Q2 2025 Hertz Global Holdings Inc Earnings Call
Instruments 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 Johan Rollyson, Vice President of Investor Relations. Please go ahead Sir.
Good morning, everyone and thank you for joining us by now you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call and these can be accessed through the Investor Relations section of our website I'll walk.
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 may differ materially any forward looking information relayed on this call speaks only as of today's date.
And the company undertakes no obligation to update that information to reflect changed circumstances.
Additional information concerning these statements, including factors that could cause our actual results to differ is contained in our earnings press release and in the risk factors and forward looking statements sections in the filings, we make with the Securities and Exchange Commission.
Our filings are available on the Sec's website, and the Investor Relations section of the Hertz website.
Today, we will 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 unless otherwise noted our discussion today focuses on our global business.
On the call. This morning, we have Gil <unk>, our Chief Executive Officer, who will discuss operational highlights and our fleet, our chief commercial officer and deep debate will then share insights into our commercial strategy, followed by Scott Haralson, Our Chief Financial Officer, who will discuss our financial performance in <unk>.
Liquidity. We are also joined by Darryn Harrington, our executive Vice President for revenue management, who will be available to answer questions. During the Q&A session.
I'll now turn the call over to Gil.
Thank you Johan and good morning, everyone.
First of all I'd like to thank the team at Hertz for their hard work and dedication over the last quarter.
Our people continue to lead this transformation driving execution proving operations and strengthening performance across the business.
When we introduced our back to basics roadmap last year, we didn't just make a strategic pivot under new leadership, we began a multi year journey to reset the foundation of the company and position Hertz for the future. This transformation isn't about broad strokes it's about.
Driving fundamental change starting at the core of our business and rebuilding it from the ground up.
Arrington, our Executive Vice President for Revenue management. Who will be available to answer questions during the Q&A session. I'll now turn the call over to Gil.
At Hertz, we believe transformation has earned we know that through disciplined execution and operational excellence, we will drive tangible results for our customers our team members and our shareholders.
That's why we've been transparent about our goals clear about our progress grounded in the details that drive performance and this quarter. We delivered our best set of results in nearly two years for the first time in seven quarters Hertz delivered positive adjusted corporate EBITDA.
Nearly half a billion dollars year over year improvement.
We exceeded our north star target for depreciation per unit.
Achieved the highest second quarter retail vehicle sales in five years.
And had our highest fleet utilization in nearly two years. These.
These gains supported $2 $2 billion in revenue for the quarter and underscore our ability to sweat the assets and do more with less.
Importantly, we also improved our direct operating expense per transaction day, despite lower year over year volume a clear sign of growing operational leverage.
What's behind that progress.
The same three financial pillars, we laid out at the start of our journey.
Disciplined fleet management.
Revenue optimization and rigorous cost management.
Powered by our people technology and processes. These are the fundamentals for long term durable profitability.
Let's dive deeper into these results and begin with the fleet.
At its core Hertz as an asset management company that buys rents and sales.
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With our scale and brand recognition earned over more than a century of service. Our fleet is our most powerful economic lever.
We knew that any meaningful transformation had to start there.
Over the past year, we've moved aggressively to rotate the fleet and realign the mix to better reflect customer preferences that progress is proven.
Core to building, our new foundation, resulting in tangible financial impact.
Measured best through the results delivered by our pyrite hold right sell right strategy.
We achieved depreciation per unit of $251 well below the sub $300 North star target. Thanks to our early action on favorable model year, 2025 pricing and a timely acceleration of our fleet rotation and.
In the first quarter, we navigated a challenging environment marked by unpredictable travel demand and tariff developments.
Confident in our strategy, but mindful of the risk to demand and potential oversupply of fleet. We continued our fleet rotation and artist selling off older higher depreciating vehicles into a strengthening residual market, while fleeting up for our peak season.
While the fleet size decline year over year, the quality of our assets improved setting the stage for better unit economics as we complete the rotation.
This approach proved effective yielding strong cash proceeds and positioning us for more efficient growth.
As a result, 80% of our U S core rental fleet is now less than a year old. This younger fleet is driving better reliability, lower maintenance cost and stronger customer experience, all while supporting lower depreciation.
Looking ahead, we are applying the same disciplined approach to model year 2026 vehicles.
Despite supply chain related delays.
We are progressing in our negotiations diversifying our OEM relationships and maintaining flexibility as the industry continues to navigate any economic headwinds are refreshed fleet gives us flexibility to navigate this uncertainty.
We also had our best second quarter for retail vehicle sales in half a decade building on the momentum achieved in Q1's record performance.
As we continue to elevate and expand awareness of our Hertz car sales channel with.
We partnered with Cox automotive to support a fully digital transaction.
Adding customers, where they are and enhancing how we engage across the car buying journey.
They are deep consumer insights through platforms like auto trader will help inform and strengthen our marketing pricing and retail strategy as we scale.
We're also seeing strong momentum in our rent to buy program.
Which continues to deliver one of the highest conversion rates.
Clear sign that try before you buy model is resonating.
Combines the flexibility of our rental with the convenience of ownership and it's proving to be a meaningful driver of volume and customer satisfaction.
Beyond that we're expanding our technical partnerships and digital integrations to improve visibility ease and reach ensuring our vehicles are present on the platforms, where consumers are already browsing and shopping.
These efforts are designed to drive greater awareness stronger engagement and a seamless path from interest to ownership.
Shifting gears, our revenue results were down commensurate with our decision to reduce our fleet size for the reasons I outlined earlier.
Our intent is to earn the right to grow again as we complete our fleet rotation and our unit economics fall into line.
The headline on <unk> is encouraging essentially flat year over year, when adjusting for car class mix shift which was margin accretive.
As a peel back.
As you Peel back the elements that make up <unk>.
We're making some great headway in demand generation and utilization.
But have work to do on pricing.
We're staying focused on what we can control in this area and our courage by the market setup going forward.
With tighter supply, resulting in a resulting from OEM supply chain disruptions and recalls along with growing macro demand.
A rigorous efforts to control costs also showed progress this quarter.
Despite previously mentioned insurance and rent expense headwinds.
Direct operating expense per transaction day was down year over year, driven by younger fleet better supply chain leverage productivity improvements and tighter operating discipline.
We expect these efficiencies to continue improving our P&L as we work towards North star target of BOE per day in the low thirties.
Yes.
Using <unk>.
Given the pace of change.
In this transformation.
Need to stay focused on.
How we make hertz.
The most preferred rental car company in the world.
As we improve our core economics of our business.
We're focused on how we leverage the strength and foundation to.
To deliver an improved customer experience, putting our customers in the forefront of everything we do.
Net promoter score improved 11 points year over year.
We're seeing stronger enrollment in our loyalty programs.
But our job to continue earning our customers' trust every day by delivering value consistency and reliability.
That's what we've set out to do with our digital vehicle inspections.
For over 100 years manual damage inspections have caused confusion and frustration, creating unnecessary friction with customers. This.
<unk> technology is designed to bring much needed precision objectivity and transparency to the process.
While improving our ability to proactively identify specific maintenance actions and drive further operational efficiencies. We know change of this scale takes time and were listening learning and improving every day. Our goal is to enhance the customer experience by removing friction sharing transparency.
Building trust not just for the 3% who experienced damage.
But also for the 97% who don't.
Before I hand, it over to Sandeep.
I will just say this transformation doesn't happen overnight, but by tackling the largest economic lever. The fleet first we created the foundation needed to move faster and smarter. We can now empower our customer team to act with greater speed and precision at all.
Local market level to capitalize on pricing and revenue opportunities and meet customer demand.
There is still a lot of work to be done, but we're making measurable progress in our operations and doing it the right way for staying disciplined controlling what we can and executing with precision to earn the right to grow with that I'll turn it over to Sandy. Thank you Jill good morning, everyone.
On the commercial side, we are focused on the foundational improvements to drive our Bu two <unk> metric up over $1500. These efforts will directly enhance profitability and strengthen our position for future growth.
In Q2 revenue was down 7% in part due to as Gil mentioned running a smaller fleet down 6% year over year.
In that environment, we built momentum on demand generation and utilization.
Face challenges with pricing.
Going forward, we have a clear commercial strategy to unlock the value, where we see significant potential.
Our strategy begins with our ability to set out assets and drive more days, but given <unk> size, which <unk> Hood is yielding results. The utilization improvement in Q2 was driven by our world class Tech ops team, reducing out of sales waco's improve demand gen.
<unk> from our commercial and operations teams and better alignment of capacity and demand driven by a fleet planning and revenue management teams.
This utilization performance also supported our sequential improvement in year over year, RPE, even within a competitive pricing environment.
Looking ahead, we believe pricing represents one of our largest opportunities to unlock further value to.
To capture it we're executing.
<unk> against the detailed plan.
Starting with the transformation of our revenue management platform.
Current system or regionally implemented in 2004.
<unk> on our data forecasting methods on batch space optimization lacks real time data.
And it is not integrated with adjacent functions like capacity planning.
It also fails to reflect localized market dynamics I'll respond to real time demand signals and has over reliant on human judgment.
The change that we.
We are several quarters into a multiyear partnership with Amadeus.
Global travel technology leader to replace our legacy item system.
The new platform will introduce sophistication like that seen in the airline industry, including real time optimization dynamic for costing and integration with adjacent systems. Our next major upgrade remains on track for deployment at the end of Q3.
The same rig that will be applied to our operational overhaul is now guiding how we approach commercial execution at the local level.
Mid quarter, we launched new initiatives that empower and incentivize field leaders to drive profitability in those specific markets.
Even in the early stages.
<unk> seen value creation emerge from local teams identifying and acting on fleet and demand and opportunities.
As this matures it will further enable more effective pricing and higher margin decision, making.
Stronger demand generation, particularly in durable direct channels.
Another foundational lever.
We saw a sequential improvement in <unk> website sales.
A standout metric this quarter was a 100% year over year increase.
In new U S Hutch loyalty member sign ups, accompanied by increased member booking activity.
We also made progress on revenue diversification with sequential growth in both our off airport and mobility business units.
At our last earnings call, we had expected formal pricing as we stepped into summer. However, the <unk> pricing environment started challenged but the conditions are improving.
Domestic air travel returned to positive year over year growth in July.
Supply constraints for model year, 'twenty six of uncertainty and manufacturer recalls are tightening supply.
With three calls currently affecting approximately 2% of our U S rental fleet.
Our hearts.
U S. Leisure forward bookings are currently tracking ahead of planned fleet capacity.
Demand is strengthening and suppliers getting constrained.
While the challenge second quarters trends continued through July.
Our U S forward bookings for August through the fourth quarter are quickly narrowing the gap to last year's RPT trends.
While this is materializing later than expected.
Increasingly optimistic about pricing in the second half of the year.
In summary, our gains in utilization not accelerating and we have momentum in our demand generation channels.
We have an actionable plan to address our largest opportunity in pricing.
And technology modernization revenue management strategy refinements and local market empowerment.
Our focus remains on strengthening the core profitability of the business to serve as a launchpad for future growth.
Let me now turn the call over to Scott for a review of our financial performance and liquidity.
Andy Good morning, everyone great to have you on the call today, let's start with our second quarter financial results.
Total revenues were $2 2 billion and.
And adjusted corporate EBITDA came in at a positive $1 million.
Which was consistent with our guidance and an impressive turnaround from a loss of $460 million in the prior year with a similar improvement in adjusted operating cash flow.
It is a clear indication that we are making significant progress.
While we've taken a moment to celebrate this milestone with the team we're already focused on the next one.
Fully aware that continued progress will require a sustained effort and execution. So a big high five to the team for the accomplishments so far but now it's out of the next play.
Looking at our key operational metrics RPE was $1400 down slightly year over year and flat when adjusted for our change in fleet mix.
Nickel utilization reached 83% in Q2, marking a 300 basis point improvement year over year.
This improved performance highlights our ability to optimize fleet deployment, while maintaining service levels.
While there is solid demand generation execution of our pricing initiatives will unlock material margin expansion.
Underscoring the strength of our fleet strategy and a favorable residual value environment. DP you came in well below guidance at $251 per unit per month exceeding our north star target by 16%.
This is a meaningful improvement both sequentially and year over year on a gross basis DP was around $280 net gains on sale represented about $30 per unit per month, driven by strong residual values achieved through our optimized optimized disposition channels and our continued <unk>.
Those will have older vehicles.
We expect gross TPU to remained under $300 for the rest of the year.
We don't expect to have the same level of gains on sale in Q3, and Q4 due to unexpected lower volume of sales than in Q2, So our net <unk> numbers will likely be closer to our gross TPU numbers.
In addition to fleet, our operating cost management initiatives continue to yield positive results direct operating expenses or DAU declined 3% year over year on an absolute dollar basis.
Bo per transaction day of about $36 improved sequentially and year over year, reflecting disciplined cost control and operational agility.
Despite the reduction in capacity SG&A remains well controlled through focused expense management and increased operational efficiency. Once again, we hit our internal cost targets and we expect to continue to do so as we execute on productivity.
We expect gross dpu to remain under $300 for the rest of the year.
While we have more work to do to achieve our Northstar goal. These results reflect the continued execution of our transformation strategy and our commitment to building a more resilient and profitable business model.
We don't expect to have the same level of gains on sailing in Q3 and Q4 due to an expected lower volume of sales than in Q2. So our net dpu numbers will likely be closer to our gross dpu numbers.
In addition to Fleet our operating cost management initiatives continue to yield positive results.
Our liquidity at the end of June was $1 4 billion.
Stronger position than we had signaled on our last earnings call. This was obviously bolstered by the delay of the Wells Fargo Litigation resolution as the Supreme Court continues to consider whether they hear our appeal.
Direct operating expenses (DOE) declined 3% year-over-year on an absolute dollar basis.
Doe per transaction day of about 36 dollars. Improved sequentially and year-over-year reflecting disciplined cost control and operational agile agility.
During the quarter, we executed on a series of smaller transactions, which enhanced our liquidity and made efficient use of the balance sheet. We have no significant corporate debt maturities until the end of 2026.
On the ABS side, we completed several business as usual transactions that were well received by the market demonstrating continued investor confidence in our business model and asset quality.
Our ABS facilities remained strong buoyed by a positive residual value environment with our ABS fair market values at about 110% of our net book values and resulting in an equity cushion of about $1 billion as of the end of June.
Despite the reduction in capacity sgna remains Well Control through focused expense management and increased operational efficiency. Once again, we hit our internal cost targets and we expect to continue to do. So, as we execute on productivity while we have more work to do to achieve our Northstar doe goal, these results, reflect the continued execution of our transformation strategy, and our commitment to building, a more resilient and profitable business model.
Our liquidity at the end of June was 1.4 billion, a stronger position than we had signaled on our last earnings call.
For our forward outlook, we anticipate maintaining our fleet size at approximately 6% below 2024 through year end with flexibility to adjust based on demand signals.
This was obviously bolstered by the delay of the Wells Fargo litigation resolution as the Supreme Court continues to consider whether to hear our appeal.
Our model year 2026 acquisition process is delayed versus the typical schedule as the industry continues to navigate supply chain volatility. However, we are cautiously optimistic about where things will end up plus the significant number of model year 2025 acquisitions and the corresponding economics on those.
During the quarter, we executed on a series of smaller transactions which enhance our liquidity and made efficient use of the balance sheet, we have no significant, corporate debt maturities, until the end of 2026.
On the ABS side, we completed several business. As usual transactions, that were well received by the market demonstrating continued investor confidence in our business model, and asset quality.
Vehicles gives us a lot of optionality and flexibility.
And while the pricing uplift, we anticipated from both our own initiatives and the macro environment is materializing later than expected. We are now seeing early encouraging signs in August however, with a limited data set it's too soon to extrapolate this fully into the second half of the year's outlook.
For the third quarter, we expect our adjusted corporate EBITDA margin to be in the mid to high single digit range, which incorporates an overall muted revenue forecast relative to what we said on the last call.
Our ABS facilities remain strong, buoyed by a positive residual value environment. Our ABS fair market values are at about 110% of our net book values, resulting in an equity cushion of about $1 billion. As of the end of June, for our forward outlook, we anticipate maintaining our fleet size at approximately 6% below 2024 through year-end, with flexibility to adjust based on demand sickness.
We continue to expect the third quarter to show our first positive EPS since 2023, which is another milestone for the transformation.
For the fourth quarter, we still expect a slightly positive EBITDA margin based on improved pricing due to macro vehicle supply constraints recent pricing trends as well as our own revenue initiatives.
Number of model year, 2025 Acquisitions and the corresponding economics on those Vehicles. Gives us a lot of optionality and flexibility.
While the directional commentary on EBITDA still holds the overall levels of positive EBITDA or slightly lower for Q3, and Q4, thereby pushing our full year EBITDA levels to slightly below breakeven versus our previous estimates of slightly above.
And while the pricing uplift, we anticipated from both our own initiatives and the macro environment is materializing later than expected. We are now seeing early encouraging signs in August. However, with a limited data set, it's too soon to extrapolate this fully into the second half of the year's Outlook.
But the longer term we are confident we are still on track to achieve its adjusted corporate EBITDA of $1 billion by 2027.
Overall, we remain committed to our transformation and we are pleased with where the initiatives are tracking there is a lot of background work on process reporting intelligence insights and the underlying platforms that allow us to continue to make better and better decisions. This is where a lot of critical work happens that doesn't always show up in.
For the third quarter, we expect our adjusted corporate EBITDA margin to be in the mid to high single-digit range, which incorporates an overall muted revenue forecast relative to what we stated on the last call.
We continue to expect the third quarter to show our first positive EPS since 2023, which is another milestone for the transformation.
The quarterly results. However, we know these are key unlocks to future performance and we are excited to see the results of these initiatives. So again proud of the progress to date and getting to our first financial goal of positive adjusted corporate EBITDA and now the team has tasted some success and has rallied around where we can go.
For the fourth quarter, we still expect a slightly positive, evida margin based on, improved pricing due to macro vehicle Supply. Constraints recent pricing Trends as well as our own Revenue initiatives.
While the directional commentary on EBITDA still holds the overall levels of positive EBITDA slightly lower for Q3 and Q4, thereby pushing our full year EBITDA levels to slightly below break-even versus our previous estimates of slightly above.
Exciting times to come with that I'll turn it back to Gil for closing remarks. Thank you Scott to reiterate this quarter for the first time in nearly two years, we delivered positive adjusted corporate EBITDA and almost a $500 million year over year improvement.
For the longer term. We are confident, we are still on track to achieve adjusted corporate ibida of 1 billion dollars by 2027.
Alongside record.
Retail vehicle sales stronger GPU and meaningful gains in utilization customer satisfaction and cost efficiency.
These results show, we've made real progress in our just to stop over on a longer journey. We are clear eyed about the work still ahead, just as confident in our conviction about where we're going Hertz has the scale brand and operational expertise to lead again.
With sharper operations and a world class team, we are building a business that's not only executing against the northstar metrics, but positioning to lead in the next era of mobility.
And we're focused on getting it right.
In our playbook disciplined execution and bold transformation go hand in hand.
Overall, we remain committed to our transformation and we are pleased with where the initiatives are tracking. There is a lot of background work on process, reporting intelligence insights, and the, underlying platforms that allow us to continue to make better and better decisions. This is where a lot of critical work happens. That doesn't always show up in the quarterly results. However, we know these are key unlocks to Future performance, and we are excited to see the results of these initiatives. So, again, proud of the progress to date and getting to our First Financial goal of positive adjusted, corporate ibida. But now the team is tasted some success and has rallied around where we can go. Exciting times to come with that. I'll turn it back to Gil for closing remarks. Thank you, Scott to reiterate this quarter for the first time in the nearly 2 years. We delivered positive adjusted, corporate ibida and almost a $500 million year-over-year Improvement alongside Rec.
Our momentum is real vision is focused.
And our team is United in building the company fit for the future without trying to jump ahead of it with that let's open it up for questions <unk> you operator.
Retail vehicle sales, stronger dpu and meaningful gains in utilization customer satisfaction and cost efficiency.
Thank you 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 press star one on your telephone keypad.
These results show we made real progress and are just a stopover on a longer Journey. We are cleared about the work still ahead, just as confident in our conviction about where we're going, herdz has the scale brand and operational expertise to lead again.
Wish to cancel your question. Please press Star one again, our first question will come from Chris <unk> with Deutsche Bank.
With sharper operations in a world-class team, or building a business. That's not only executing against the Northstar metrics.
Hey, good morning, guys.
But positioning to lead in the next era of Mobility.
Thanks for taking the question.
And we're focused on getting it right.
Gil maybe we could start off with a very kind.
Or a longer term question that would kind of be.
And our Playbook disciplined execution, and bold transformation. Go hand in hand.
Ms Virginia.
Kind of in the future of Avs.
Our momentum is real vision. Is focused.
Axes and things like that.
Yes sure.
Chris Thanks for the question yes.
Well first Hertz, certainly has a role in the future of Avs and Robo taxis.
Our team is united in building the company fit for the future, without trying to jump ahead of it with that. Let's open it up for questions, back to you operator.
Just say.
I and others on the team know this space.
The Tech works.
Safety will be dramatically improve with avs.
And is the way I think about it is is the cost of Avs decrease the economics will be transformational. So we've got a significant role to play in that future of mobility and partnerships are just part of our DNA.
Thank you. We'll now open the line for questions. Please limit your questions to 1 question per speaker and 1 per follow-up. If needed to ask a question, please press star 1 on your telephone keypad, if you wish to cancel your question. Please press star 1. Again, our first question will come from Chris Rocca with Deutsche Bank,
Hey uh, 2 morning guys. Thanks for taking the question.
This is a huge.
Was it already.
Um, Gil, I I maybe we could start off with with a very, um, kind of a longer term question. That would kind of be how, how do you guys envision your kind of in the future of AVS and uh Robo taxis and things like that.
I think the whole <unk>.
Robot taxi market is a huge tam right and it's not a winner take all game here. So we're one of a limited number of companies.
Yeah, sure. Uh, well, Chris, thanks for the question. Yeah. Um,
They have all the necessary ingredients to be a major player in <unk>. So as I think about it we've got chronic brand we've got a global operating footprint driving operational excellence.
Well, first it hurts certainly has a role in the future of AVS and Robo taxis. I'll just say um, I and others on the team know, the space.
Vance maintenance capabilities of course large.
The tech Works. Um, Road Safety will be dramatically improved with AVS. And the, and as the way I think about it is, is the
Fleet management skills.
And we've also got the experience managing evs because in all likelihood all of these will be evs.
cost of AVS. Decrease, the economics will be transformational. So, um, we've got a significant role to play in that future of mobility and Partnerships are just part of our DNA.
And then of course infrastructure, but more importantly, we're an asset heavy business and we have vehicle financing capability. So bottom line is just owning and operating large fleets of vehicles Thats, our core business and as I see it that's the foundation.
this is a huge, uh,
Uh, oh sorry, look I I think the whole uh uh Robo taxi Market is a huge Tam, right? And it's not a winner, take all game here. So we're 1 of a limited number of uh companies.
For for AAV.
Business in mobility in the future.
Okay. Thanks. Thanks.
As a follow up I was hoping we could maybe dig a little bit deeper into the into.
And to the RPT and I know you like to sometimes looking tomorrow EU basis, but just on our PD on kind of what it was.
Uh, that have all the necessary ingredients to be a major player in AVS. So as I think about it, we've got iconic brand. We got a global operating footprint driving operational excellence. You got Vance, maintenance capabilities, of course, large
And in Q2 year on year. Your commentary is there any way to break down how much of that is mix versus kind of what.
You know what's going on in the market.
Do you think that breakdown split.
<unk>.
Half of the year as well thanks.
Yes.
Thanks. This is sandeep here and I know you said, though we'd like to focus on IPO.
Let me actually first start with Ikea and then I will get back to your question on RPT for sure. So.
Fleet management skills. And we've also got the experience managing EVS because in all likelihood, all AVS will be EVS. Um and then uh of course infrastructure. But more importantly, we're an asset heavy business and we have vehicle financing capabilities. So bottom line is just owning and operating large fleets of vehicles that's our Core Business and as I see it, that's the foundation. Um, for for Ave.
Ugh, business and mobility in the future.
<unk> overall revenues.
<unk> bought right.
Q2 had a sequential improvement in year over year revenue by six points.
And also improving our view by one one point.
And we manage our revenue on a focus of our not some metric about you.
You balancing I'll be in use at the local market level similar to what the airline industry does where RASM is the key unit revenue outcome balancing even vote. So that's how we kind of manage it. All now then you breakdown Q2 itself RPT for us in isolation was down about 5%.
Okay. Thanks, thanks skill as a follow-up. I, I was hoping we could maybe dig a little bit deeper into the, um, you know, into the RPD. And I know you like to sometimes looking at more than Pooh basis, but just on RPD on, kind of what was printed in in Q2 and your, your commentary is there any way to break down? How much of that?
Is mixed versus kind of what, uh, you know, what's been going on in the market. And and, and do you think that breakdown or split is applicable to the to the back half of the year as well? Thanks.
And would have been about two to three points better normalizing for change in fleet mix.
Now yes.
We all know what the market was.
Pretty challenged in Q2 overall and I'd say the overall market pricing was down mid two.
High single digits as such and there is a lot of work there that we had done it in terms of improvement in our segment mix improvement in the way we do.
We drive our revenue management strategies and tactics to extract and monetize more from the demand that we were generating so I'd say, we were able to overcome a decent bit of what was happening in the marketplace through the foundation improvement of how we monetize.
Yeah, um, Chris, thanks, this is seep here. And and I, and I know you said, uh, we like to focus on RPO, um, versus RPD. Let me actually first start with RP and then I'll, I'll, I will get back to your question around RPD, uh, for sure. So, uh, just overall revenue is on on encouraging path, right? Um, Q2 had a sequential Improvement in year-over-year Revenue by 6 points, uh, while also improving our poo, by 1, 1, 1 Point. Um, and we manage our revenue on a focus of our Northstar metric of rpu balancing. Our PDN youth at the local market level similar to what the airline industry does. Whereas rasim is the key unit Revenue, outcome balancing deal and don't
Monetize demand I think looking ahead as we talked about in the in the.
So, uh, that's how kind of we manage it all. Now, when you break down, Q2 in itself, uh, RPD for us in isolation, was down about 5% and would have been about 2 to 3 points better normalizing for change in Fleet, mix.
A few minutes ago, I think the biggest opportunity for us on a year over year basis is going to be how we price we.
We have a pretty I'm going to use the antiquated revenue management system.
And it puts a lot of load on our revenue management system, and making the right calls and I think over the over the next few quarters. I know this is a multiyear journey, but it is going to be material in terms of the year over year accretive nature of what we are trying to do here.
Im actually Super excited about the journey forward.
And so as the entire commercial team here.
Okay very good very helpful. Thanks, guys.
Your next question will come from Ryan Brinkman with Jpmorgan.
Alright, great. Thanks for taking my question I didn't hear much discussion of recalls in your prepared remarks, and your utilization rate is very high during the quarter, which would be hard to achieve in the current recall environment. So I'm curious if you might have been disproportionately less exposed to the vehicles that were recalled or maybe the younger nature of.
Now, yeah, we all know the market was uh pretty challenged in Q2 overall. And I'd say the the overall market pricing was down mid to uh, High single digits as such and there's a lot of work there that we had done in uh, in terms of improvement in our segment. Mix Improvement in the way we do. Uh, we drive our Revenue management strategies and tactics to extract and monetize more from the demand that we were generating. So I'd say, uh, we were over able to overcome a decent bit of what was happening in the marketplace, through the foundational Improvement of how we monetize uh uh monetized demand. I think looking ahead as we talked about in the in the um uh uh a few minutes ago. I think the biggest option for us on a year-over-year basis is going to be how we price, right? We have a pretty, I'm going to use the term Antiquated Revenue management system and
Our fleet now post rotation might have left you're less exposed or just how recalls you think impacted the quarter and then what your outlook for their impact might be going forward.
Yes. Thanks.
I'll take that Ryan. Thanks for the question, Yes, I think a couple a couple of pieces I think first of all for the quarter for Q2.
Uh, it puts a lot of load on our Revenue management system in making the right calls and I think over the over the next few quarters. I I know this is a multi-year journey but it's going to be material in in terms of the year over over year creative nature of what we are trying to do here. So I'm I'm actually super excited about the journey forward and so, is the entire commercial team here?
Okay. Uh, very good, very helpful. Thanks guys.
We really didn't have much of a headwind for Recall's. It's really Q3 is where I think we're going to experience the impact so.
Your next question will come from Ryan Brinkman with JP Morgan?
We're I think Sandeep mentioned, we're about 2% of our vehicles currently on recall.
That's about a point and half higher than normal let me say that kind of give you a sense of that so we've seen a rash of recalls and as we've entered the summer period.
And I mean, as you know are implying.
We don't have the ability to rent a car when it's when it's on recall, so we don't do that but.
All right, great. Thanks for taking my question. You know, I didn't hear much discussion of recalls in your prepared remarks and your utilization rate was very high during the quarter, which, you know, would be hard to achieve in the current recall environment. So I'm curious if you might have been just proportionately less exposed to the vehicles that were recalled or maybe the younger nature of your Fleet. Now, post rotation might have left you less exposed or just how recalls you think impacted the quarter and then what your outlook for their impact, might be going forward.
Yes, I think what I would say in terms of.
How we've been managing this just to put it in perspective, our tech ops team first of all is the best of the best they are very proactive to identify and mitigate any upcoming vehicle recalls before they were sold in a vehicle out of service. So much of the impact that we see.
Today is where an OEM does not have the fix for the recall.
Developed candidly are the parts arent available. So those are the kind of two pieces that we're working our way through and then I'll just say.
Not all Oems are created equal in this respect so mix is an important part of it but you are right I think the younger fleet also has less exposure to recalls in general.
Think, uh, first of all, for the quarter for Q2, um, we really didn't have, uh, much of a headwind for recalls. It's really Q3 is where I think we're going to experience the impact. So, um, we're you know, as I think Sandeep mentioned, we're about 2% of our vehicles currently on recall. Um, you know, that's about a point and a half higher than normal. Let me say that kind of give you a sense of that. So we've we've seen a rash of recalls and as we've entered the summer period, uh, and I mean, as you know, or implying we you know we don't we don't have the ability to rent a car when it's, uh, when its on recall. So we don't do that. But um,
Okay, great. Thanks, and obviously great performance on depreciation per unit during the quarter and thanks for the breakout of how much of the gains on sale contributed and how we might expect that to go forward, but I'm curious on the contribution from the higher prices achieved by selling more through the vertically integrated retail channel like how much of the high.
Here sales volume at retail the second best in five years was driven by a higher level of dispositions generally is maybe you were more successful in security in 2025 model year vehicles earlier, because you are reducing the size of the fleet year over year versus how much was maybe driven by some initiatives on year end, perhaps structural in nature.
Yeah, I think what I would say in terms of uh how we've been managing this, just to put it in perspective, our our Tech Ops Team. First of all, is the best of the best. You know, they are very proactive to identify and mitigate any upcoming vehicle recalls before they resolved in a vehicle out of service. So much of the impact that we see today is where an oem does not have the fix for the recall, um, developed candidly or the parts aren't available. So those are the kind of 2 pieces that um, we're working our way through. And then I, I'll just say uh, not all oems are created equal in this respect, right?
<unk>, a higher percent of dispositions through retail going forward.
So mix is an important part of it, but you're right. I think uh, the younger Fleet also has less exposure to recalls in general.
Yes. Thank you.
I think it starts with our strategy first of all because that frames out kind of all the actions we've been taking to drive our depreciation down and that includes the core of your question too. So again, we've been really focused on trying to develop a cohesive end to end strategy now we call it internally by Ray <unk>.
Right. So right just to frame that out in each of those three pieces have a lot of depth to them.
But as we've been executing the strategy first of all on the buy side Youre right I mean, we were.
We recognized of course early that we had a lot of fleet headwinds and the team has done an amazing job kind of turning those headwinds into a real real competitive tailwind now for us and it's part of our fleet rotation strategy, but also as we bought vehicles in 2025.
Okay. Great. Thanks. And, you know, obviously a great performance on uh depreciation per unit during the quarter. Thanks for the breakout of how much of the gains on sale contributed, and how we might expect that to go forward. But I'm curious on the contribution from the higher prices, achieved by selling more through the vertically, integrated retail Channel, like, how much of the higher sales volume at retail? But the second best in 5 years, was driven by a higher level of dispositions generally. As maybe you were more successful in, securing 2025 model year vehicles earlier because you're reducing the size of the fleet year-over-year versus how much was maybe driven by some initiatives on your end. Perhaps structural in nature to drive a higher P percent of uh dispositions through retail going forward.
Five we tried to align our buys with the mix that our customers book to as close as we can but also we were really rigorous and far more analytical about our approach to the buy side economics.
With an eye towards when we sell the vehicles.
Will that look like.
And then of course, our objective here is also to refine our whole period to optimize our depreciation and return on those assets as well, but on the sales side of the equation.
Yeah, no, thank you. I you know, I think it starts with our strategy first of all because that frames out kind of all the actions we've been taking to driver depreciation down and that includes, you know, the core of your question too. So again, we've been really focused on trying to develop a cohesive end to end strategy. We call it internally by right. Hold right. Sell right. Just to frame that out and each of those 3 pieces have a lot of depth to them. Um, but as as we've been executing the strategy, first of all, on the buy side,
Really important as well that we get more than that out of what were so alright, and then it's really the retention value that we're trying to manage from when we buy the vehicle to when we sell it and that's of course, when we sell it how much we sell it for its key in that.
The retail channels are the most accretive in that respect so that's where we're leaning into.
And as you know we've had partnerships.
We've got our own internal car sales our website of course, that's the primary sales channel team has done a great job as I mentioned working to digitize that now but the partnership model has also been very helpful to open up that.
So we've got a number of partnerships those are growing by the way and we will continue to grow.
Side. You're right. All right. I mean we were um, you know, we recognized, of course early that we, you know, we had a lot of Fleet headwinds and the team's done amazing job, kind of turning those headwinds into a real real competitive Tailwind. Now, for us and, um, it's part of our Fleet rotation strategy. But also as we bought vehicles in 2025, you know, we tried to align our buys with the mix that our customers, uh, booked to, as close as we can. But also we were really rigorous and far more analytical about our approach to, uh, the buy side economics, um, with an eye towards when we sell the vehicles, what will that look like? Um, and then, of course our our objective here is also to refine our whole period to optimize our depreciation and return on those assets, as well. But on the sales side of the, the equation,
And then also looking to to understand what is best in class performance in terms of net return on the vehicles and of course, we benchmark it.
Donnelley and with our partners to understand where the F&I opportunities are where the reconditioning cost opportunities are in the reduction, but ultimately trying to solve for a higher net out of the vehicles. We're selling so all of that's really the end to end piece and then.
Um really important as well that we get more net out of what we're selling right. And then it's really the retention value that. We're trying to manage from when we buy the vehicle to when we sell it and that's of course when we sell it how much we sell it for its key in that. So um the retail channels are the most accretive in that respect so that's where we're leaning into. Um and uh as you know, we've had uh Partnerships uh we've got our own internal Car Sales uh website
Probably also worth noting as I mentioned in the in the earlier discussion.
We're also we're mindful of course seasonal demand that we need in our rental business, but we did lean in during the corner to take advantage of a real strong marketplace and vehicle sales and then continue to work towards that to accelerate our fleet rotation to sell out older higher.
Depreciating cars, which is helpful that positions us well going forward, but even with that we were able to pick up some good gains when we did that so part of that is market as well and the market dynamics.
On the games, but then its also all that's underpinned by the strategy of our fleet team.
Got it thank you.
Your next question will come from John Healy with Northcoast research.
I think you get.
I wanted to ask a little bit more on the fleet side of things, particularly as you discussed.
That relationship with Cox automotive.
We thought about them as more of on the wholesale side of things more so than retail. So I was just hoping you could explain kind of what youre doing with them and how those cars are getting retail deposits.
Dealers or direct to consumer and does this represent maybe a departure or a change in the relationship that you have been there Bob thanks.
In terms of, uh, net, uh, return on the vehicle. And of course, we Benchmark, uh, externally. And with our partners, to understand where the fni opportunities are, or the reconditioning cost opportunities are in the reduction. But ultimately trying to solve for a higher net out of the vehicles we're selling. So, all that's really the end-to-end piece and then, um, probably also worth noting as I mentioned in the, in the earlier discussion, you know, we're also, uh, we're mindful, of course, seasonal demand that we need in the rental business. But we did Lean in, uh, during the corner to take advantage of a real strong, uh, Marketplace and vehicle sales, and then continued to work towards that to accelerate uh, our Fleet rotation to sell out older, higher depreciation, depreciating cars, which is helpful that positions as well going forward. But even with that, you know, we were able to pick up some good gains when we did that. So part.
Yeah no. Thanks, Great question first of all Cox's wonderful partner I'll start there known them for decades in fact, I mean, even when I was a kid I would go by audit traders.
Of that's Market, you know, as well in the market dynamics, on the gains. But then it's also all that's underpinned by the strategy of our fleet team.
Got it. Thank you.
Was 18 years old to look for card to buy so.
Got tremendous respect for the company.
Your next question will come from John Healey with North Coast research.
There as we partnered with them what I will say is.
In terms of retail sales in particular.
The opportunities that we've got with them is one I mentioned earlier is digital transformation of the cell experience, so rather than the traditional model of selling cars and putting them out on a retail lot coming.
Coming in.
Back and forth on price reach a deal and then having a paper that up right. If you look at that whole process, probably the most agonizing part is all of the documentation at the year and you've got to fill out and go through.
On the sweet side of things. Particularly, as you discussed the um the relationship with Cox Automotive. Um, I've always thought about them as more of on the wholesale side of things more so than retail. So I I was just hoping you could explain kind of what you're doing with them and how those cars are getting retailed if it's you know 2 dealers or it's direct to Consumer and does this represent maybe a departure or a change in the relationship that you've had with carvana. Thanks.
We've worked with Cox, who really digitize all of that so that's important on a couple of levels. One it improves the customer experience of course, but then it also allows US then to.
To open up a much larger market.
Car sales that today doesn't.
In the future doesn't require that physical footprint at lots we can advertise.
And transact digitally then.
Which is which is really opens up the opportunities for us and there was a lot a lot of other dimensions to that too but.
That's the ultimate objective our rent to buy program also plays a role in that where you can rent cars experience them and then we can transact right.
Yeah, no, thanks. Great question. Uh, first of all, Cox is a wonderful partner. I'll start there known them for decades. In fact, I, I mean, even when I was a kid, I would go buy all the Traders. You know, when I was 18 years old to look for cards to buy so, um, I've got tremendous respect for the company, uh, there there, as we partnered with them, what I will say is, um, you know, in terms of retail sales in particular, um, the opportunities that we've got with them is 1. I mentioned, uh, earlier is digital transformation of the cell experience. So rather, you know, the traditional model of selling cars, you know, putting them out on a retail lot. You know, coming in, um, back and forth on price, reach a deal and then having a paper that up, right? If you look at that whole process, probably the most agonizing part is all the
So all of those things are geared around that the other thing Cox has done for us.
One our pricing strategies right. So.
They've got tremendous data of course wholesale as you mentioned, but also retail data because they've got.
Auto trader is just one example, but they've got a lot of <unk> in the retail space. So.
They've helped us leverage AI pricing, so we really know at a make model trim market location level.
What the retail.
Market is and kind of what the elasticity curve is in terms of price and time to sell the vehicles. So all of that then we ingest into our <unk>.
Our systems to be able to price vehicles optimally so.
Again, they're a great partner and there was a lot we're doing with them.
Documentation at the end, you've got to fill out and go through. Um, we've worked with Cox the really digitize all that, so um that's important on a couple of levels 1. It improves the customer experience, of course. But then um, it also allows us then to to uh, open up a much larger market of of car sales that today doesn't require or in the future. Doesn't require that physical footprint at Lots, we can advertise uh, and transact digitally then uh, which is which is really opens up, uh, the opportunities for us and there's a lot lot of other dimensions to that to, but um, that's, that's the ultimate objective our rent to buy program also plays a role in that, where you can rent cars, experience them, and then we can transact, right? Um, so all those things are geared around that. The other thing Cox has done for us is uh on our pricing strategy.
Great and then Sandeep I just wanted to ask one follow up question I think when you were talking about RPT performance, you kind of what you said.
Pricing was down kind of the industry mid to high single digits.
I think we saw the pricing for Avis.
A bit lower than that.
Better than that rather.
So when you kind of have that view is that suggestive of like a big change in what youre seeing out of enterprise or.
Just any color there thanks.
Yeah I think.
When we look at year over year pricing for a specific.
Right. So, um, they've got tremendous data, of course, wholesale as you mentioned, but also a retail data because they've got, you know, Auto auto traders, just 1 example, but they've got, you know, a lot of dimensions in the retail space. So, um, they've helped us leverage, AI pricing. So we really know at a make model trim Market, you know, location level, um, what the what the retail um, Market is and kind of what the elasticity.
Brian you have to look at what the implied last year with since this year right.
Generally.
Does that affect in play.
As well.
Curve is in terms of price and time to sell the vehicle. So all of that, then we ingest into our in a, into our systems, to be able to price Vehicles. Optimally. So um again they're a great partner and there's a lot we're doing with them.
So I just wanted to put that out there and then the other thing just to mention is overall.
Focus is on our view right and for US, it's finding that balance between yield and our BD at the local market level and the way we are operating on that.
This year is different than how we executed last year and that's being represented in DRP performance document driving so again similar to the airline industry.
Great. And and then I just want to ask 1, follow-up question. I think you when you were talking about RPD performance, you kind of, I thought you said pricing was down kind of in the industry mid to high single digits. Um, I think we saw the pricing for Avis and, you know, kind of a bit lower than that, or a bit a bit better than that. Rather, um, so when, when you kind of have that view is, is that suggestive of like a big change in what you're seeing out of Enterprise or um just any color there. Thanks.
I'm going to say that.
We're going to be focused on on <unk> and finding that balance at the local market level.
The.
So I'll leave it at that.
Okay.
I think, uh, when we look at year-over-year pricing for a specific, uh, uh, brand, you have to look at what strategy they employed last year versus this year, right? There's there's, there's generally, um, um, uh, there's that, uh, effect in play,
Your next question will come from Stephanie <unk> with Jefferies.
Hi, good morning, Thank you.
I wanted to follow up on the updated EBITDA outlook or for the full year and if you could talk a little bit about what drove that slight adjustment up going from.
Maybe just slightly below breakeven or slightly above the floor. Thank you.
Hey, <unk> this is Scott I'll start.
As well. Um, so I just want to put that out there. Uh, and then the other thing just to mention is overall. Um, our focus is on rpu, right? And, and for us, it's finding that balance between Youth and RPD at a local market level. And the way we are operating on that. Uh, this year is is different than how we executed last year and that's being represented in the rpu performance that we're driving. So again, similar to the airline industry, um I'm I'm going to say that um
Sure Sandy, but you don't want to chime in too but.
I think what we're really talking about here and we kind of hinted at this in the prepared remarks.
Was that in our base assumption really through.
Um, we're going to be focused on on rpu and finding that balance, uh, at the local market level. Uh, the um, so I'll leave it at that. Yeah.
The summer and into the back end of the year was based on a sudden curve of sort of pricing moves.
Okay, thanks.
We did see a bit of a delay in that honestly the Q2 pricing as we talked about wasn't as strong as we had hoped but we're starting to see.
Your next question will come from Stephanie Moore with Jeffries.
Hi, good morning. Thank you.
Cracks in that as we head into <unk>.
August and into the meat of middle of Q3 and into Q4. So I think what we're talking about here is that that sort of delayed pricing move has caused the math to come down slightly.
I wanted to to follow up on maybe the the updated Eva outlook for for the full year. And if you could talk a little bit about, you know what, drove the the slight adjustment of going from um, you know, maybe just slightly below Break. Even versus slightly above before. Thank you.
Slightly.
So I think we're just sort of revising.
The volume of kind of what we thought around pricing in total revenue for the back end of the year.
But I think sandy kind of hinted to a lot of the green shoots that we're seeing that do give us a little bit of optimism.
But like I mentioned limited data set so far so we're not ready to extrapolate that.
Throughout the back end of the year yet.
Okay.
Then as it would be helpful. If you could just Scott, yes, that's what you can about the overall.
Overall demand environment.
Thank you Angela.
July and August and then maybe any commentary around forward bookings, indicating the health of just the overall travel market.
Yes. This is sandeep here.
I'll cover that so I think.
What we generally saw in it.
Specifically in the U S. If you look at the segments that had shown a lot of decrease in the first half of the year.
And I am referring to corporate I am referring to government and I'm, referring to the high RPT inbound.
Hey yes, Stephanie, this is Scott. I I'll start. Um, I'm sure Sandy would go on to chime in too but um I I I think what we're really talking about here, we kind of hinted at this, in the prepared remarks. Um, was that, that in our basis, assumption really through, um, you know, the summer and into the back into the year was based on a certain curve of, um, sort of pricing moves. Um, we did see a bit of a delay in that, honestly, the, the Q2 pricing as we talked about wasn't as strong as we had hoped. Um, but we're starting to see, um, you know, cracks in that as we head into, um, you know, August and into the the meat of, of middle of Q3 and into Q4. So I think what we're we're talking about here is that, that sort of delayed pricing move has caused the math to come down, uh, slightly. Um, so I think we're just sort of revising, um, you know, the, the volume of kind of what we thought around pricing and total revenue for the back end of the year. Um, but I think, you know, Sandeep, kind of hinted to a lot of the, the green shoots that we're seeing that do give us a
USA <unk> segments those are on a declining trend.
The first half of the year for reasons, we all know.
A little bit of optimism, um, but like I mentioned, uh, limited data sets so far. So we're not ready to extrapolate that, uh, throughout the back end of the year yet.
Hey.
Those segments here.
Say plateaued out.
In June.
And since then we've seen an improvement in all three of those segments.
The corporate segment was down mid single digits, we saw good.
Three to four points improvement in July from a demand perspective.
Okay, understood. And then, you know, it would be helpful if you could just discuss. She has the best that you can about the demand overall demand environment that you've seen the uh, that you saw in July, maybe that's for in August and then maybe any commentary around forward bookings. Indicating the health of just the overall travel Market
The government sector again, plateaued out a down 25% to 30% and then seeing that was in June and then we saw about a five point improvement in July in that segment and I would say the inbound segment, which show where we've actually seen positive demand from APAC and Latin America, but of.
Lars a reduced demand.
The EMEA region in the first half of the year, we actually saw some.
Improvement in EMEA in July as well and net net and bond was actually positive by a point to two points from a demand perspective in July and I'd say those trends and when we look at the early part of August continued to improve so I think the demand profile as such.
That's coming and continues to improve now going to the second part of your question on forward bookings, we are as I mentioned in the.
Earlier on we are booking ahead of our client a capacity that's indicative of two things one is the improvement in demand that we see again early days for that I do want to say, it's early days, so that we need that to that trend to continue on.
Thank you. Yeah. Now this is on the here. Uh, I'll I'll cover that. So I think, um, what we generally saw and if you, uh, specifically in the US, if you look at the segments that are shown, a lot of decrease, in the first half of the year, um, and and I'm referring to corporate, I'm referring to government and I'm referring to the high RPD inbound. Uh, uh, us inbound segments. Those were on a declining Trend. Uh, through the first half of the, of the year for reasons, we all know they, uh, those segments hit a. I'm going to say, plateaued out in, in, in June, and since then we've seen an improvement in all 3 of those segments, right? Um, uh, the the the corporate segment was down mid single digits. We we saw a good uh, uh, 3 to 4 Points Improvement in July, uh, from a demand perspective. Uh, the government sector again flattered out as down 25 to 30%, and we've seen in that was in June. And then we saw a about a 5
But also change in some of our <unk> strategies and tactics as we keep on refining the way we foundation.
Do revenue management.
Overall, I'd say increasingly optimistic but the study still has to be told you need to see more progress.
I guess just to put that all together and it sounds like demand environment optimistic.
<unk>, maybe in a little bit better as you noted pricing environment, maybe a little bit worse than I had expected and then how would you layer and maybe the overall used price environment and expectations around vehicle gain.
Expectations without the air.
Thanks.
I thought.
Just some details I'll just mentioned on the pricing front just one on commentary I think the pricing amendment the way I would characterize what we've seen so far is a delay in the improvement we expected when we met in Q1.
During the earnings call, we had expected pricing due to improved through summer that element has just been delayed but then now we see progression.
Uh 2 things 1 is uh the uh the Improvement in demand that we see early days for that. I do want to say it's early days for that. We need that to that Trend to continue on but also change in in some of our RM strategies and tactics as we keep on refining the way we foundationally. Um uh do Revenue management. But overall uh I'd say increasingly optimistic, but the story still has to be told, right? We need to see more progress.
And narrowing of the gap on a year over year basis on that front. So I think it's a delay in that shouldn't achievements as worsening. So I just wanted to.
We communicate that.
And then just to follow up on the other side around the fleet I think the assumption going forward is that we generally expect stable.
I guess just to put that all together. So it sounds like the main environment optimistic, you know, stable maybe in a little bit better as you noted pricing environment, you know, maybe a little bit worse than had expected. And then, how would you layer in maybe the overall used price environment and expectations around, you know, vehicle gains and GPU versus expectations to start the year?
Residual values, we talked about gross TPU being somewhat similar in Q3 and Q4 is what we produced in Q2, probably won't have the same level of gains.
Less volume.
Be sold through.
The periods going forward as we did in Q2 slightly less but all in all.
<unk> pretty stable residual values as we go forward.
Thank you everybody.
Your next question will come from Federico 90 with Bank of America.
Hi, good morning, everybody.
So I'll listen deep here, I'll just mention on the pricing front, just 1, uh, 1 commentary. I think the, the pricing amount the way I would characterize, what we've seen so far is a delay in the Improvement, right? We expected when, when we met in q1, um, and during the earnings call, we had expected pricing to, to improve through summer. That element has just been delayed, but then now we see, uh, progression, uh, you know, narrowing of the gap, on a year-over-year basis uh, on that front. So I think it's it's a delay in in that trajectory versus worsening. So I just want to, uh, ensure we communicate that. Yeah. And then, then just to follow
I just wanted to ask a question regarding liquidity.
Could you help us understand to bridge.
From current level to the end of the year.
Given that.
My understanding in the second half of the year is a little bit weaker than previously expected.
So could you sorry could you give us some more clarity or early comments for 2020 given D.
800, and 900 million dollar headwind from the debt repayment and the latter part of the liability.
Follow up on the other side around the, the fleet, I think the Assumption, um, going forward is that we generally expect stable, uh, residual values, you know, we talked about um, gross CPU being somewhat similar in Q3 and Q4 is what we produced in Q2 probably want to have the same level of gains. Um, you know, less volume uh will be sold through um, you know, the periods going forward as we did in Q2 slightly less, but all all in all. Um, you know, we're expecting pretty stable. We did do a values as we go forward.
Thank you, everybody.
Okay. Let me, let me start here in 'twenty five.
Slight revision downward in the back end of the year, but we will be cash flow positive in the back end of the year, we expect that to be the case as the business gets better.
Your next question will come from Federico Mandy with Bank of America.
This is better operating cash flow.
The sort of fleets the fleet in and out in the period are different in the back half than the front half so we.
Hi, good morning everybody. Um, I just want to talk to you a question regarding liquidity. Um, could you help us to understand to bridge liquidity from current level to end of year?
We expect two to end the year at a pretty sizable liquidity balance I'm going to stop short of predicting the balance just given the fact that there was a number of of components here.
Given that, from my understanding this second half of the year is a little bit weaker than previously expected. And also, could you give, sorry, could you give us, uh, some more clarity or early comments for 2026? Given the
That may be in and out I think the larger point is that we're sort of beyond.
The levels of liquidity that sort of call is concerned in the front half and even last year I think the business is in a better spot today. So we're going to think about liquidity.
Potentially an $8.9 billion headwind from, uh, the debt repayment and the Wells Fargo liability. Thank you.
Sources and uses and what the business can produce what our obligations are.
How we think about the continued fleet rotation of fleet size next year. All of these inputs will drive where we may end up at the full year, so I'm going to I'm not going to predict an outcome, but you will see a higher cash balance as we run through the year.
In preparation for 2026.
So I'll sort of pause there for 25.
And as 26, maybe refresh me on your on your question for 'twenty six real quick.
Not with just a big debt maturities was it.
Yes, okay.
Debt maturities yellow, yes, sure sorry about that the debt maturities of the Wells Fargo. Obviously, we talked about the the delay from the Supreme Court, whether or not to hear the case.
We'll figure out where that where that ends up.
Okay, let me let me start here in 25. Um, yeah, I mean, slight revision downward and, and the back end of the year, but we we will be cash flow positive in the back end of the year, uh, we expect that to be the case as as the business gets better, uh, produces better, operating cash flow. Um, the the sort of fleets the fleet in and outs and, and the period are different in the back half than the front half. So, um, we expect to, uh, to end the year at a, at a pretty sizable, liquidity balance. I'm I'm going to stop short of of predicting the balance, just given the fact that there's a number of of components here, um, that, that may be in and out. I think the larger point is that we're sort of Beyond, uh, um, the, the levels of liquidity, that that sort of calls concerned in the front half and even last year. Um, I think the business in is in a better spot today. Um, so we're going to think about liquidity as um, you know, sources and uses of what the business can produce, what our obligations are um how we think about
And we sort of earmarked funds for that internally. So we mentioned on the last call that we would end up with a little bit higher than $1 billion or right at $1 billion, we exceeded that target here.
Leading the sort of wells Fargo potential.
And then as we head through next year, there's a lot of flexibility to address the 2026 maturity of December 2026 maturity.
The continued Fleet rotation, the fleet size next year, all these inputs will drive where we may end up, you know, at the full year. So I'm going to I'm not going to predict an outcome um but you will see a higher cash balance as we run through the year um in in preparation for 2026. Um so I'll I'll also to pause it there uh, for 25. Um, and and as 26, uh, may may be refreshed me on your on your question for 26 real quick.
A lot of flexibility with our own cash production and within our own capital markets activities.
Um, no, I was just the debt. Maturities was it?
The activities that are possible for us obviously, we.
We had an ATM that we launched in may of last year.
We did not execute on in the quarter.
And we have that capability as a strategic opportunistic capital raise possibility and theres. Other mechanism mechanisms that we have today that we probably didn't have a year ago.
So we have a lot of flexibility in how we can address those things in the future.
Thank you and I just wanted to ask a question on the.
RP and GPU so.
If you came out came down nicely and part of that from my understanding I guess.
Fleet mix.
Changed.
How does that.
Fleet mix change or impact on the on the <unk>, because I'm thinking that the let's say your downside kind of vehicles that you have in your fleet.
I would assume that consumers customers pay.
Pay the same RPT for those vehicles.
Yes.
So.
I think the.
The direction, we are going on on this fund is essentially ensuring that customers have a sudden booking behavior and then showing that the.
The the sort of Wells Fargo uh, potential. Um, and then as we head through next year, um there's a lot of flexibility to address the the 2026 maturity. It's a December 2026 uh maturity. Uh we have a lot of flexibility with our own cash production and within our own Capital markets um activities that are possible for us. You know, obviously we you know we uh we had an ATM that we launched in May of last year. Um, that that we did not execute on in the quarter. Um, and we have that capability as a strategic opportunistic, Capital raise possibility. Um, and there's other mechanism mechanisms that we have today that we probably didn't have a year ago. Um, so we have a lot of flexibility and, and how we can address those things in the future.
Thank you. And I just wanted to ask a question on the
From a from an economic perspective, the best decision for us as.
Is thinking and looking at this from a EBITDA perspective, and saying if we buy the right product mixes that match up with.
With.
The customer booking behavior, and that's a better outcome financially for the organization right and so that's the way we have aligned at the B B.
RPD and dpu. So dpu, came out came down nicely and part of that. From my understanding is the, the, the, the, the fleet mix, uh, changed.
One of the metrics that gets impacted in that in that strategy is of course, our BD.
How does that actually, sleep? Sleep makes change it impacts on the, on the RPD as well, because I'm thinking that if let's say you downsized in the kind of vehicles that you have in your Fleet,
Absolutely right right.
I would assume that consumers, customers won't pay the same RPD for those vehicles.
The burn rate that a consumer pays for a higher class vehicle or a larger vehicle is more than that.
A smaller waco, but net net even financially and economically this is actually a better decision for the R&D organization and Thats why we have aligned in that direction. So we are prioritizing EBITDA or.
RPT and taking that decision.
Thank you very much guys.
Your next question will come from Ian Zaffino with Oppenheimer.
Hey, Good morning. This is Isaac consulting on for Ian Thanks for fitting in our questions here.
Yeah. Um so um, uh, I think the the the direction we are going on on this front is essentially ensuring that customers have a certain booking behavior, and ensuring that the uh from a from an economic perspective. The best decision for us is is taking a look at this, from a ibida perspective. And saying, if we buy the right car classes that match up with with, uh, the customer booking Behavior. Then that's a better outcome, uh, financially for the organization, right? And so that's the way we've aligned it. The, the, the the
I was just wondering if you could provide a quick update on dollar and thrifty.
Maybe if youre seeing any type of trade down to those brands are higher growth than that.
And then maybe a bigger picture bigger picture question. The goal is still to drive kind of higher rate. This brands. Thanks.
Yes. So I'll also say that our goal is to drive higher RVO for every brand right. So that's.
That's the objective as an organization, we will always be on that on that journey.
I think what we've actually seen and this is based on the hard work. The entire organization is doing is actually if I look at the overall mix between last year compare in contrast to this there are mix of our premium Brian purchases actually the one that's growing and that's the direction, we want to keep going.
1 of the metrics that gets impacted in that uh in that strategy is of course RPD because you're absolutely right. Right. Um, the the per day rate that a consumer pays for a higher class vehicle or a larger vehicle is more than that of a, a smaller vehicle but net, net is financially and economically. This is actually a better decision for the for the organization and that's why we have aligned in that direction. So we are prioritizing even though over uh, RPD and taking that decision.
Thank you very much, guys.
Your next question will come from Ian Zeino with Alpenheim.
That's the part of the business that I'm going to say is more margin accretive.
And.
It represents the premium ness of the hubs brand that has a strong pull for our consumers.
That being said dollar and thrifty has its place because their consumers that need that good combination of.
This is Isaac, sailing on for Ian. Thanks for fitting in our questions here. Um, I was just wondering if you could provide a quick update on Dollar and Thrifty. You know, maybe if you're seeing any type of trade down to those brands or higher growth in them. Um, and then maybe as a bigger picture question, is the goal still to drive kind of higher rates for those brands? Thanks.
Valley view and experience and so we'll always have a $1 50 bonds that that cater to that.
Consumer base.
But overall as a business we have shifted more towards.
Okay. Thank you.
Follow up just on the.
A bunch of my six year buys.
Obviously, a lot going on in tariffs and supply chain.
Delays I guess when would you typically be making those Ford vehicle purchases and then.
Thoughts on anticipated GPU for those as well.
Yes, no. Thanks Isaac.
I'll try to respond.
Yes, what how I would describe it as after much delay due to the OEM supply chain disruptions. The model year 2006 vehicle buys are starting to build momentum and.
Yeah, so I'll first say that our our goal is to drive higher RPO for every brand, right? So that's that's the objective as an organization. So we we will always be on that, on the on that Journey. Um, I think, um, what we've actually seen and, and this is based on the hard work, the entire organization is doing, is actually, if, if I look at the overall mix between last year compared and contrast to to this year, our mix of our our premium brand parts is actually the 1. That's that's growing and that's the direction we want to keep going. That's the part of the business that I'm, I'm going to say is more margin a creative and, um, you know, it it represents the premium of the Herz brand, that is a strong pull for our consumers. Uh, that being said, dollar and Thrifty has its place because their consumers that need that good combination of of, uh, of of value, uh, and experience. And so, we'll always have the dollar and 50 brands.
We remain very disciplined to ensure we achieve the economics necessary to sustain or.
That caters to that consumer base. However, overall, as a business, we have shifted more towards that.
Northstar <unk> target mitigate of course any <unk>.
Okay, thank you. And then there's a quick follow.
<unk> dual value risk and a tariff type environment. So.
I would just say we're pleased.
What are the unit economics and volumes are beginning to lineup for the model year 'twenty sixes.
Up, just on the point 256 here by, um, you know, obviously a lot going on with tariffs and supply chain kind of delays, I guess. When would you typically be making those forward vehicle purchases? And then, you know, any thoughts on anticipated, you know, DPU for those as well? Thanks.
And.
Of course, the accelerated model year 'twenty five buys that we did.
And our fleet rotation really gives us a lot of flexibility to manage that bridge, but yes.
We're finally, while it's been delayed a number of months I think everything is building momentum on that side now.
Okay. Thanks very much.
Q.
Your final question will come from Dan Levy with Barclays.
Hi, Good morning, Thank you for taking the questions.
I wanted to first ask about your views on.
Future fleet size as we've had.
Complete shrinkage here and I know that that's more strategic than anything else, but how much more you think you need to shrink the fleet from here.
And then how does that play into achieving your.
North Star target on ROE.
Given youre not going to have maybe the same scale benefits with a smaller fleet can you still get to that low 30, <unk>, what's the timing.
Ensure we achieve the economics necessary to sustain our uh, Northstar dpu Target and mitigate of course any, um, residual value risk, you know, in a tariff type environment. So, um, you know, I I would just say, you know, we're pleased to see where the, uh, unit economics and volumes are beginning to line up for the model year. 26 is and um, of course, the accelerated model year, 25 buys that we did and of uh, you know, our Fleet rotation. It really gives us a lot of flexibility to manage that bridge. But um, yeah. We're finally, uh, while it's been delayed a number of months, I think, uh, everything's built in momentum on that side now.
Timing.
Yeah, no. Thanks, Dan Great question.
Okay, thanks.
You.
Starbucks.
I want to grow profitably start there.
Your final question will come from Dan Levy with barklay.
And candidly.
Candidly, we have had to shrink the fleet in order to grow again, because the fleet itself was the biggest headwind. We had so we had to rotate rotate it through get toward that number targets North star targets.
And basically create a set of assets than the foundation that we can build and grow from right. So.
That's been the strategy I think Scott.
Got Sandy both mentioned I think on a relative year over year.
Hi, good morning, thank you for uh taking the questions. Um what's the first asked about your views on uh future Fleet size? Because we've had a uh you know, complete shrinkage here and I know that that's more strategic than anything else. But how much more you think you need to FL shrink the fleet from here. Uh and then how does that play into achieving? Your uh, Northstar Target on doe given? You're not going to have maybe the same scale benefit.
Basis, we're going to keep the fleet down similar amounts to what you saw in the quarter through the end of the year.
Fits with a smaller Fleet can you still get to that low 30 DOD once the timing on that?
But we do have flexibility to grow as we move forward. We also want to make sure of that.
Sandeep mentioned, where you are.
We're we're growing our demand through.
Also more diverse revenue channels, so were less concentrated at the airport.
Two areas has done a great job boards, the off airport and our mobility businesses are really start to grow. So we're happy about that but there are what we really want to do is create multiple channels of revenue growth. So that we can grow the fleet ultimately our profitability and that's been kind of under one strategy of everything.
We're doing so.
As we move forward that's the way we're looking at it.
You want to add anything to that Scott No I think thats thats. Good. Thank you.
Okay, great. Thank you.
It is a question on balance sheet and cash in first maybe you can address I think we saw any issued to the ATM last quarter, but it looks like you didn't actually execute any stocks and maybe.
Yeah, no, thanks Dan uh, great question. Um, I'll just start by look want to grow profitably, start there. And uh, you know, candidly we have had to shrink the fleet in order to grow again because the fleet itself was the biggest headwind we had. So we had to rotate, rotate it through, uh, get to our depth, number targets, Northstar targets, uh, and basically create a set of assets, then it's the foundation that we can build and grow from, right? So, um, that's been the strategy I think. Uh, as Scott and Sandy both mentioned, you know, I think on a relative year-over-year, uh, basis. We're going to keep the fleet down somewhere amounts to what you saw in the quarter through the end of the year. Um, but I, we do have flexibility to grow as we move forward. We also want to make sure that, as Sandeep mentioned, we're, um, we're, we're, uh, we're
Cleaning the plan on an equity issuance and then maybe just like a bigger picture question and Youre sitting on half a billion dollars a year of non fleet interests and I think the challenge is is there still.
A bit of a ways to go before youre hitting free cash flow breakeven and can start to pay down some of that non fleet debt. So what is the plan to do.
Growing our demand through also more diverse Revenue channels, so we're less concentrated at the airport um 2 areas done. A great job for us, the off air port and our Mobility businesses are really starting to to grow. So we're happy about that. But there are what we really want to do is create multiple channels of Revenue growth so that we can grow the fleet and all
Deleverage the non fleet that is it just going to be the old fashion.
Ultimately our profitability and that's been the kind of underlying strategy of everything we're doing. So um you know, as we move forward that's that's the way we're looking at it. You want to add anything to that? Scott know, I think that's, that's good. Go, thank you.
Raise your free cash flow paid down or are there other options as far as potential equity issuance.
Yeah, Hey, Dan Greg Great question.
Yes, I mean look theres a couple of facets to this.
I think as we go forward obviously, the first step in the transformation is getting the business to produce operating cash flow positive free cash flow for the business. That's the first step in the deleveraging plan.
It will be a key contributor to it obviously.
As we think about.
Speed and utilizing equity in the business equity is going to play a role.
We talked about the ATM that we launch was our first foray into using equity.
Okay. Great, thank you. Um, second is a is a question on balance sheet and cash and first, maybe you could address. I we saw you should the the ATM last quarter but looks like you didn't actually execute any stocks and maybe uh, you know, just explaining, you know, the plan on on Equity issues and then maybe just like a bigger picture question and you're sitting on half a billion dollars a year of non-fleet interest and I think the challenge is is there's still maybe a bit of a ways to go before you're hitting free cash, flow break even and can start to pay down some of that uh non-fleet debt. So what is the plan to, uh, de-lever? The non-fleet that is it's just going to be the old-fashioned.
Is it a longer term way to deleverage the balance sheet and Thats the plan.
And we will chip away at it it's not going to happen overnight, but.
Raise your free cash, flow pay it down, or are there other options as far as uh potential Equity issuance?
But I think as the business improves youll start to see that sort of the house the parts get built and we will use free cash flow will use equity will use better ways to refinance.
As you know.
Some different ways to optimize the balance sheet with the ultimate goal of reducing non fleet corporate debt. I mean, we all are very well aware of of the amount of interest we pay.
Yeah. Hey, hey, Dan Greg, Greg question. Um, yeah I mean look there there's a couple of facets to this. Um, you know, the thing is we go forward. Obviously, the first step in the transformation is getting the business to produce operating cash flow, positive free cash flow for the business. That's the first step in the deleveraging plan. Um, and it will
Every quarter from that so.
Something that is at forefront, but its a longer term plan that will happen over time.
There are no operator, that's all the questions.
This concludes the Hertz Global Holdings second quarter 2020 earnings Conference call. Thank you for your participation you may now disconnect.
Um, but I think as, as the business improved, you'll start to see that sort of House of Cards, get built and, and we'll use free cash flow. We'll use equity, we'll use better ways to refinance. Um, we use, you know, um, you know, some, some different ways to optimize the balance sheet with the ultimate goal of reducing that non-league, corporate debt. I mean, we we all are very well aware of of the amount of Interest we pay, um, you know, every quarter from that. So, um, you know, something that that is at Forefront but it's a longer term plan that will happen over time.
That's all the questions.
It's this concludes the hurt School levels Holdings. Second quarter 2025 earnings conference call. Thank you for your participation. You may now disconnect
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