Revenue: $1.8 billion for Q1 2025. Adjusted EBITDA: Loss of $325 million, improved from a loss of $567 million in the prior year period. Depreciation Per Unit (DPU): $353 per month, with expectations to be below $300 in Q2 2025. Direct Operating Expense (DOE): Down 4% quarter to quarter on a per day basis. Fleet Capacity: Down 8% year over year in Q1 2025. Utilization: Up 240 basis points year over year in Q1 2025. Liquidity: $1.2 billion at the end of Q1 2025. Net Promoter Score: Improved by 11 points year over year. Board Authorization: Up to $250 million for an ATM equity offering.

Warning! GuruFocus has detected 7 Warning Signs with HTZ.

Release Date: May 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hertz Global Holdings Inc (NASDAQ:HTZ) has successfully executed a fleet rotation strategy, with over 70% of its core US rack fleet now 12 months old or newer, reducing depreciation per unit (DPU) to below $300. The company has diversified its supply chain and reduced reliance on any single OEM, enhancing its ability to respond to market dynamics. Hertz Global Holdings Inc (NASDAQ:HTZ) achieved a record quarter for retail car sales, positively impacting depreciation per unit and driving awareness through Hertz car sales. The company has managed costs effectively, contributing to a nearly $100 million year-over-year improvement in total direct operating expense. Hertz Global Holdings Inc (NASDAQ:HTZ) has expanded its customer service AI agent capabilities, improving customer interactions and reducing costs.

Negative Points

Revenue was down year-over-year, driven primarily by reduced fleet capacity and a tighter fleet strategy. Pricing for the quarter was down 5% year-over-year, partly due to fleet mix changes and temporary over-fleeting in certain markets. The early delivery of vehicles from OEMs and an unpredictable macroeconomic backdrop made pricing optimization challenging. There is uncertainty regarding model year 2026 vehicle supply and pricing, which could impact future fleet strategy. The company faces potential macroeconomic headwinds and uncertainty, particularly in corporate, government, and US inbound segments.

Q & A Highlights

Q: Can you provide details on the fleet over-fleeting situation and the impact on residual values in retail versus wholesale markets? A: Gil West, CEO: At the macro level, we are not over-fleeted; our fleet was down 8% in the quarter. However, at the local market level, we experienced over-fleeting due to the timing of vehicle deliveries. This impacted pricing and utilization temporarily. Regarding residuals, we are seeing rising values, especially in the wholesale market, which tends to adjust quicker than retail. The MMR rental car index for April was up 8%, indicating strong residuals.

Story Continues

Q: How are you managing fleet deliveries and tariffs in the current environment? A: Gil West, CEO: We have taken about two-thirds of our model year 2025 fleet, avoiding tariff exposure by securing vehicles at pre-tariff prices. Deliveries will continue throughout the year, providing us flexibility to manage the fleet size in response to market conditions.

Q: With the current fleet size reduction, how does this affect your long-term EBITDA targets? A: Scott Haralson, CFO: The fleet size reduction does not affect our long-term targets. We aim for a $1 billion EBITDA run rate by 2027, focusing on utilization improvements and cost efficiencies to offset fleet size reductions.

Q: Can you elaborate on the impact of tariffs on direct operating expenses (DOE)? A: Gil West, CEO: Tariffs mainly impact parts and maintenance costs. However, our newer fleet and efficient tech operations team are expected to reduce maintenance costs year over year, mitigating tariff-related headwinds.

Q: How are you addressing the balance between cost-cutting and maintaining customer service quality? A: Gil West, CEO: We focus on improving customer experience while controlling costs. Our Net Promoter Scores have improved significantly, and we leverage technology to enhance service without compromising on cost efficiency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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