Hertz Global Holdings, Inc

Welcome to Hertz Global Holdings' third 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 Investor 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 would like 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 statement section 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'll use certain non-GAAP financial measures which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing 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 Chief Financial Officer, and Sandeep Dube, our Chief Commercial Officer. We are also joined by Darren Errington, our Executive Vice President for Revenue Management. I'll now turn the call over to Gil.

Thanks, Johan. Good morning, everyone, and thank you for joining our third quarter earnings call. I want to begin by extending my deepest gratitude to our team. They've been hard at work behind the scenes here at Hertz. This summer, they were dedicated to helping our customers seamlessly reach their destinations, while at the same time driving forward our strategic goals, balancing day-to-day operations during our peak with a focus on our vision. They have truly demonstrated the energy and resilience that define us. The unwavering commitment and resiliency of our people were also on full display during the hurricanes that impacted millions of people across the Southeast, including many of our customers and employees in Southwest Florida, which is home to our world headquarters. Throughout the storms, our primary focus was on the safety and security of our employees while being there for our customers and community. We immediately activated our employee relief fund to provide critical aid to impacted team members, help customers safely evacuate by providing one-way rentals, and collaborated with law enforcement to set up a command center at our headquarters so they were ready to serve the community. Additionally, we worked with the organizations like the American Red Cross to provide emergency services to those deeply impacted by the storms. and provided in-kind vehicle rentals to our nonprofit partner, Team Rubicon, to assist with post-hurricane cleanup and recovery. In a time of crisis, we demonstrated our commitment to being a responsible corporate citizen and upholding one of our core corporate values, putting people first. We will continue to support our employees and communities on the long road to recovering from those natural disasters. With that said, I'd like to first spend a moment contextualizing Hertz as I see it. This is a world-renowned brand that was built on a legacy of service, innovation, and loyalty that in recent years hasn't lived up to its full potential. The first step in a turnaround is recognizing that. The next step is addressing it. And that's what we've been hard at work doing since I joined the company. In the last quarter, we solidified a best-in-class senior management team, and we've continued to uplevel the talent throughout the organization. We have developed a clear roadmap with actionable plans and have established management operating systems acutely focused on data-driven goals that will allow us to control the things we can control and return this company to a position of strength and operational excellence that will generate sustainable, long-term value for both our customers and shareholders. And our back-to-basics strategy is built on three pillars, our fleet, our revenue, and our cost management, and leverages key enablers around our people, technology, and process. Our operational transformation is on track for completion by the end of next year, and we are excited to share our progress with you. I'll start by covering the progress we made regarding our fleet, and Sandeep will cover progress around revenue and customer service. Scott will then cover our Q3 results and provide an update on our direct operating cost in SG&A. He'll also give an update on our capital position. So let me start with a fleet. Our strategy continues to be to operate the fleet inside demand. Through our analysis, we believe we can produce the same number of transaction days with less fleet, which will also benefit our cost structure. This includes maximizing asset returns by optimizing utilization. Our most critical asset is currently our biggest constraint and has the most significant impact on our business. To address this, we have accelerated our fleet rotation. In this quarter, we have established a new vertical dedicated to end-to-end fleet management. During the third quarter, we also recorded an asset impairment charge, which primarily affected our US and European fleets, which Scott will cover in more detail. our new management team is focused on three key pillars first buying the right vehicles at competitive prices ensuring a fleet mix that matches customer demand across different geographies and seasons enabled by a proprietary data driven platform second determining the right timing for rotating vehicles out of our rental fleet to sell them at the optimal point in the depreciation curve, and lastly, leveraging our retail car sales channels to maximize net proceeds, allowing for reinvestment into the business. Our strategy aims to enhance the resilience of our fleet against industry dynamics and economic shifts, turning the management of depreciation into a core competency as we take advantage of our fleet management capabilities to manage to improved outcomes. The volatility in market conditions has masked the efficacy of our fleet management actions, which I believe this is now largely behind us. And it will become more apparent that we have fundamentally changed to be more agile. This proactive model provides us with greater stability and growth over the long term. The largest market conditions, the latest market conditions, combined with the strategy, lay out a clear path for us to achieve DPU below $300, given that acquisition conditions are more favorable than our original expectations. Our expectations are supported by the expected economics of model year 25 purchases we've already secured. Ultimately, achieving this milestone will be the key to unlocking increased shareholder value. Aside from the rotation, we continue to build operational excellence in how we manage and maintain a best-in-class rental fleet for our customers. The key component is decreasing the number of vehicles that are out of service by quickly identifying constraints and working to remove them. Our vehicle sales and maintenance teams leveraging process engineering are focused on driving down work in process time and waste by Redesigning process flows to reduce cycle time, which in turn decreases the number of vehicles in the queue that aren't generating revenue. Increasing throughput in constrained areas, such as maintenance and repairs, reconditioning, transportation, licensing, and marketing to accelerate vehicle sales and minimize out-of-service time. Reducing cumulative collision and repair times to improve damage cycle time and leveraging fleet rotation tailwinds to further reduce out-of-service vehicles as newer model years generally require less maintenance and have a lower recall exposure. Eliminating waste and reducing out-of-service vehicles is fundamental to improving our vehicle utilization. The scale of this opportunity is considerable Given that reduced out of service could improve utilization by several percentage points. Throughout it all, our people and technology are fueling our progress. We are leveraging several new digital platforms that are focused on optimizing our fleet efficiency, improving depreciation costs, and maximizing the quality of our customer experience. Our frontline teams are celebrating these new tools and capabilities and are more engaged in the innovation process than ever before. Now, I'll hand it over to Sandeep.