Hertz(HTZ) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved revenue of $2.5 billion and delivered adjusted corporate EBITDA of $190 million, representing a year-over-year improvement of $350 million and positive EPS for the first time in two years [7][40]. - The average DPU was $273 per month, in line with expectations, supported by healthy residuals and disciplined channel management [42]. - Direct operating expenses declined by 1% year over year, and DOE per day improved both sequentially and annually despite inflation [42]. Business Line Data and Key Metrics Changes - The fleet refresh was completed, resulting in an average fleet age of under twelve months and record high utilization rates of 84%, the highest since 2018 [10][41]. - RPU came in at $15.30, nearly flat year over year, with improvements seen sequentially throughout the quarter [40][21]. - The car sales segment is being transformed into a profit-generating engine, with a rent-to-buy program showing a 70% purchase rate among customers [12][14]. Market Data and Key Metrics Changes - International segments saw strong margins with larger RPD and RPU gains, indicating a robust pricing environment [40]. - Inbound demand showed improvement in Q3 compared to Q2, with positive trends noted in corporate demand as of October [91][94]. - The government segment experienced a decline in November due to the government shutdown, impacting overall demand [93]. Company Strategy and Development Direction - The company is focused on transforming its Rent A Car business while simultaneously laying the groundwork for a diversified value-creating platform across four strategic areas: rent a car, fleet, service, and mobility [10][19]. - The strategy includes enhancing customer experience, optimizing fleet management, and leveraging digital retail channels to capture additional revenue streams [15][16]. - The company aims to grow its mobility business, including partnerships with rideshare companies and exploring opportunities in the autonomous vehicle space [62]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, emphasizing the importance of execution and the potential for growth beyond the traditional rental car business [38][51]. - The company anticipates a stable setup for 2026, with expectations for mid-single-digit growth in transaction days and a focus on improving margins [48][50]. - Management acknowledged challenges such as vehicle recalls and external system outages but remains focused on long-term strategic goals [46][47]. Other Important Information - The company ended the quarter with $2.2 billion in total liquidity, including $1.1 billion in unrestricted cash [43]. - A $154 million benefit was recorded from a litigation settlement distribution during the quarter [43]. - The company is targeting a 3% to 6% EBITDA margin for 2026, aiming for $1 billion in EBITDA production by 2027 [50][51]. Q&A Session Summary Question: Can you unpack what becoming a value-creating mobility platform means in practice? - Management emphasized that while the rental car business remains core, there are additional growth opportunities in car sales, service, and mobility, leveraging their existing infrastructure and customer base [56][58]. Question: How does the customer mix affect RPD and pricing? - Management noted that while there are RPD headwinds, they are dynamically optimizing the car class mix based on customer demand and willingness to pay, which helps improve unit economics [66][68]. Question: What are the expectations for the sub-$300 DPU for next year? - Management indicated that the strategy of buying right, holding right, and selling right will support achieving this target, with stable residuals and good pricing expected for model year 2026 vehicles [75][78]. Question: Can you provide insights on international demand and market performance? - Management reported substantial improvement in demand from Q2 to Q3, with positive trends in corporate demand noted in October, although inbound demand remains slightly down year over year [90][94].