Hertz Global Holdings, Inc

Welcome to the Hertz Global Holdings second quarter 2024 earnings call. Currently, all lines are in a listen-only mode. Following management's commentary, we will conduct a question-and-answer session. I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to our host, Johan Rawlinson, Vice President of Pressure Relations. Please go ahead.

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 want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance and by their nature are subject to inherent risks and uncertainties. Actual results 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 change 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 statement section of the filings that we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the investor relations section of the Hertz website. Today we'll use certain non-GAAP financial measures which are reconciled with GAAP numbers in our earnings press release and earnings presentations available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business. On the call this morning, we have Gil West, our Chief Executive Officer, Scott Harrelson, our recently appointed Chief Financial Officer, and Sandeep Dube, our newly appointed Chief Commercial Officer. We are also joined by Darren Arrington, our Executive Vice President for Revenue. I'll now turn the call over to Gil.

Morning. Thank you all for joining our second quarter earnings call. We've accomplished a lot as a team over the past quarter and we look forward to walking you through our Q2 results and the actions we've taken to advance our strategic priorities, enhance our operational capabilities, and drive long-term and sustainable shareholder value. As I said on our last call, we're in the midst of a critical transformation for our company. And our priority is getting back to the basics, operational excellence and unmatched customer service, and using these springboards for value creation and earnings growth. Our strategy to get there has three building blocks, our fleet, our revenue, and cost management. Our recent additions to the executive team, investments in our technology, and product innovation, and the talent and hard work of our people, coupled with process rigor in how we manage the business, are key enablers. To advance these strategic priorities, two things needed to be accomplished. First, strengthen the balance sheet and ensure a more stable liquidity position. so that we can accelerate the rotation of our fleet and take a longer view of how we manage the business. Both are essential parts of our transformation strategy. Second, build a team and organizational design that ensures we can execute our strategy with speed, rigor, and excellence. We've quickly done both of these things. On the financing side, we strengthened our balance sheet and improved our liquidity. With the additional capital buffer we secured in June, we are accelerating our fleet rotation, enabling us to lower our depreciation and maintenance costs, improve our customer experience, and increase pricing power. I'm pleased with the progress we're making and look forward to completing the fleet rotation as soon as practical. Our new CFO, Scott Harrelson, will get into more detail on the financing and the actions we've taken to bolster the balance sheet to support our strategic plan. On the leadership front, all the seasoned leaders we've recently announced come to Hertz with a track record of driving commercial success across complex customer-facing operations in the travel and transportation industries. I've known and worked with all of them, and I'm thrilled that they share my optimism for the value creation potential here at Hertz. Starting with Scott, he brings deep expertise in financial and cost management and leveraging the capital markets to drive business transformation. He has a history of turning challenges into opportunities, and I know he's the right person for the job. Sandeep Dube, our new Chief Commercial Officer, who you will also hear from on the call today, brings a comprehensive and customer-centric approach across our commercial and revenue-generating activities. He understands what customers desire and are willing to pay for, puts these customer expectations at the center of the business operation and in innovative ways and converts the resulting customer satisfaction into revenue. Having one executive taking a holistic view of all the commercial aspects is a novel approach at Hertz, and I'm thrilled to have him on the team. We've also brought in additional senior asset management and operational expertise. with Greg May leading all aspects of Hertz fleet management, including fleet procurement and strategy, analytics and vehicle remarketing, Henry Kuykendall overseeing our airport and off-airport car rental operations in North America, and Mike Moore, who will lead all aspects of fleet maintenance. We've also asked Catherine Martin to take on the permanent role of general counsel. The new leadership structure will enable end-to-end oversight and accountability of key components of the business, which complement our existing dedicated team who have deep institutional knowledge of the car rental industry. With these changes now in place, I believe we have a transformative and achievable strategy, along with the right team and organization, so now more than ever, our focus is on execution. While we will remain nimble on the exact timing of key milestones, I'm confident that the execution of our strategy will render superior unit economics for the company. Let me focus the remainder of our comments on our strategy, particularly around bleed. Then Sandeep will cover what we are actioning around revenue and customers. After that, scott will cover our q2 financial performance our cost management and balance sheet position as i mentioned a fundamental component of our strategy is our fleet and completing our fleet refresh and rotation is one of our highest priorities a substantial portion of our fleet consists of vehicles with inflated cap costs that were acquired from oems during a period in which both volume discounts and trim packages befitting our rental car fleet were constrained. Our fleet also consists of high-cost pre-owned vehicles we acquired from spot market at peak pricing. Most vehicles purchased in that environment have experienced declines in resale value as the market normalized, resulting in an elevated monthly depreciation rate. This primarily applies to vehicles 12 months in age or older. As we announced in June, we have accelerated our refresh and currently expect higher depreciation vehicles to be rotated by the end of 2025. As a result, by early 2026, we expect average depreciation per unit, or DPU, in the low 300s per month. My confidence is driven by the fact that we are already Seeing lower vehicle costs manifest and the purchase prices recently negotiated with OEMs already reflect our targeted DPU. Scott will talk more about the operating cost and productivity, but it's worth mentioning here that another tailwind of completing our fleet rotation will be savings generated by reduced maintenance and collision costs, which will decrease our direct operating expenses. Let's move on to the other building blocks, unit revenue and cost management. Sandeep, over to you.