled a world class team who are focused on driving result momentum is on our side and I truly believe the best days of Hertz or still ahead back to you operator.
Speaker Change: We will now open the line for questions. Please limit your questions to one question per speaker and one follow up if needed to ask a question. Please dial star one on your phone.
Speaker Change: If you wish to cancel your question.
Speaker Change: Our first question comes from Ian Zaffino from Oppenheimer. Please go ahead. Your line is open.
Ian Zaffino: Hi, great. Thank you very much for the color.
Ian Zaffino: I wanted to ask about the <unk>.
Ian Zaffino: <unk> and.
Ian Zaffino: I guess, we're in this period of kind of over fleeting because you you bought a model year cars earlier or took delivery.
Ian Zaffino: Do you think.
Ian Zaffino: You are kind of over fleeting or what do you do there how many vehicles are we talking about and then also as you look to divest vehicles can you maybe help us understand what residuals looked like in retail versus wholesale.
Ian Zaffino:
Ian Zaffino: And kind of what's stronger what's weaker in line.
Ian Zaffino: Yeah, Thanks, Ian I'll start yeah.
Ian Zaffino: First of all from a over fleeting standpoint, I think.
Ian Zaffino: At the at a macro level, we're not over fleeting as I mentioned I think if anything we've tried to tighten the fleet.
Ian Zaffino: And keep supply inside of <unk>.
Ian Zaffino: Demand so as Scott mentioned, we were down 8% in the quarter on fleet.
Ian Zaffino: So we're tied a we're not over fleet at the macro level I think the points that were being made here we're more at the local level at the market.
Ian Zaffino: Level pick a city pick an airport.
Ian Zaffino: There we were over fleet it because keep in mind that dynamic was we pulled forward the vehicle deliveries.
Ian Zaffino: To avoid tariff exposure, but those came.
Ian Zaffino: The timing of those deliveries were not optimal for us at a market level. So there were markets, we found oversupply and not at the aggregate level, but at the market level and then that in turn.
Ian Zaffino: At that market level hurts, our ability to price and utilization Sandy, yes, and this Sunday period. The other point I'll make is the effect of that Oh, I'd say temporary O of leading in certain local markets Oh. It was a temporary effect right. It was president to the tail end of February March.
Ian Zaffino: And then.
Ian Zaffino: Probably the first couple of weeks of April and then basically.
Ian Zaffino: Basically we took proactive proactive actions to minimize that and demand also kicked in so I think that's no longer a factor in play.
Ian Zaffino: Yeah and on the residual question.
Ian Zaffino: I guess, what I would say of course.
Ian Zaffino: I mean tariffs and really that just generally the disrupted automotive supply chain, creating some tailwind for us given that we're an asset heavy business and we're seeing residual values rise.
Ian Zaffino: We've seen analysts' projections of course as you have I think as we think about residuals.
Ian Zaffino: We're in both markets wholesale as well as our retail horse, we've skewed our sales more towards retail, but I think if you look at the wholesale market, which tends to move quicker than the retail market terms of pricing.
Ian Zaffino: Yeah, we've seen those those residuals rise fairly quickly in March and April I mean, you you can obviously look at the same data we are but I mean as a proof point I think the MMR.
Ian Zaffino: MMR rental car index for April was up 8% just to kind of frame some of that there is different the different inputs, but there.
That is more seasonally adjusted for similar mixes I think we're also seeing.
Ian Zaffino: The younger cars.
Ian Zaffino: Our residual values rising quicker disproportionately.
Ian Zaffino: Okay. Thank you and then just as a follow up.
Ian Zaffino: When you think about how the demand.
Ian Zaffino: Yeah.
Ian Zaffino: The demand as you saw in this past quarter, and what you've kind of seen so far.
Ian Zaffino: Notably like geographically speaking in it and I know, there's certain markets are better and certain months, but.
Ian Zaffino: Anything you'd kind of notice and geographically and against California, a little bit weaker anything along those lines and then when you talk about the business.
Ian Zaffino: How much of that.
Ian Zaffino: The softness is seasonal versus maybe a pullback on corporate spend thanks.
Ian Zaffino: Yes. This suddenly appear I can I'll answer that question so I'd.
Ian Zaffino: I'd say from a geographic level there wasn't there weren't any major differences in terms of how we saw the impact come through and then of course sudden geographies where segments of customers like Opex Theyre more heavy our government is more heavy for example through Washington D. C. So you're going to see that impact come through but it's more related to segments rather than.
Ian Zaffino: Anything else I think the one difference I would articulate it does of Dale.
Ian Zaffino: <unk> says given that corporate is heavy and government is heavy.
Ian Zaffino: The early part of the week Tuesdays and Wednesdays, that's where you saw a dip overall in demand. So that's that's how I would classify the difference in the environment.
Ian Zaffino: In terms of seasonality first of all we're seeing the normal seasonal pick in demand that we would expect as we are moving towards summer and into summer. So that's our that's the positive and the macro environment. The pullback that we have seen is on the corporate side. The government side in inbound segment and that's still data need.
Ian Zaffino: So it's a combination of the uptick due to seasonal demand as we as we get it worked towards summer, but sample down because of corporate government and inbound.
Ian Zaffino: Okay. Thank you very much.
Speaker Change: Our next question comes from John Babcock from Bank of America. Please go ahead. Your line is open.
John Babcock: Good morning, and thanks for taking my questions just starting out I was wondering if you might be able to talk about your footing efforts in April and May so far and.
John Babcock: I know you mentioned a bit of an fitting towards the end of <unk>, but just kind of curious what your activity has been like in April and May if you're able to talk about that.
John Babcock: Yes, I think I mean in general of course, we continue to take vehicles throughout the year and as we mentioned we've got of course as you know we've been we've been focused on our fleet rotation in particular with our model year 'twenty five pies.
John Babcock: <unk>.
John Babcock: We've taken about two thirds of those now.
John Babcock: We have from a timing standpoint, as we mentioned some of those were pulled forward into the quarter.
John Babcock: In April.
John Babcock: Really from a tariff exposure.
John Babcock: Strategy standpoint, but we will continue to take vehicles throughout the year I think the.
John Babcock: The larger unknown is model year 2000, six's right. So I would just emphasize kind of where we're at at least as with the with the model year 'twenty five and the and our fleet rotation that we've done.
John Babcock: We're set up really to have flexibility in the way we manage.
John Babcock: The second half of the year and into 26 in terms of.
John Babcock: The fleet because there is a question relative to supply as you go forward the volume the pricing and with our fleet rotation with the model year 'twenty Fives, we've got flexibility to manage through that but generally the deliveries will continue through the end of the year as we take the final model year 'twenty five.
Scott: Yeah, Hey, John This is Scott too if you're getting at sort of the.
John Babcock: Quarter over quarter sequential size I think you know we've talked about we're going to take deliveries will probably be in the mid to high single digits. You know higher in Q2 than we were in Q1 as you're framing your thoughts around it.
Speaker Change: Okay very helpful.
Scott: And then I should.
Scott: On tariffs before I, just kind of one other topic briefly here I'm looking at your U S fleet do you have any sense for what share of vehicles, you own you know might be subject to tariffs.
Scott: Well basically all of the model year 'twenty fives that were taken to delivery on we're really not subject to tariffs we will take those vehicles at the previously agreed to pricing. So we're not exposed in the short run.
Scott: Okay I'll follow up on that.
Scott: And then.
Speaker Change: Last question here I know, you've talked a decent bit about cost cutting and also revenue optimization.
Scott: Just anecdotally.
Scott: Some airports.
Scott: <unk> seen you know very long lines like Hertz counters, and I am wondering to some extent, whether there might be there might be.
Scott: Some instances, where you might need to actually add costs.
Scott: Two perhaps generate revenue or to avoid losing revenue.
Gil West: So I was wondering if you might be able to talk about that that kind of balance of of cost cutting but also realizing that when your cost cut too much you might actually be losing revenues. So I don't know if you are maybe san deeper or Gil if you don't want to go through that.
Gil West: Yeah, no. Thanks, John Great question, I'll start, but Sandeep I'm sure have his stalled but from my vantage point look wetter.
Gil West: Hum.
Gil West: First of all we're a as you know over the last year have really leaned into our customer experience. So we're very sensitive to that as Sandeep mentioned you know our net promoter scores were up 11 points year over year. The momentum has been really good one of the key.
Gil West: Drivers on our net promoter score or line waits as an example, but we understand kind of what.
Gil West: What the M. P. S profile looks like in terms of where you know where we have improvements in M. P S or detraction from M. P. As you May know I think we mentioned it on prior call. We partnered with <unk>, which gives us a much better real time data to manage so we were of the view.
Speaker Change: You can have the power of an you can have both you can have improved customer experience, which we've demonstrated and cost control as well, but we've got to be really sensitive to your point that.
Speaker Change: We're not pennywise and pound the evolution, we detract from the customer experience for the sake of cost saves because we can do both sandy.
Speaker Change: Again, you said it right. It's the power of the and I think what I'm excited about is the journey, we ever had in terms of net promoter score a lot of focus.
Speaker Change: I'll focus on the biggest leavers.
Speaker Change: We have a cough customer centric organization. That's the set of leaders we have here and we will continuously drive progress on that I think I think technology in general is another big on walk in the customer experience too. So we're all about taking friction out you know in terms of line waves or other part so as we continue to lean in.
Speaker Change: <unk> technology, and the digital experience that's accretive as well.
Paul: And Paul in Tulsa office.
Krishna: Krishna Thanks.
Paul: Thanks Scott.
Our next question comes from Chris <unk> from Deutsche Bank. Please go ahead. Your line is open.
Speaker Change: Hey, guys good morning.
Speaker Change: All the color so far.
Paul: My first question is kind of.
Paul: On the fleet strategy in RP.
Paul: <unk> and.
Paul: Gil I think you mentioned you're.
Speaker Change: Youre doing it going to be doing more off airport and rideshare, you want to lean into that.
Paul: As part of utilization strategy, but it also sounds like if you're if you're shrinking the fleet.
Paul: Are you trying to go higher and kind of at the at the airport is there a push to whether it's regaining corporate accounts.
Paul: Our higher end leisure just trying to understand kind of the components of the.
Paul: Of the fleet strategy relative to you know an industry, that's still kind of settling on normalized RPT.
Paul: Yeah, Yeah, I'll, let sandeep comment, but I guess from my vantage point, where I think the position we want to be and ultimately the setup is.
Paul: We're we're in part of us.
Speaker Change: As part of our transformation at Hertz of course, I would just say broader brush we prioritize.
Speaker Change: Fleet and cost actions at the top of the list cost because it moves quicker fleet because it's so impactful it's 80% of our economic so not saying we haven't focused on revenue Sandeep would certainly argue that point, we have been but it.
Speaker Change: But as we're moving through revenue transformation, where we're pruning we're.
Speaker Change: We're pruning some revenue.
Speaker Change: The team is really focused on creating a sustainable demand.
Speaker Change: And that that also includes our trough periods right, both seasonally and day of week.
Speaker Change: So finding a revenue streams is important to your point off airport mobility, we've been airport centric as you know and then channel mix right in particular, where the airports are what that looks like along with revenue management tools right. So I think all those things are playing out as we see them right now.
Speaker Change: But with a tighter fleet our goal is to produce more demand than we can satisfy through all of those actions and then be able to yield ultimately for profitability, but yeah, yeah, just adding a little bit more color I think from a revenue perspective, you're basically true.
Speaker Change: I'm going to use the dump pruning our portfolio right now.
Speaker Change: There are certain segments and business units, we are growing there are others, where we're basically pruning all with an eye on unit economics and being margin accretive right. So why not improve.
Speaker Change: The economics and that positions us for growth in 2026 and beyond.
Speaker Change: And to be a little bit more specific right and even when I look back at Q1, we maintained really strong performance against our high RPT premium brand hurts at the airports right. These are customers, who are sticky and brand raw brand loyal.
Speaker Change: Also performed well when it comes to dollar and Thrifty brand loyal customers, who book directly with us.
Speaker Change: And.
Speaker Change: Lastly, we also drove incremental volume from our partners and this is a growing part of our business is a higher RPT customers, who generally tend to book earlier in the booking curve, it's really a good business.
Speaker Change: What we took less often what we pruned was the lower end of the market. These are brand agnostic agnostic customers.
Speaker Change: Who come from competitive platforms.
Speaker Change: And while taking some of these customers would have been I would say revenue and are accretive.
Speaker Change: Our margins would have been lower and we're focused like Gil and I mentioned on improving our margins so giving up this revenue right now is the right decision for us.
Speaker Change: So I think that's the way I would kind of classify the geography.
Our father and demand profile.
Speaker Change: Okay. Thanks.
Speaker Change: Thanks, Scott and then just as a follow up I appreciate all the guidance so far on GPU in.
Speaker Change: Yeah, no what she said through Q under 300, which is earlier than you thought.
Speaker Change: We look back to 2019 I think your your U S. GPU was kind of.
Speaker Change: Just south of $2 60, and I don't know if that's your North star target is under 300, so anything or 300 is there but is there any kind of.
Speaker Change: Current environment today, and what you're thinking about buy prices, possibly in 'twenty six.
Speaker Change: Is there a level below 300 that you think is hey, we can get to the next target to $2 75, or something something Allison for any way to kind of kind of frame it a little bit more for.
Speaker Change: Precisely than than under 300.
Speaker Change: Yeah, no. Thanks, Chris what I would say is first of all I think what you're alluding to in 2019, I mean, historically, if you put aside COVID-19.
Speaker Change: D. P use been sub 300, I think historically, so I think your frame of reference is similar to how we look at that and irrespective of the cap cost. It's really the difference in buying and selling works the economics that drive that so the fleet strategy we have.
Speaker Change: Really can can't produce those results in any environment.
Speaker Change: There are certainly a tailwind to accelerate that.
Speaker Change: Scott if you want to give additional color yeah, I mean, thanks, Chris for the question and I know, what you're getting at all of the mathematical components that go into that are obviously possible given the backdrop, but there's a lot of volatility on the tariff environment supply for 2000 and sixes.
Speaker Change: And the corresponding residual value. So we're not ready to give any any further indications of where that may end up.
Speaker Change: Given sort of where we are but but all of those are possible given the backdrop.
Speaker Change: Okay, Yeah, no fair enough understood. Thanks, Thanks, a lot guys best of luck.
Speaker Change: Thank you.
Speaker Change: Our next question comes from John Healy from Northcoast Northcoast Research. Please go ahead. Your line is open.
John Healy: Thanks for taking my question I wanted to spend a couple more minutes on the depreciation side of things, obviously, a lot going on in the last year or so so you guys wrote down the fleet to some degree now the used car market is coming back and you know obviously, that's a tailwind for you, but when you talk about that 300 number for Q2 or below that.
John Healy: What sort of gains are embedded in that and secondly, as you buy new cars. You know what are you depreciating that because I feel like we're talking about these quarterly depreciation numbers, but in reality I'm not sure how relevant they are given the you know the.
John Healy: Movements of pluses and minuses going into the aggregate fleet value, though the last year or so so would just love to get some perspective on what you know.
John Healy: Onboarding fleet, what are those depreciation numbers.
Speaker Change: Yeah, Hey, John I'll start I'm sure go we'd like to chime in too.
Speaker Change: We tried to bifurcate in the prepared remarks around how this playing out we have the 2025 deliveries that are already making up a majority of our fleet that are dumping at sub 300 alone.
And then as we talked about the guidance for Q2, our gross step sort of run rate Dep is sub 300, we will have some gains in the period that that will make net DP lower but the intention is that we ended up having gains as we go forward through the cycle.
Speaker Change: And continue to do that so the idea is that there may be some volume fluctuations in gains as we sell more or less in certain periods and depending on the time of year, but I think the sort of the run rate depth of the business is sub 300, and we're seeing that in a couple of different areas. So.
Speaker Change: That's what we're trying to sort of get across is sort of the foundational gross TPU is already sub 300.
Speaker Change: Without any benefit of tariffs on our core fleet to your point.
John Healy: John is that the.
John Healy: Model year, 'twenty fives that we bought that we've been rotating.
John Healy: Those have all been executed with our Northstar in mind, so without any tariff tail windows those had been adapting below $3.
John Healy: And we continue to rotate out you know the older higher depreciating vehicles. The the other the other dynamic of that of course as residual values have increased for those vehicles.
John Healy: Model year prior to 2025.
John Healy: Historically, we would've taken some loss on sale of those vehicles now with rising residual values.
John Healy: We can actually see some gains on some of the older fleet as we rotate out of it.
John Healy: Got it makes sense.
John Healy: And just another high level question I mean, you guys have brought down your fleet a lot you know Avis has brought down their fleet as well but.
John Healy: But the rate environment still.
John Healy: You know over the last four months, it's probably been softer.
Speaker Change: Do you think that's just the mix of business that's out there or is.
John Healy: Enterprise you know.
Speaker Change: Being more aggressive.
Speaker Change: You look at the market you know I know sixth as you know also come in I'm, just trying to understand you know with half the market down in fleet.
Speaker Change: What what's the pressure on rate and is it true.
Speaker Change: Cancel or.
Speaker Change: Segmentation oriented or is it just more competition. Thank you.
Speaker Change: Yeah. So just suddenly appear I think when you look at right I think I would I would again bifurcate January and February and then March right. So when you look purely at January and February and this is Pete <unk> tennis.
Speaker Change: I would classify the rate environment.
Speaker Change: Environment as being pretty stable right.
Speaker Change: That's what I would classify that the big they actually came in.
Speaker Change: Post tariff announcement, that's where there was some pull back in some segments and you saw that impact.
Speaker Change: There's also the impact of incremental.
Speaker Change: And that impacted us I'm sure some of the other it affected some of the other industry players as well right that that I would classify that as a temporary impact.
Speaker Change: As we look ahead, and we look into summer theirs.
Speaker Change: There's seasonal improvement of course and rates, but he also see just in general the rate environment improve, especially especially as you look at somewhere in late summer. So I wouldn't say that there's a little bit of a.
Speaker Change: Normalization back from a rate perspective that I see in the environment now all of this is obviously subject to the macro economic environment and consumer sentiment.
Speaker Change: And that's a moving target, but in general I see.
Speaker Change: It's somehow through late summer kind of.
Speaker Change: Normalized.
Speaker Change: Thanks, guys.
Speaker Change: Our next question comes from Lizzie Dove from Goldman Sachs. Please go ahead. Your line is open.
Lizzie Dove: Hi, Thanks for taking the question.
Lizzie Dove: Just on that a little bit, but I'm wondering you know you're running with a smaller fleet now it feels like that's going to continue for this year and then you said within demand next year.
Lizzie Dove: So to what extent does that kind of change the outlook for normalized EBITDA or how do you think about that over the long term.
Lizzie Dove: So Mike scaling headwinds on that side of things, but maybe you could just talk about how you think about that profitability outlook margin outlook with running.
Lizzie Dove: Running at a smaller fleet.
Scott: Yeah, Hey, Les this is Scott I'll start.
Speaker Change: I went to.
Speaker Change: I don't think it affects our long term targets you know we've talked about the below 300 or P. U 500 or above low thirties D. O I think the combination of those and in and in varying degrees. We think will produce $1 billion EBITDA and maybe a quick time to correct. My previous misstatement I was told by the <unk>.
Speaker Change: With that I said EBITDA by 2026, its really EBITDA by 2027 is the right way to think about this but I think the the volume isn't isn't the lever that's going to move the needle for us. So we still think that that's sort of $1 billion run rate is is the right target.
Speaker Change: We think there's other levers within the business as well but.
Speaker Change: I think it's the right way to think about it regardless of volume.
Speaker Change: Volume, Yeah, and I would just add you know keep in mind, our fleet size being down as a percent is one thing, but yeah. We have we have big opportunities on utilization, we've talked about them on previous calls, but we can we can make up.
Speaker Change: It's significant.
Speaker Change: A significant amount of fleet reduction by better utilization and we have.
Speaker Change: A number of different buckets to go after there, but effectively it's reducing any two time associated with the vehicles from our process engineering standpoint, and we're seeing.
Speaker Change: So we're seeing really good progress in that area. Obviously, we got to drive rentable days as well on top of that but our strategy is to mitigate.
Speaker Change: Mitigate some of the fleet reduction, which then gives us and other economic lever.
Speaker Change: Got it that makes sense and then just one follow up on the op, specifically I know you're still targeting the 1500, which I think is like high teens ahead of where you were in <unk>, which I understand the headwinds to <unk>, but how should we think about the cadence thing of getting there was improvements in RPE like cannot happen this year or towards the end of this.
Speaker Change: I know, there's a bit of a dip in April but how should we think about that maybe kind of quantifying the moving pieces that are of that improvement on pricing.
Speaker Change: Yeah. So sandeep here so on the IPO, that's not a metric right and that's what we aim for as a business I think to gail's point.
Speaker Change: We will make a significant improvement on the utilization part of that equation right. That's there's a lot of them had been going on in that I wouldn't weekend.
Speaker Change: That story there in that those efforts there.
Speaker Change: I think India RPT piece right.
Speaker Change: There's a bunch of initiatives, we have that I detailed on the call and then some beyond that that should provide a fundamental uptick in our ability to produce RPT and then that's going to then be pretty good and with what's happening in the macroeconomic environment as well right. It's a business where rates do depend on the macroeconomic environment.
Speaker Change: And then the combination of demand and supply. So that's a story, that's yet to unfold, but fundamentally they increased their improving the foundations of our business to produce better youth and RPT.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from Stephanie Miller from Jefferies. Please go ahead. Your line is open.
Stephanie Miller: Hi, good morning, Thank you.
Stephanie Miller: Touching on your north.
Speaker Change: Northstar, our long term target could you walk us through that DLA target can you achieve that target even on a lower fleet or is there some kind of fixed cost headwinds that would prohibit you from hitting that that loan or any cle and maybe more clearly you know what is your underlying fleet size embedded in that low 30.
Stephanie Miller: Daily target. Thank you.
Stephanie Miller: Yeah, Stephanie that's a great question, Yeah, I think obviously a lot lower fleet makes that number more difficult ultimately to get to the low thirties.
Stephanie Miller: We're going to need some scale to do that but we have a number of initiatives internally.
Stephanie Miller: To drive a reduction in fixed costs and more efficient variable cost production. So I think it's gonna be a combination of all those things.
Stephanie Miller: But I think scale is going to be required to get to that north star metric. Obviously, we have inflation components that are headwinds as well. So it will it will be dependent on a number of factors, but we have a lot of initiatives in place we've talked about a lot of those where we're not ready to give a ton of details on that at this point, but.
Stephanie Miller: The basket is pretty large but scale will be a contributing factor to it no doubt.
Stephanie Miller: Absolutely.
Stephanie Miller: So maybe just as a follow up on that when do you think as you think about the scaling initiatives that you could be able to hit that target at current scale.
Stephanie Miller: Yes, I mean, our guidance right now is really thinking through 2027 is the point at which we get the scale and the efficiencies in the business the initiatives to take take footing.
Stephanie Miller: The the estimate is that we get to sort of north star metrics around that 2027 time frame.
Speaker Change: Got it and then just switching gears to the liquidity side that the tequila liquidity number I believe of $1 billion that you pointed to is that inclusive of the financing proceeds or was there some kind of kind of working components of that $200 million cash burning.
Speaker Change: I guess I'm just trying to figure out that's inclusive of any cash proceeds from signed out fleet or just more color there would be helpful.
Speaker Change: Yeah, Hey, Stephanie I tried to give some detail on the prepared remarks to walk through that but we ended the quarter with about $1 $2 billion.
Speaker Change: We have some other liquidity initiatives that are taking hold as we speak.
Speaker Change: That will help shield against the potential Wells Fargo litigation payment in the quarter.
Speaker Change: And so as we think through all the pluses and minuses of the financings the the cash burn in the business of the in fleeting.
Speaker Change: As well as the potential make whole, we think we will end the quarter at around maybe slightly above the $1 billion number and that does not include the ATM proceeds as I mentioned this is just sort of the pluses and minuses of our financings and the business cash flows.
Speaker Change: Great and then just lastly, how much of your.
Speaker Change: And what is your percentage of your.
Speaker Change: Travel that's inbound travel as a percentage of laser.
Speaker Change: I guess, the inbound for sometimes up here.
Speaker Change: It's a it's a single digit business unit for us so yeah.
Speaker Change: Yes relatively small.
Speaker Change: Yes. Thank you I appreciate the time.
Speaker Change: Our next.
Ryan Brinkman: Comes from Ryan Brinkman from JP Morgan. Please go ahead your line is open.
Speaker Change: Hi, Good morning. This is Josh <unk> on for Ryan Brinkman, Thanks for taking our questions.
Speaker Change: I just wanted to take a closer look at the changes to our revenue management system would you be able to doubleclick on how the new system is expected to support EBITDA margins and would appreciate if you could quantify any expected benefits from this transition. You also mentioned that this is a part of a multiyear journey. So could you share more about the <unk>.
Speaker Change: Line and the pace of the rollout as you move forward, Thanks and have a follow up.
Speaker Change: Josh Thanks for the question I know this is a very exciting journey for US is there's a lot of potential here.
Speaker Change: Unfortunately on the details behind this we don't we don't disclose that but super excited about what this could do to our foundational ability to drive better margins for the business.
Speaker Change: Got it and then we discussed about tariff implications from a fleet standpoint, but just wondering if you could spend a couple minutes here on tariff implications from a D O E standpoint.
Speaker Change: Any insights, helping us size the sensitivity of D. O E. Two tariff induced inflation and vehicle parts and perhaps any other areas outside of fleet value that may be impacted due to drivers. Thank you.
Speaker Change: Yeah, Thanks, I'll start and Scott may want to chime in but.
Speaker Change: I think both he and I mentioned you know we've got an expansive list of opportunities to reduce the OE in general right.
Most of the exposure relative to tariffs would be on parts cost.
Speaker Change: And maintenance.
Speaker Change: But.
Speaker Change: What I would say in terms of parts and maintenance we are.
Speaker Change: We got a tailwind and benefits from a newer fleet that we've been rotating into and we've also got a I think I see this objectively the best Tech ops team in the business and their innovation and execution and kind of rigor to run the business we would.
Speaker Change: Specced, our year over year maintenance cost to be down irrespective of any tariff headwinds and the momentum is really good in that space. So.
Speaker Change: Yeah, No I think that's right I mean, the majority of the potential exposures and maintenance for the newer fleet will help counter that.
Speaker Change: I mean, we will also see potentials from spin.
Speaker Change: Spend in other components of the business, but that's our job to offset those things and we'll.
Speaker Change: We will continue to do that.
Speaker Change: Great got it thank you.
Speaker Change: Our last question today will come from Dan Levy from Barclays. Please go ahead. Your line is open.
Dan Levy: Hi, Good morning, Thanks for squeezing me in.
Dan Levy: Wanted to just first start with the question on second quarter. He said second quarter with EBITDA breakeven you are talking about $300 GPU.
Dan Levy: But to hit breakeven I think he's still need to have our PD to be down only only slightly.
Dan Levy: And I think you talked to some softness in early April so what's your line of sight to improved RPG and just remind us again on when that mix benefit comes through on <unk>.
Dan Levy: Channel and customers.
Sandeep: Yes, Dan this is sandeep here so.
Sandeep: I think the mix benefit is it's an ongoing effort from our end right. That's not a point in time benefit. That's that's something that will drive. It is the journey that we're taking that will drive continuous improvement, but ongoing improvement.
Let's analyze our mix right and the RPT component you you you got it accurately the first part of April.
Sandeep: I think I'd mentioned, the softness from an R&D perspective.
Sandeep: BD overall, we see it progressively improve as we get into the summer beef I think the overall soda out and that is yet to be told right. We generally have a shot booking.
Sandeep: Window.
Sandeep: Majority of that is within 30 days. So we are progressing towards that what I've seen is a stabilization in the rates I've seen a stabilization in the demand profile.
Sandeep: And the last.
Sandeep: A few weeks so there's been stabilization, but yeah, theres uncertainty in India environment, and we have to see it play through.
Speaker Change: Okay. Thank you and then just as a follow up touching on one of the prior questions I appreciate the commentary that you're.
Speaker Change: Depreciating at sub 300 X gains, but can you just remind us.
Speaker Change: How you would approach.
Speaker Change: The gain how you would approach stronger residuals.
Speaker Change: Flowing those through the depreciation or would you rather wait until you're actually disposing of the vehicles and then take the gains there. So it's just when would you recognize those benefits and depreciation.
Speaker Change: Yeah, Hey, Dan This is Scott I'll talk a little bit about depreciation but some.
Speaker Change: Some of this stuff is a bit sensitive so I'll give them.
Speaker Change: Too many details, but as a general rule, we're gonna sort of mark to market.
Speaker Change: And so we will do that.
Speaker Change: And we have parameters by which we do that.
Speaker Change: But we do take gains in the period, but which we sell vehicles.
Speaker Change: But our depreciation will move a bit as the market moves.
It may be a little bit of a lag as the indicators in those parameters get flushed through.
Speaker Change: Our accounting system, and how we think about those things, but generally it will move in tandem with the market for the most part but at a lag.
Speaker Change: Okay. Thank you.
Speaker Change: This concludes the Hertz Global Holdings first quarter 2025 earnings Conference call. Thank you for your participation you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: [music].