Q2 2024 Earnings Summary
Reported on Mar 7, 2025 (Before Market Open)
Pre-Earnings Price$4.08Last close (Jul 31, 2024)
Post-Earnings Price$4.00Open (Aug 1, 2024)
Price Change
$-0.08(-1.96%)
- Accelerated fleet rotation leading to lower depreciation and improved profitability: Hertz is rapidly rotating its fleet, replacing high-depreciation vehicles with new ones at lower purchase prices. As of June 30, over 30% of the global fleet was at a Depreciation Per Unit (DPU) of $325 or less, with new vehicles being acquired at DPU rates below $325. This fleet refresh is expected to reduce DPU to the low $300s by early 2026, significantly lowering depreciation expenses and enhancing margins.
- Strengthened balance sheet and liquidity position providing flexibility for transformation: Hertz has bolstered its liquidity by raising $1 billion in June, which includes issuing $750 million of first lien notes and $250 million of exchangeable second lien PIK notes. This strengthened balance sheet allows the company to accelerate its fleet rotation and provides a buffer against unforeseen macroeconomic challenges, ensuring stability throughout its transformation.
- Focus on higher-margin revenue streams and improved customer experience driving unit revenue growth: The company is prioritizing rate over volume by culling low Revenue Per Day (RPD) business and enhancing its direct booking channels. Initiatives such as a self-service digital platform are improving customer experience, leading to positive trends in Net Promoter Scores. These efforts have resulted in global RPD increasing 5% sequentially in the quarter, with expectations of RPD rate parity in the third quarter year-over-year.
- Hertz expects to incur over $1 billion of non-cash depreciation from Q3 of this year through the end of 2025 due to accelerated fleet rotation, potentially impacting profitability during this period.
- The company anticipates potential liquidity challenges, expecting to use cash on the operating side through the first half of 2025, with the low point of liquidity likely at the end of the second quarter of 2025.
- Declining vehicle residual values may require Hertz to make incremental lease payments of $50 million to $100 million to maintain a positive cushion in its ABS facilities, which could further strain its liquidity position.