Hertz(HTZ) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2024 was just over $2 billion, representing a 7% year-over-year decrease largely driven by a decrease in volume [38] - Adjusted EBITDA for Q4 was a loss of$ 357 million [38] - Fleet utilization improved year-over-year for the first time in 2024, with a year-over-year utilization increase of 270 basis points from Q3 to Q4 [19][38] - The company expects DPU for Q1 2025 to be slightly below the Q4 2024 level, with a target to exit the year at below $300 per unit [40][68] Business Line Data and Key Metrics Changes - The fleet size was down 4% year-over-year in Q4, with a 7% reduction compared to the start of 2024 [30] - The company sold over 100,000 vehicles in Q4, significantly up from just over 30,000 in Q4 2023 [16] - The average cap cost of risk vehicles is almost 30% lower than the existing fleet of model year '22 through '24 car buys [16] Market Data and Key Metrics Changes - In 2024, Hertz serviced 154 million transaction days, with improved year-over-year utilization [19] - The company is focusing on markets with established product market fit and infrastructure for EVs, particularly in the rideshare business [20] Company Strategy and Development Direction - The company is implementing a "Back to Basics" roadmap anchored by three core financial pillars: fleet, revenue, and cost management [14] - Hertz is prioritizing retail as the primary car selling channel and enhancing digital purchasing experiences [18] - The company aims to maximize ARPU above$ 1,500 while focusing on durable demand and high RPD segments [71] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2024 as a challenging year but noted encouraging signs of progress and a commitment to transforming the company [9] - The company is confident in its ability to manage upcoming debt maturities and expects to start generating cash in the latter part of 2025 [50][100] - Management emphasized the importance of customer satisfaction as a cornerstone for driving durable demand and fostering loyalty [31] Other Important Information - The company completed a capital raise of $500 million to enhance liquidity and support operational plans [50] - Hertz has begun discussions aimed at resolving pending litigation with undefined timing [52] Q&A Session Summary Question: Metrics for gauging Hertz's operational progress - Management indicated that the North Star metric for fleet rotation is achieving a DPU of less than$ 300, with a focus on optimizing vehicle sales timing and channels [61][64] Question: Net DPU expectations for the year - Management clarified that the target is for net DPU to be below $300 by year-end, despite an inflated number in Q1 [68] Question: Fleet size trends and demand - Management expects to maintain a smaller fleet while maximizing ARPU and focusing on durable demand [70] Question: Medium or long-term margin expectations - Management suggested that achieving a DPU below$ 300, low 30s DOE, and $1,500 RPU are targets for future EBITDA production [76] Question: Impact of fleet rotation on pricing - Management noted that they are moving towards higher-margin sales channels and reducing reliance on auctions [104] Question: Cash and liquidity management - Management confirmed a strong liquidity position with$ 1.8 billion available, and plans to manage cash flow through fleet rotation [98][100] Question: Vehicle disposal strategies - Management is focusing on increasing retail sales channels and reducing auction sales to enhance margins [106] Question: Operational initiatives and cost headwinds - Management acknowledged ongoing operational improvements but noted some headwinds related to insurance and accounting changes [130]