Core Thesis - Hertz Global Holdings, Inc. (HTZ) is viewed positively due to its asset management-like operations, recent stabilization in cash flow, and potential for significant upside if execution remains strong [1][6][7]. Company Overview - Hertz is the third-largest car rental company globally, with the top three players controlling approximately 95% of the market [3]. - The company operates in a highly consolidated industry, and despite its strong brand, investor sentiment has declined due to concerns over leverage and negative cash flow [3]. Financial Performance - As of February 5th, HTZ's share price was $4.94, with trailing and forward P/E ratios of 23.71 and 11.78, respectively [1]. - Following its exit from bankruptcy in 2021, Hertz initially benefited from rising used car prices but misallocated cash flows into share buybacks and electric vehicle investments, leading to negative free cash flow [5]. - The company has faced challenges due to falling used car prices and rapid price cuts from competitors like Tesla, resulting in losses and additional borrowing [5]. Operational Strategy - Hertz functions more like an asset manager, focusing on fleet economics, depreciation, and residual values as key profitability drivers [4]. - The company has recently rotated its fleet at more reasonable prices and recognized losses, contributing to cash flow stabilization and positive EBITDA [6]. Future Outlook - Liquidity is strong, with major debt maturities extended to 2028-2029, and rising used car prices are expected to provide additional support [7]. - Under conservative assumptions, Hertz is positioned to break even, and a normalization of operations could lead to substantial upside potential [7]. - Previous bullish perspectives on Hertz, including those from notable investors, highlight improving industry conditions and operational turnarounds, although the stock has depreciated by approximately 30% since earlier coverage [8].

Financial Data and Key Metrics Changes - Revenue for Q4 was just over $2 billion, representing a 7% year-over-year decrease largely driven by a decrease in volume [24] - Adjusted EBITDA for the quarter was a loss of $357 million [24] - Fleet utilization improved year-over-year for the first time in 2024, with a DPU (depreciation per unit) target of below $300 [25][32] 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 [18] - The company sold over 100,000 vehicles in Q4, significantly up from just over 30,000 in Q4 2023 [9] - The average fleet consisted of over 60% vehicles one year old or less by year-end 2024 [9] Market Data and Key Metrics Changes - Hertz serviced 154 million transaction days in 2024, with year-over-year utilization improving by 270 basis points from Q3 to Q4 [11] - Loyalty enrollments grew 18% year-over-year in Q4, indicating a positive trend in customer retention [21] Company Strategy and Development Direction - The company is focused on a "back to basics" roadmap anchored by three core financial pillars: fleet, revenue, and cost management [8] - A transformative fleet rotation strategy is underway, with a goal to complete it by year-end 2025 [9] - The company aims to enhance customer experience through improved service recovery and digital experiences [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2024 as a challenging year but expressed optimism about the foundational changes being implemented for long-term success [5] - The company expects to face a seasonal EBITDA loss in Q1 2025, with a gradual improvement throughout the year [31] - Management is confident in achieving a sub-$300 DPU by the end of 2025, supported by improved fleet management and sales strategies [40][44] Other Important Information - The company raised $500 million through the issuance of additional first lien senior secured notes due in 2029 to enhance liquidity [32] - Upcoming debt maturities are being actively planned for, with confidence in managing these obligations [33] Q&A Session Summary Question: What metrics should be used to gauge Hertz's operational progress? - Management highlighted DPU as a key metric, aiming for less than $300, along with utilization and NPS (Net Promoter Score) as critical indicators [40][42] Question: How should net DPU be expected to trend throughout the year? - Management indicated that net DPU would be inflated in Q1 but expected to decline through the year, aiming for sub-$300 by year-end [43][44] Question: What is the outlook for fleet size moving forward? - Management expects to maintain a smaller fleet while maximizing RPU (Revenue Per Unit) through improved demand capture strategies [45][46] Question: What is the medium or long-term margin target for the company? - Management suggested using North Star metrics, targeting RPU above $1,500 and DOE (Daily Operating Expense) in the low 30s [50][52] Question: How is the company addressing liquidity and cash considerations? - Management confirmed a strong liquidity position of $1.8 billion, with plans to manage cash flow through fleet rotation and operational improvements [67][70] Question: What avenues are being explored for vehicle disposals? - Management is focusing on increasing retail sales channels while reducing reliance on auctions, aiming for higher net margin sales [73][74] Question: What options are available for refinancing upcoming maturities? - Management expressed confidence in addressing refinancing needs, with ongoing discussions for the revolver due in the first half of the year [78][79]