Hertz Global Holdings, Inc

Welcome to Hertz Global Holdings' fourth 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 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 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, who will provide an overview of our strategy and discuss operational highlights and our fleet. Our Chief Commercial Officer, Sandeep Dube, will then share insights into our capacity, unit revenue, and commercial strategy, followed by Scott Harrelson, our Chief Financial Officer, who will discuss our financial performance and liquidity. We are also joined by Darren 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 to Gil.

Good morning, everyone. As I reflect on my first eight months at Hertz, 2024 was undoubtedly a challenging year for our company. But I am pleased to share that we've taken the necessary actions to turn the page on the past and set Hertz up for ongoing success. While there is still a lot of work to do, we are already seeing encouraging signs of progress as we've implemented fundamental changes which have laid the foundation to transform our company for the long term. When I joined, I recognized two basic truths. We have an iconic brand and our success is powered by our people. So I want to start by thanking our dedicated team for their resilience and commitment through this period of significant change, especially during the busy holiday season. We've strengthened our team throughout the year and supplemented our resident expertise in the rental car industry with experience and transformation and operational excellence. across transportation companies and consumer brands. Many of these individuals also have experience with managing asset-heavy businesses, and all of them are attracted and committed to transforming Hertz to once again be an industry leader. Most recently, Chris Berg supplemented our best-in-class leadership team as our chief administrative officer, Chris spent over 20 years at Home Depot running large-scale transformation projects and operations across 500 stores and 100,000 employees and is immediately enhancing our ability to execute cross-functionally. Doria Holbrook also recently joined as EVP of Mobility. Doria was instrumental in operationalizing Amazon's last-mile delivery service. and will bring innovative expertise to the significant opportunities we see in this space. Our new organizational structure enables faster, more rigorous execution of our strategy. We've also deployed robust management operating systems, which drive a disciplined approach to managing the business and achieving results. These systems are fueled by goals, which provide the proper focus for the team, Managing with data, reporting on all aspects of the business, rigorous performance reviews, and reward systems that align to the success of the business. With these foundational elements in place, we are building a high-performance culture driven to win, to once again become a leading employer of choice. Our actions are guided by our back-to-basics roadmap and are anchored by three core financial pillars. fleet, revenue, and cost management. The key enablers to these pillars are our people, technology, and processes. Turning now to the first of our financial pillars, the fleet. As I mentioned before, we are turning our fleet from a headwind to a tailwind for the business through our ability to buy right, hold right, and sell right. Our transformative fleet rotation is well underway And as of year end 2024, over 60% of our fleet was comprised of vehicles one year old or less. And we remain on track to substantially complete our fleet rotation by year end 2025. In terms of our buy right strategy, our risk vehicles, that is vehicles with residual value exposure, have an average cap cost almost 30% lower than our existing fleet of model year 22 through 24 car buys. Our fleet rotation will provide benefits to our customers, our cost structure, our balance sheet, and unlocks our ability to achieve sub $300 DPU. In Q4, we aggressively aligned our fleet size to meet the seasonal demand patterns and sold 100,000 vehicles up from just over 30,000 in Q4 23. This is a significant effort by the team, given both the volume and timing of the sales. Because of this, we chose to leverage wholesale channels in addition to our more desirable retail channels to achieve our strategic goals. As one of the world's largest car dealers, We recognize the unique opportunity that Hertz Car Sales presents. Because of this, we are prioritizing making retail our primary car selling channel. We have several initiatives underway, including increasing awareness of the Hertz Car Sales brand, and improving the digital and purchasing experiences so that customers can more easily discover and purchase the car they want, whether online or anywhere across Hertz' expansive footprint. In parallel, we continue to grow our retail sales channels through strategic partnerships. In 2024, Hertz serviced 154 million transaction days, Our year-over-year utilization improved 270 basis points when comparing Q4 to Q3, despite the seasonally adjusted demand in the industry largely being similar between the quarters. Through our operational improvements in our fleet management and our effort to sweat the assets, we remain focused on eliminating unproductive vehicles to generate higher utilizations. We are working towards turning our vehicles more productively and shortening our vehicle turnaround time from drop-off to rental, reducing vehicle out-of-service, and shortening our vehicle sale cycle times, which drive out waste by leveraging process and technology. Our partnerships with Palantir and GoldRat Group are enabling us to harness our data through redesigned processes to more efficiently operate our fleet. It is worth noting that we have completed the 30,000 EV fleet reduction announced just last year. Moving forward, we recognize the strategic value of EVs in the markets with established product market fit and infrastructure, particularly in our rideshare business where drivers receive advantageous partner incentives for choosing EVs over traditional ICE vehicles. I'm also encouraged by the progress Our team is making both on revenue and cost, which Sandy and Scott will discuss in detail. Finally, I'd like to turn to our customers. We know that to truly earn customer loyalty, we must build trust and confidence in our service. In 2024, we directly confronted the issues that drive customer satisfaction by addressing key pain points. providing newer, well-maintained vehicles that customers want to drive, creating seamless digital experiences, better enabling self-service, reducing line weights at counters, delivering best-in-class customer service experience, and ensuring effective problem resolution. By putting ourselves on the other side of the counter and in our customer's shoes, we've seen strong gains in our net promoter scores, both in our core customer experience and in our customer service recovery. Our passion for a better experience will not stop here. We're committed to making 2025 a breakout year for our customer. Having successfully launched our back to basics roadmap in 2024, Our focus for 2025 is clear, excellence in execution. With strong execution of our strategy, we are confident we can strengthen the core business, unlock new areas of value creation, and restore Hertz back to its full potential. There's no doubt it will take hard work to make our strategic goals a reality, but I know we've got the right team and plans in place to do it. With that, I'll turn it over to Sandeep.