Hertz(US:HTZ)2024-02-06 16:31Financial Data and Key Metrics Changes - Revenue for Q4 2023 was $2.2 billion, up 7% year-over-year, reflecting strong demand consistent with travel trends [8][47] - Adjusted EBITDA for Q4 was a loss of $382 million, impacted by $245 million of incremental net depreciation expense related to the EV sales plan [11][25] - For the full year 2023, revenue was $9.4 billion, an 8% increase year-over-year, with adjusted corporate EBITDA of $561 million, reflecting a 6% margin [25][47] Business Line Data and Key Metrics Changes - Q4 volume was up 12% year-over-year, with revenue per day (RPD) at $58.09, slightly better than expected [8][24] - The company prioritized RPD over utilization, leading to a focus on higher-margin business despite lower overall utilization [9][10] - Rideshare revenue grew by 75% year-over-year, and the international business increased volume by 17% [14] Market Data and Key Metrics Changes - The rate environment remained stable, with rates for the whole of 2023 being 40% higher than in 2019 [8] - The company noted strong leisure demand and significant growth in corporate rentals, particularly in the Midwest [53][65] Company Strategy and Development Direction - The company is focusing on a cost-out plan aiming for $250 million in benefits in 2024, alongside the strategic decision to reduce the EV fleet [17][31] - The transition to a younger fleet composition is a priority, with plans to rotate the fleet to reduce average age and mileage [90] - The company is enhancing operational discipline and productivity, with a focus on reducing fixed and variable costs [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand and rate environment for 2024, anticipating a transitional year with improved financial performance [6][31] - The company expects to regain operational cadence and improve financial performance with increasing effects into 2025 [6][31] - Management highlighted the importance of monitoring residual values and adjusting fleet strategy accordingly [24][30] Other Important Information - The company has a well-structured corporate debt maturity ladder with no material maturities until 2026, and available liquidity of $2 billion as of December 31 [26][27] - The company plans to refinance $2 billion of medium-term notes maturing in December 2024, subject to market conditions [27] Q&A Session Summary Question: What markers will evaluate the progress on the EV fleet reduction? - Management indicated that they will assess the return on invested capital (ROIC) and the economic drag from the fleet reduction, expecting to recapture about $250 million of EBITDA over two years [34][35] Question: How is the company approaching fleet sourcing? - The company plans to redeploy existing ICE vehicles from underperforming locations and manage purchases and sales based on return profiles [41] Question: What is the expected normalized EBITDA number? - Management clarified that the $250 million EBITDA uplift from the EV sale is separate from the $500 million target from new projects and productivity improvements [45][48] Question: How confident is the company in the rate environment going forward? - Management noted strong leisure demand and a decelerating trend in rate decline, indicating confidence in maintaining healthy rates [53][65] Question: What are the top concerns from field managers? - Field managers expressed concerns about the EVs and their impact on customer satisfaction, indicating a need to refocus on customer service [70] Question: How will the company manage the age and mileage of its fleet? - The company plans to significantly reduce the age of the fleet and improve utilization, with a focus on deploying younger vehicles [90]