Hertz Global Q1 2025 Earnings Report

Hertz Global EPS Results

• Actual EPS: -$1.12
• Consensus EPS: -$1.08
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: -$1.28

Hertz Global Revenue Results

• Actual Revenue: $1.81 billion
• Expected Revenue: $2.01 billion
• Beat/Miss: Missed by -$193.42 million
• YoY Revenue Growth: -12.80%

Hertz Global Announcement Details

• Quarter: Q1 2025
• Date: 5/12/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 13, 2025
• Conference Call Time: 9:00AM ET

The Hertz Corporation, a subsidiary of Hertz Global (NASDAQ:HTZ)., operates the Hertz, Dollar and Thrifty vehicle rental brands in approximately 9,700 corporate and franchisee locations throughout North America, Europe, The Caribbean, Latin America, Africa, the Middle East, Asia, Australia, and New Zealand. The Hertz Corporation is one of the largest worldwide airport general use vehicle rental companies.

Hertz Global Q1 2025 Earnings Call Transcript

Key Takeaways

• Disciplined fleet management: Over 70% of Hertz’s core U.S. fleet is now 12 months old or newer, enabling a sub-$300 depreciation per unit run rate and lower maintenance costs, with two-thirds of 2025 model deliveries already completed to mitigate tariff exposure.
• Revenue optimization: Management targets RPU above $1,500 and is overhauling its revenue management system with Amadeus to drive pricing gains, while shifting a smaller, better-utilized fleet toward higher-margin off-airport, mobility and direct-booking channels.
• Rigorous cost control: Q1 delivered nearly $100 million of year-over-year direct operating expense savings, with DOE per day down 4% sequentially and targeted low-30s by leveraging a younger fleet and process improvements.
• Improved financial results: Q1 revenue reached $1.8 billion and adjusted EBITDA loss narrowed to $325 million from $567 million, with Q2 expected to break even, Q3 turning profitable on both EBITDA and net income, and liquidity of around $1.2 billion post credit-facility extension.
• Retail car sales acceleration: Hertz achieved a record quarter for retail channel sales, raising average selling prices and net margins, and rolled out AI-based pricing via Cox Automotive to further enhance used-car revenue.

Presentation

[Operator]

Welcome to Hertz Global Holdings First Quarter twenty twenty five Earnings Call. Currently, all lines are in listen only mode. Following management's commentary, we will conduct a question and answer session. I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to our host, Johan Walensen, Vice President of Investor Relations.

[Operator]

Please go ahead.

[Johann Rawlinson, VP, IR at Hertz Global]

Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call, and these can be accessed through the Investor Relations section of our website. I would like to remind you that certain statements made on this call contain forward looking information. Forward looking statements are not a guarantee of performance and by their nature are subject to inherent risks and uncertainties.

[Johann Rawlinson, VP, IR at Hertz Global]

Actual results may differ materially. Any forward looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements, including factors that could cause our actual results to differ, is contained in our earnings press release and in the Risk Factors and Forward Looking Statements sections in the filings we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website. Today, we'll use certain non GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website.

[Johann Rawlinson, VP, IR at Hertz Global]

We believe that these non GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business. On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss operational highlights and our fleet Our Chief Commercial Officer, Sandeep Dube, will then share insights on our commercial strategy, followed by Scott Harrelson, our Chief Financial Officer, who will discuss our financial performance and liquidity. We are also joined by Darren Arrington, our Executive Vice President for Revenue Management, who will be available to answer questions during the Q and A session. I'll now turn the call over to Gil.

[Gil West, CEO at Hertz Global]

Thank you, Johan. Good morning, everyone. The first quarter of twenty twenty five was dynamic, not just for Hertz or the travel industry, but across the broader business landscape. As companies evaluated the near and long term effects of macroeconomic events, including tariffs. While these shifts continue to influence the operating environment, our strategy was designed to navigate uncertainty.

[Gil West, CEO at Hertz Global]

Our success does not rely on tariff related benefits, but we are pulling the right levers to capitalize on them. We remain focused on what we can control. It's that discipline and a clear understanding of what drives this business that guides us forward. These past few months have only reinforced something I've known since day one. Hertz is at its core an asset management company.

[Gil West, CEO at Hertz Global]

We buy, rent and sell cars and we've sharpened our focus on that flywheel, not just to drive performance, but to stay agile in any environment. The fleet is the economic engine of the company and our greatest lever. That's why transforming it from a headwind to a tailwind isn't just a goal, it's essential. Through the relentless execution of our back to basics roadmap, we're building momentum, reshaping Hertz and delivering long term value for our customers and shareholders. Our strategy is anchored around three financial pillars: disciplined fleet management, revenue optimization and rigorous cost management.

[Gil West, CEO at Hertz Global]

We set clear North Star metrics: DPU below $300 RPU above $1,500 and DOE per day in the low 30s. I'm proud of the progress our teams have made, and I'm grateful for their hard work and perseverance. It's because of their efforts that we're beginning to see foundational improvements take hold. With that, let's dive into the results. Let's start with our most dominant economic lever, the fleet.

[Gil West, CEO at Hertz Global]

One year ago, we established a disciplined end to end fleet management strategy and recognized the urgent need for a refresh. At that time, we were managing an older, high cost fleet with a suboptimal mix of vehicles within a declining residual value market. Guided by our buy right, hold right and sell right strategy, we acted swiftly to reposition ourselves and rapidly execute our fleet rotation. Today, I'm pleased to share we've made progress in our strategy and our investment is beginning to pay off. With over 70% of our core U.

[Gil West, CEO at Hertz Global]

S. RAC fleet now twelve months old or newer, we have a younger fleet that's well equipped to navigate today's uncertainty. Thanks to our early and deliberate effort to lock in vehicles at highly favorable economics ahead of tariff implementation, our model year 2025 fleet is shaping up to be transformative for Hertz as those vehicles currently have a DPU of sub-three hundred prior to the benefits associated with tariffs. To make this happen, we work closely with OEMs to accept vehicle deliveries in Q1 ahead of schedule to avoid tariff exposure. While we continue to aggressively rotate out older, higher cost vehicles, the timing of new vehicle deliveries was suboptimal at the local market level, impacting utilization and pricing.

[Gil West, CEO at Hertz Global]

However, we view this as a deliberate short term trade off that better positions us for the remainder of the year. With approximately two thirds of our model year 2025 fleet already delivered, the long term benefits are taking shape. Our proactive buy right strategy has also enabled us to diversify our supply chain, reduce reliance on any single OEM and build a fleet mix that enhances our ability to quickly respond to market dynamics. While I mentioned the younger fleet is already driving measurable improvements in our North Star metric of DPU, it is also delivering on DOE. We're seeing lower maintenance cost and we expect these efficiencies to continue improving our P and L throughout the year.

[Gil West, CEO at Hertz Global]

As residual values rise, supported by early market indicators and analysts forecast of significant residual value increases, we're well positioned to benefit in this environment. To put it simply, every 1% increase in residual value generates more than $100,000,000 in economic benefits to our fleet. Because of our early actions, we're not just adapting to market dynamics, we're out in front of them. Through our disciplined fleet rotation, we're now managing a lower cost fleet with a more optimal mix in a rising residual value environment, putting us in nearly the inverse position of where we were when I joined the company. This is a clear sign that our strategy is working.

[Gil West, CEO at Hertz Global]

While overall demand remains solid, we recognize that there may be potential macroeconomic headwinds and uncertainty. Still we remain disciplined on capacity management. To that end, we plan to run a smaller fleet year over year and sweat the assets to drive higher utilization to offset some of the reduction in capacity. We remain disciplined in our capacity. We do however have flexibility to adjust our fleet up or down as we move through the year as we better gauge the macro environment.

[Gil West, CEO at Hertz Global]

Model year 2026 vehicle supply and pricing remain an unknown at this point. Historically, vehicle supply chain disruption has supported stronger pricing as well as increases in used vehicle residual values. If this is again the case, we're ready to respond quickly. We have a number of levers to pull to remain agile as we manage through the macro environment. Looking beyond 2025, I would expect fleet growth in line with demand growth, improved unit economics as we exit the year earn us the right to grow again.

[Gil West, CEO at Hertz Global]

As one of the world's largest used car dealers, we recognize the value of Hertz car sales. And last quarter, we highlighted our sell right strategy to prioritize retail as our primary car selling channel. We took proactive steps earlier in the year to raise awareness of this channel, timing that proved advantageous for our business. We began to see this play out in March, where our average selling price through retail channel strengthened, positively impacting depreciation per unit. In fact, this was a record quarter for retail car sales.

[Gil West, CEO at Hertz Global]

As part of this strategy, we are focused on increasing our net margins by better managing reconditioning costs and capturing more finance and insurance commissions on the transaction. Leveraging the strong residual market, we continue to drive awareness through Hertz Car sales and expand our retail partnerships. In addition, we just launched AI pricing capability for our vehicle sales through a partnership with Cox Automotive. These efforts through our buy right, hold right and sell right strategy are turning our fleet from a headwind to a tailwind for our business. Another highlight this quarter was our ability to manage cost as our strategy contributed to nearly $100,000,000 year over year improvement in total direct operating expense.

[Gil West, CEO at Hertz Global]

We also achieved sequential improvement in DOE per day despite lower volumes and we estimate that the newer fleet drove almost $1 of DOE benefit year over year. These results aren't one off. We remain disciplined and committed to continuous improvement in cost management as we build a more sustainable business. As we transform Hertz, we're focused on leveraging technology to improve our results, and we're strategically partnering with the world's leading tech companies. As we shared last quarter, we're leveraging Palantir's foundry platform to improve our fleet management and workforce planning.

[Gil West, CEO at Hertz Global]

This quarter, we announced our partnership with UVI, a global leader in AI powered vehicle inspection systems. This collaboration will enhance the speed and accuracy of our vehicle inspections and damage assessments while also creating a more transparent digital first experience for our customers. We're also working with Amadeus, a best in class global travel tech solutions provider on advanced capabilities designed to modernize our revenue management system and significantly enhance our pricing strategies and execution. We've expanded our customer service AI agent capabilities and we are working with Decagon, the conversational AI platform, to deliver a more reliable personalized customer interactions at speed, greater scale and lower cost. Transformations like ours take time, but above all, it depends upon unwavering commitment to executing the strategy we established with our Back to Basics roadmap.

[Gil West, CEO at Hertz Global]

Despite today's uncertain environment, we remain confident, steadfast and fully committed to this plan. We are beginning to see the tangible results and as we chart our path forward, we will maintain our disciplined focus on what we can control while remaining agile and responsive to changing conditions. I'll turn now to Sandeep to comment on capacity management and our commercial strategy.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Thank you, Gil. Good morning, everyone. Let me start by saying how proud I am of what the commercial team is accomplishing. As we execute our strategy and work towards our North Star metric of ARPU greater than $1,500, we are driving a transformation that will deliver greater durability and margins for our business. Let's start with what we saw during the quarter.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Revenue was down year over year driven primarily by reduced fleet capacity. We continue to manage our fleet prudently, which was down 8% year over year in the first quarter. Given macro demand uncertainties, we intentionally ran a tighter fleet year over year while capitalizing on the strong residual value environment to accelerate the rotation of its remaining older vehicles. On a monthly per unit basis, revenue would have been flat year over year excluding the impact of leap year and a margin accretive yet RPU dilutive decision to orient our fleet mix towards lower depreciating vehicles, which is more in line with consumer booking behavior. The impact of this fleet mix change will largely annualize for the first quarter of twenty twenty six.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

We continue to focus on sweating our assets through better fleet utilization, which showed improvement. In Q1, utilization was up two forty basis points year over year and would have been even higher without temporary headwinds of accelerated in fleeting. This is a journey we started in late twenty twenty four and we foresee continuous progress on our ability to further sweat the fleet. Pricing for the quarter was down 5% year over year, partly driven by fleet mix. Breaking down pricing a bit further, while January and February performed better, March and the first couple of weeks in April came in lower.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Part of it was expected with Easter shifting into q two this year and the fact that there was no eclipse, which helped drive rate last year. We were nimble in taking delivery of some model year 2025 vehicles earlier than planned ahead of tariffs. While this decision put us in an advantageous position pertaining to our fleet rotation, we were temporarily overfeated in certain markets in a seasonally low demand period, which impacted RPD and utilization. All told, we didn't get the utility out of these additional vehicles that we normally would have and probably left some price on the table, but we view this as temporary and isolated to Q1. As we look ahead, we see macroeconomic uncertainty, but we also see opportunities.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

We are seeing demand moderate for corporate, government and US inbound segments, but our forward bookings for Hurt Leisure are up year over year. Our approach is to stay prudent by going into the summer with a tighter fleet, thereby also leveraging the rising residual values as we trim to stay on the demand. We will stay nimble as we continue to assess the changing demand environment. The macroeconomic opportunity lies in the upside revenue potential that Gil mentioned in the form of vehicle constraints, which may bring a tailwind to RPD. Historically, supply constraints such as the two thousand and eight financial crisis and the most recent COVID period have consistently driven significant RPD gains in our industry.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Beyond the characterization of the macroeconomic environment, let's talk about the things that we get excited about the most, which are the outcomes we want to deliver for the rest of 2025 and into 2026. The commercial team is focused on fundamentally improving the durability and margins of our business. The initiatives which underpin our strategy are as follows. First, improving our revenue management systems. We are in the early stages of a multiyear transformation journey leveraging our newly signed partner Amadeus, who provide best in class RM systems to airlines and hotels.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

We are enhancing the ability of our revenue management system to deliver higher margins through an iterative build process that will deliver incremental EBITDA on a regular basis. This improvement will be in the pricing and demand selection of non contractual demand, which constitutes the majority of what we book. And any improvement will likely apply to a large revenue base, hence providing significant gains. We kick started the project in earnest in late Q4 and early initiatives that have already been executed are exceeding our expectations. Second, we are optimizing the foundations for improved demand generation within our off airport and mobility business units.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

While the airport business has higher RPDs, the off airport business and the mobility business benefit from more consistent utilization and a longer length of keep thereby driving lower direct operating expenses per transaction day leading to healthy margins. They also have greater resiliency in demand and RPDs during periods of low economic growth. During recent quarters, given our smaller fleet, we skewed our fleet to airports. Looking ahead, we intend to feed our off airport and mobility businesses heavier than in prior periods. This diversification of our revenue stream over time should lead to greater resilience and improve margins for our business.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Third, we are improving the mix of our durable segments. Durable segments like direct sales through our own websites are segments that we aren't directly competing with our competitors on shared platforms or where competition is limited. We continue to enhance the mix of durable segments. And lastly, I want to touch on driving customer preference. By the end of Q1, our Net Promoter Scores improved by 11 points year over year, a result that displays the strength of this team to execute operationally across our global footprint.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Just as encouraging, our loyalty enrollments were up 11% year over year and are up even higher so far in Q2. Also, we are starting to see this translate into increased loyalty bookings. In summary, the current market conditions present risks and opportunities. We are focused on capacity discipline to derisk our fleet investments, improving our utilization to process improvements, and delivering on our commercial strategy to build a more durable and margin accretive business. Let me now turn the call over to Scott for a detailed review of our financial performance and liquidity.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Thank you, Sandeep. Good morning, everyone. Let me walk you through our financial performance for the first quarter of twenty twenty five and also provide an update on some recent transactions. Revenue was $1,800,000,000 for the quarter and adjusted EBITDA was a loss of $325,000,000 versus a loss of $567,000,000 in the prior year period. As a result, our margin improved by 9% year over year.

[Scott Haralson, Executive VP & CFO at Hertz Global]

We saw good movement in depreciation per unit or DPU and we hit our internal cost targets for the quarter. However, the early delivery of vehicles from OEMs and an unpredictable macroeconomic backdrop made pricing optimization a bit tricky on the revenue side. We also saw lower levels of industry supply in the quarter. All in all, our EBITDA results were in line with the guidance we gave during last quarter's earnings call. Our fleet has now shifted from a significant headwind to a prominent tailwind for the business.

[Scott Haralson, Executive VP & CFO at Hertz Global]

The primary objective of the rotation is lower vehicle depreciation and now that we are more than 70% rotated, you can see this play out in our P and L and metrics. Q1 depreciation expense decreased 45% year over year and DPU for the quarter was $353 per month, a meaningful improvement both sequentially and year over year. This reflects the rotation benefits and improving residuals. Q1 twenty twenty four also included the unfavorable impact of EVs held for sale. We had previously said we would reach sub 300 DPU by the end of twenty twenty five and now we expect it to be below $300 in the second quarter.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Our accelerated fleet rotation as well as some expected benefits from improved residuals should drive our gross depreciation per unit below $300 We will also benefit from additional gains from car sales which should drive net DPU even further below $300 per month. During the quarter, our continued focus on productivity and lowering our direct operating costs continued to yield positive results. On a per day basis, DOE was down 4% quarter over quarter notwithstanding lower volume. Year over year DOE was down 1% on a volume adjusted basis despite continued headwinds from insurance and rent expense as we discussed on our prior calls. In Q1, excluding the impact of stock based compensation awards forfeited in the prior year quarter, our selling general and administrative costs also decreased year over year since we structurally removed costs from the business.

[Scott Haralson, Executive VP & CFO at Hertz Global]

This is our first quarter of hitting our budgeted cost targets and we expect to do that in 2Q as well. That may sound like an innocuous statement, but this is an important internal indication that our efforts of driving improved predictability in our forecast and better execution on our productivity and costs are working. The execution across our business is bearing fruit and we expect these trends to continue as we move forward. In terms of liquidity, our position remains strong at $1,200,000,000 at the end of Q1. A couple of important transactions were recently concluded.

[Scott Haralson, Executive VP & CFO at Hertz Global]

First, as we announced in a recent eight ks, we amended our revolving credit facility last week. The amendment provides for the extension of the maturity date approximately 1,700,000,000 of commitments under the existing $2,000,000,000 facility from June of twenty twenty six to March of twenty twenty eight subject to a springing maturity date. This means we have access to up to $2,000,000,000 until June of twenty twenty six and thereafter the amounts of commitments is approximately $1,700,000,000 until March of twenty twenty eight. Key financial terms are unchanged from the prior facility and we have flexibility to replace the reductions if we choose to. We receive very strong support from our lending banks that points to confidence in our transformation.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Second, our asset backed securities programs continue to perform well, providing efficient funding for our fleet requirements. We've successfully completed several business as usual ABS transactions, including an extension of our HVF III variable funding notes, demonstrating strong market acceptance and competitive pricing. These funding channels remain a cornerstone of our fleet financing strategy and we anticipate continued access to ABS markets on favorable terms. Our ABS facilities have been buoyed by favorable U. S.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Rack fleet values where the three month average fair market value of $9,200,000,000 is 105 percent of the net book value of $8,800,000,000 as of March 2025. Overall, these transactions improve our capital structure and maturity ladder and derisk the balance sheet providing flexibility to continue transforming the company. We are also pursuing several transactions which may generate liquidity through optimization of our letters of credit and real estate portfolio. These are not splashy financings, but rather tactical strategies designed to improve liquidity at a more effective cost of capital. Although discussions to date have been productive, we cannot provide any assurance that any transaction will be completed.

[Scott Haralson, Executive VP & CFO at Hertz Global]

But giving effect to some of these that are currently in process and expected to close in the quarter, we expect to end the second quarter with over $1,000,000,000 of liquidity even if we are required to pay for our make whole litigation during the quarter. We also have other capital capacity in reserve totaling well north of $500,000,000 including debt capacity allowed under our credit facilities if needed. Lastly, our Board of Directors recently authorized the launch of an ATM or at the money equity offering. We expect to file a shelf registration statement and prospectus in the coming days. With a successful fleet rotation largely behind us and the summer peak ahead, it is time to begin working on deleveraging.

[Scott Haralson, Executive VP & CFO at Hertz Global]

To that end, we have authorized up to $250,000,000 of shares for the ATM, but the timing, total proceeds and final number of shares offered will be determined as we progress. These potential proceeds are not included in the over $1,000,000,000 of liquidity we expect to end the second quarter with and are intended to be used to start deleveraging the balance sheet. While we are certainly price sensitive, we generally see the equity for debt trade here to be P and L, cash flow and shareholder accretive as the reduced interest and lower risk contributes to equity value. We also expect to generate free cash flow from operations in the back half of the year. The combination of an improved earnings profile, refinancing levers and the ATM optionality gives us a number of alternatives for addressing upcoming maturities.

[Scott Haralson, Executive VP & CFO at Hertz Global]

During Q1, we utilized $210,000,000 of cash for continued fleet rotation and we'll continue to use cash as we fleet up for the peak and continue our rotation. Despite the tariffs that went into effect in April, we continue to take delivery of model year 2025 vehicles at the previously negotiated prices. It's too early to provide color on our model year 2026 buys as we have only recently begun those negotiations. Looking at the remainder of 2025, we're maintaining a balanced approach. While we see encouraging trends for both the industry and the company, we're mindful of potential headwinds including consumer sentiment and possible tariff impacts.

[Scott Haralson, Executive VP & CFO at Hertz Global]

We will continue to be prudent with our fleet, which was down 8% in Q1. We expect the full year to be down about the same level. We do however expect to make up some of the reduction in utilization. So we expect our transaction days for the full year to be down less than the fleet. We believe this reduction in supply should be supportive of better pricing across our geographies.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Overall, we continue to expect Q2 EBITDA to be approximately breakeven, Q3 EBITDA to be a sizable profit and even positive from a net income basis producing our first positive EPS since 2023 and Q4 to be a positive EBITDA result as well. All of this should produce a full year EBITDA margin in the low single digits consistent with our prior expectations. Our North Star targets continue to be DPU below 300, RPU above 1,500 and DOE per day in the low 30s, which we believe together could produce an EBITDA of more than $1,000,000,000 by 2026. With that, I will hand it back to Gil for his closing comments.

[Gil West, CEO at Hertz Global]

Thanks, Scott. I'd like to close by sharing why I remain incredibly bullish about the future of Hertz. When I joined the company just over a year ago, I immediately saw the enormous potential of transforming our core business, and that belief has only deepened. Achieving our North Star metrics is expected to unlock over $1,000,000,000 of EBITDA core business run rate and the potential extends well beyond that as we unlock value creation beyond our core business through retail car sales and our mobility business. We continue to build momentum in our transformation.

[Gil West, CEO at Hertz Global]

Our fleet strategy is working. Tariffs are an added tailwind. We're making excellent progress on better managing cost, sweating our assets, elevating our revenue management and continued to action an expansive list of opportunities. Our liquidity position remains strong and the team has worked to derisk the business. The setup for the future bodes well.

[Gil West, CEO at Hertz Global]

DP outlook is strong with rising residual values. Demand remains solid, especially leisure and we're building durable counter cyclic demand beyond our core airport business. We have a young and tight fleet, which gives us leverage for utilization and RPD as well as flexibility to manage through uncertainty. Model year 2026 supply chain disruption has the potential to create further tailwinds for residual values and RPD. Ultimately, everything comes down to execution and we've assembled a world class team who are focused on driving results.

[Gil West, CEO at Hertz Global]

Momentum is on our side and I truly believe the best days of Hertz are still ahead. Back to you, operator.

[Operator]

We will now open the line for questions. Please limit your questions to one question per speaker and one follow-up if needed. Our first question comes from Ian Zaffino from Oppenheimer. Please go ahead. Your line is open.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Hi, Karina. Thank you very much for the color. I wanted to ask about the fleet. And I guess you're in this period of kind of over fleeting because you bought model year cars earlier or to delivery. How much do you think you are kind of over fleeted or what do you do there?

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

How many vehicles are we talking about? And then also as you look to divest vehicles, can you maybe help us understand what residuals look like in retail versus wholesale? And kind of what's stronger, what's weaker and why? Thanks.

[Gil West, CEO at Hertz Global]

Yes. Thanks Ian. I'll start. Yes, first of all, a over fleeting standpoint, I think at the macro level, we're not over fleeted. As I mentioned, I think if anything we've tried to tighten the fleet and keep supply inside of demand.

[Gil West, CEO at Hertz Global]

So as Scott mentioned, we were down 8% in the quarter on fleet. So we're tight. We're not overfleet at the macro level. I think the points that were being made here were more at the local level at the market level pick a city, pick an airport. There we were overfleeted because keep in mind the dynamic was we pulled forward the vehicle deliveries to avoid tariff exposure.

[Gil West, CEO at Hertz Global]

But those came the timing of those deliveries were not optimal for us at a market level. So there were markets we found oversupply and not at the aggregate level, but at the market level and then that in turn at that market level hurts our ability to price and utilization. Sandy?

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Yes. And this is Sandeep here. The other point I'll make is the effect of that, say temporary overfeeding in certain local markets, It was a temporary effect. Right? It was present, to the tail end of Feb, March, and then, probably the first couple of weeks of April.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

And then, basically, we took proactive proactive actions to minimize that and demand also kicked in. So I think that's no longer a factor in play.

[Gil West, CEO at Hertz Global]

Yes. And on the residual question, I guess what I would say of course, I mean tariffs and really just generally the disrupted automotive supply chain creating some tailwinds for us given that we're an asset heavy business. And we're seeing residual values rise. We've seen analyst projections of course as you have. I think as we think about residuals, we're in both markets wholesale as well as retail.

[Gil West, CEO at Hertz Global]

Of course, we've skewed our sales more towards retail. But I think if you look at the wholesale market which tends to move quicker than the retail market in terms of pricing, we've seen those residuals rise fairly quickly in March and April. I mean, you can obviously look at the same data we are, but as a proof point, I think the MMR Rental Car Index for April was up 8% just to kind of frame some of that. There's different inputs. But that is more seasonally adjusted for similar mixes.

[Gil West, CEO at Hertz Global]

I think we're also seeing the younger cars residual values rising quicker disproportionately.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. Thank you. And then just as a follow-up, when you think about how

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

the

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

demand, the demand you guys you saw in this past quarter and what you've kind of seen so far, anything notably like geographically speaking and I know there's what certain markets are better in certain months, but anything you kind of noticed like geographically, like is California a little bit weaker, like anything along those lines? And then when you talk about the business, How much of, I can call, the softness is seasonal versus maybe a pullback on corporate spend? Thanks.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Yep. This is Sandeep here. I can I'll answer that question. So I'd say from a geographic level, there wasn't there weren't any major differences in terms of how we saw the impact come through. There are, of course, certain geographies where segments of customers like corporate, they're more heavy.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Our government is more heavy, for example, through Washington DC. So so you're gonna see that impact come through. But it's more related to segments rather than anything else. I think the one difference I I I would, articulate in terms of day of weeks is given that corporate is heavy and government is heavy, at the early part of the week, Tuesdays and Wednesdays, that's where you saw a dip, overall in demand. So that's that's how I would classify the difference in the environment.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

In terms of seasonality, first of all, we're seeing the normal seasonal pick in demand that we would expect as we are moving towards summer and into summer. So that's, that's the positive in the macro environment. The pullback that we have seen is on the corporate side, the government side, and inbound segment, and and that's still there in the environment. So it's a combination of the uptick due to seasonal demand as we as we get it work towards summer, but some pull down because of corporate, government and inbound.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. Thank you very much.

[Operator]

Our next question comes from John Babcock from Bank of America. Please go ahead. Your line is open.

[John Babcock, Analyst at Bank of America]

Good morning and thanks for taking my questions. Just right now, I was wondering if you might be able to talk about your fleeting efforts in April and May so far. I know you mentioned a bit of inflating towards the end of 1Q, but just kind of curious what your activity has been like in April and May, if

[John Babcock, Analyst at Bank of America]

you're able to talk about that?

[Gil West, CEO at Hertz Global]

Yes. Think I mean, in general, of course, we continue to take vehicles throughout the year. And as we mentioned, we've got of course, as you know, we've been focused on our fleet rotation in particular with our model year 255s. We've taken about two thirds of those now. We have from a timing standpoint as we mentioned some of those were pulled forward into the quarter in April really from a tariff exposure strategy standpoint.

[Gil West, CEO at Hertz Global]

But we'll continue to take vehicles throughout the year. I think the larger unknown is model year '26, right? So I would just emphasize kind of where we're at at least is with the model year 2025 and fleet rotation that we've done, we're set up really to have flexibility in the way we manage kind of the second half of the year and into 2026 in terms of the fleet because there is a question relative to supply as you go forward, the volume, the pricing and with our fleet rotation with the model year '25, we've got flexibility to manage through that. But generally the deliveries will continue through the end of the year as we take the final model year '25.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yes. Hey, John. This is Scott too. If you're getting at sort of the quarter over quarter sequential size, I think we've talked about we're going to take deliveries. We'll probably be in the mid to high single digits higher in Q2 than we were in Q1 as you're framing your thoughts around it.

[John Babcock, Analyst at Bank of America]

Okay. Very helpful. And then actually on tariffs before I just go to one other topic briefly here. Looking at your U. S.

[John Babcock, Analyst at Bank of America]

Fleet, do you have any sense for what share of vehicles you own might be subject to tariffs?

[Gil West, CEO at Hertz Global]

Well, all the model year 25s that were taken to delivery on were really not subject to tariffs. Will take those vehicles at the previously agreed to pricing. So we're not exposed in the short run.

[John Babcock, Analyst at Bank of America]

Okay. I'll follow-up on that

[John Babcock, Analyst at Bank of America]

I believe. And then last question here. I know you've talked a decent bit about cost cutting and also revenue optimization. You know, I'm just anecdotally, you know, I've, you know, I've been to some airports and I've I've ultimately seen, you know, very long lines at, like, Hertz counters. And I'm I am wondering to some extent whether there might be, know, there might be some instances where you might need to actually add costs, you know, to perhaps generate revenue or to avoid losing revenue.

[John Babcock, Analyst at Bank of America]

So I was wondering if you might be able to talk about that, that kind of balance of cost cutting, but also realizing that when you cost cut too much, might actually be losing revenue. So I don't know if you maybe Sandeep or Gail, if you want to go through that.

[Gil West, CEO at Hertz Global]

Yes. No, thanks, John. Great question. I'll start, but Sandeep, I'm sure, have his thoughts. But from my vantage point, look, we're first of all, we're as you know, over the last year have really leaned into our customer experience.

[Gil West, CEO at Hertz Global]

So we're very sensitive to that. As Sandeep mentioned, our Net Promoter Scores were up 11 points year over year. The momentum has been really good. One of the key drivers on Net Promoter Score or line weights as an example, but we understand kind of what the NPS profile looks like in terms of where we have improvements in NPS or detraction from NPS. As you may know, I think we mentioned it on prior call, we partnered with Qualtrics, which gives us much better real time data to manage with.

[Gil West, CEO at Hertz Global]

So we're of the view, you can have the power of and you can have both, you can have improved customer experience, which we've demonstrated and cost control as well. But we've got to be really sensitive to your point that we're not penny wise and pound foolish and we detract from the customer experience for the sake of call settings. We can do both.

[Gil West, CEO at Hertz Global]

Sandeep?

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Yeah. No. Again, you said it right. It's the power of the end.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

And I think what I'm excited about is the journey we have ahead in terms of Net Promoter Score. Lot of focus, focus on the biggest levers. You know, we are a customer centric organization. That's the set of leaders we have here, and we'll continuously drive progress on that.

[Gil West, CEO at Hertz Global]

Yeah.

[Gil West, CEO at Hertz Global]

I think

[Gil West, CEO at Hertz Global]

I think technology in general is another big unlock in the customer experience too. So, we're all about taking friction out in terms of line weights or other parts. So as we continue to lean into technology and the digital experience, that's accretive as well.

[John Babcock, Analyst at Bank of America]

Appreciate all the color. Thanks.

[Gil West, CEO at Hertz Global]

Thanks, Scott.

[Operator]

Our next question comes from Chris Woronka from Deutsche Bank. Please go ahead. Your line is open.

[Chris Woronka, Analyst at Deutsche Bank]

Hey, guys. Good morning. Appreciate all the color so far. My first question is kind of on the fleet strategy and relative to RPD. And Gil, I think you mentioned you're going to be doing more off airport and rideshare.

[Chris Woronka, Analyst at Deutsche Bank]

You want to lean into that as as part of utilization strategy. But, you know, it also sounds like if you're if you're shrinking the fleet, are you trying to go higher end kind of at the at the airport? Is there a a push to whether it's, you know, re regaining corporate accounts or or higher end leisure? Just trying to understand kind of the components of the fleet strategy relative to an industry that's still kind of settling on normalized RPD.

[Gil West, CEO at Hertz Global]

Yes. I'll let Sandeep comment. But I guess from my vantage point, we're I think the position we want to be in ultimately the setup is we're in part kind of as part of our transformation at Hertz of course, I would just say broader brush, we prioritize fleet and cost actions at the top of the list, cost because it moves quicker, fleet because it's so impactful it's 80% of our economics. So not saying we haven't focused on revenue, Sandeep would certainly argue that point we have been. But as we're moving through revenue transformation, we're pruning some revenue.

[Gil West, CEO at Hertz Global]

The team is really focused on creating sustainable demand and that also includes our trough periods, right, both seasonally and day of week. Diversifying our revenue streams is important to your point off airport mobility. We've been airport centric as you know. And then channel mix, in particular with the airports what that looks like along with revenue management tools, right? So, I think all those things are playing out as we see them right now.

[Gil West, CEO at Hertz Global]

But with a tighter fleet, goal is produce more demand than we can satisfy through all those actions and then be able to yield ultimately for profitability.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Just adding a little bit more color. I think from a revenue perspective, are basically true I'm I'm gonna use the term pruning our portfolio. Right? There's certain segments and business units we are growing. There are others where we're basically pruning all with an eye on unit economics and and being margin accretive.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Right? So we're now improve unit economics, and that positions us for growth in 2026 and beyond. And to be a little bit more specific, right, and even when I look back at q one, we maintained really strong performance against our high RPD premium brand hurts at the airports. Right? These are customers who are sticky and brand raw brand loyal.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

We also perform well when it comes to dollar and 50 brand loyal customers who who book directly with us. And and, lastly, we also drove incremental, volume from our partners. Right? This is a growing part of our business. These are high RPD customers who generally tend to book earlier in the booking curve.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

It's really good business. What we took less off and what we pruned was the lower end of the market. These are brand agnostic customers, who come from competitive platforms. And while taking some of these customers would have been, I would say, revenue and RPU accretive, their margins would have been lower. And we're focused, like Gil and I mentioned, on improving our margins.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

So giving up this revenue right now is the right decision for us. So I think that's the way I would kind of classify the geography of our demand profile.

[Chris Woronka, Analyst at Deutsche Bank]

Okay. Thanks, guys. And then just as as a follow-up, I I appreciate all the the guidance so far on on DPU and, you know, know what you said, February under March, which is earlier than you thought. And we look back to 2019. I think your your US DPU was was kind of just just south of February.

[Chris Woronka, Analyst at Deutsche Bank]

And I don't know if that's you know, your North Star target is under 300, so anything under 300 is there. But is there any kind of with the current environment today and, you know, when you think about buy prices possibly in '26, is there a level below 300 that you think is, hey, we can get to the next target to $2.75 or something else? Is there any way to kind of frame it a little bit more precisely than under 300?

[Gil West, CEO at Hertz Global]

Yes. No, thanks Chris. What I would say is first of all I think what you're alluding to in 2019, I mean historically if you put aside COVID, DPU has been sub three hundred So I think your frame of reference is similar to how we look at that. And irrespective of the cap cost, it's really the difference in buying and selling. It's the economics that drive that.

[Gil West, CEO at Hertz Global]

So the fleet strategy we have really can produce those results in any environment. Tariffs certainly are a tailwind to accelerate that. Scott, if you want to give additional color or not?

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yes. Mean thanks Chris for the question. I know what you're getting at. All of the mathematical components that go into that are obviously possible given the backdrop. But there's a lot of volatility the tariff environment supply for 26s and the corresponding residual value.

[Scott Haralson, Executive VP & CFO at Hertz Global]

So we're not ready to give any further indications of where that may end up given sort of where we are. But all of those are possible given the backdrop.

[Chris Woronka, Analyst at Deutsche Bank]

Okay. Yes. No, fair enough. Understood. Thanks a lot, guys.

[Chris Woronka, Analyst at Deutsche Bank]

Best of luck.

[Gil West, CEO at Hertz Global]

Thank you.

[Operator]

Our next question comes from John Healy from Northcoast Research. Please go ahead. Your line is open.

[John Healy, MD & Research Analyst at Northcoast Research]

Thanks for taking my question. I wanted to spend a couple

[John Healy, MD & Research Analyst at Northcoast Research]

more minutes on the depreciation side of things. Obviously, a lot's going on in the last year or so. So you guys wrote down the fleet to some degree. Now the used car market is coming back. And obviously, that's a tailwind for you.

[John Healy, MD & Research Analyst at Northcoast Research]

But when you talk about that 300,000,000 number for Q2 or below that, what sort of gains are embedded in that? And secondly, as you buy new cars, what are you depreciating that? Because I feel like we're talking about these quarterly depreciation numbers, but in reality, I'm not sure how relevant they are given the movements of pluses and minuses going into the aggregate fleet value the last year or so. So just love to get some perspective on what the onboarding fleet, what are those depreciation numbers? Thanks.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yes. Hey, John, I'll start. I'm sure Gil would like to chime in too. We tried to bifurcate in the prepared remarks around how this is playing out. We have the twenty twenty five deliveries that are already making up a majority of our fleet that are depping at sub-three hundred alone.

[Scott Haralson, Executive VP & CFO at Hertz Global]

And then as we talked about the guidance for Q2, our gross debt sort of run rate debt is sub-three hundred. We will have some gains in the period that will make net DPE lower, but the intention is that we end up having gains as we go forward through the cycle and continue to do that. So the idea is that there may be some volume fluctuations in gains as we sell more or less in certain periods and depending on the time of year. But I think the sort of the run rate depth of the business is sub-three hundred and we're seeing that in a couple of different areas. So I think that's what we're trying to sort of get across is sort of the foundational gross TPU is already sub-three hundred million dollars

[Gil West, CEO at Hertz Global]

Yes, without any benefit of tariffs on that. The core fleet to your point, John, is that the model year 25s that we bought that we've been rotating, those have all been executed with our North Star in mind. So without any tariff tailwinds, those have been damping below 300. And we continue to rotate out the older higher depreciating vehicles. The other dynamic of that of course is residual values have increased for those vehicles model year prior to 2025.

[Gil West, CEO at Hertz Global]

Historically, we would have taken some loss on sale of those vehicles. Now with rising residual values, we can actually see some gains on some of the older fleet as we rotate out of it.

[John Healy, MD & Research Analyst at Northcoast Research]

Got it. Makes sense. And just another high level question. I mean, you guys have brought down your fleet a lot. You know, Avis has brought down their fleet as well.

[John Healy, MD & Research Analyst at Northcoast Research]

But the rate environment, you know, still, over the last four months has probably been softer. Do you think that's just the mix of business that's out there? Or is enterprise being more aggressive as you look at the market? I know six has also come in. I'm just trying to understand half the market down in fleet, what's the pressure on rate?

[John Healy, MD & Research Analyst at Northcoast Research]

And is it channel or segmentation oriented? Or is it just more competition? Thank you.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Yes. So this is Sandeep here. I think when we look at rate, I think I would again bifurcate January and February and then March, right? So when you look purely at January and February and this is pre tariff, I I I would classify the rate environment as being pretty stable. Right?

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

That's the way I would classify that. The big dip actually came in in, post tariff announcement. That's where there was some pullback in some, segments and and you saw that impact. There's also the impact of incremental add ins that impacted us. I'm sure some of the other it affected some of the other industry players as well.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Right? That that's I would classify that as a temporary impact. As we look ahead and we look into summer, there's I'm like, there's seasonal improvement, of course, in rates, but you also see just in general, the rate environment improve, especially as you look at summer and late summer. So I I would say that there's a little bit of, normalization back from a rate perspective that I see in the environment. Now all of this is obviously subject to the macroeconomic environment and consumer sentiment, and then that's a moving target.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

But in general, I see rates summer through late summer kind of, normalize.

[John Healy, MD & Research Analyst at Northcoast Research]

Thanks guys.

[Operator]

Our next question comes from Lizzie Dove from Goldman Sachs. Please go ahead. Your line is open.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Hi, there. Thanks for taking the question. You touched on it a little bit, but I'm wondering, you're running with a smaller fleet now.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

It feels like that's going

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

to continue for this year and then you said within demand next year. And so to what extent does that kind of change the outlook for normalized EBITDA at all? Or how do you think about that over the long term? There's I'm assuming some like descaling headwinds on that side of things, but maybe you could just talk about how you think about that profitability outlook and margin outlook with running at a smaller fleet?

[Scott Haralson, Executive VP & CFO at Hertz Global]

Liz, this is Scott. I'll start. The other thing I want to chime in too. I don't think it affects our long term targets. We've talked about the below $300 RPU at $1,500 or above low 30s DOE.

[Scott Haralson, Executive VP & CFO at Hertz Global]

I think the combination of those in varying degrees, we think will produce $1,000,000,000 EBITDA. And maybe a quick time to correct my previous misstatement, was told by the group that I said EBITDA by 2026, it's really EBITDA by 2027 is the right way to think about this. But I think the volume isn't the lever that's going to move the needle for us. So we still think that that sort of $1,000,000,000 run rate is the right target. We think there's other levers within the business as well.

[Scott Haralson, Executive VP & CFO at Hertz Global]

But I think it's the right way to think about it regardless of volume.

[Gil West, CEO at Hertz Global]

Yes. And I would just add, keep in mind the fleet size being down as a percent is one thing. But we have big opportunities on utilization. We've talked about them on previous calls, but we can make up a significant amount of fleet reduction by better utilization. And we have a number of different buckets to go after there.

[Gil West, CEO at Hertz Global]

But effectively, it's reducing any queue time associated with the vehicles from a process engineering standpoint. And we're seeing really good progress in that area. Obviously, got to drive rentable days as well on top of that. But our strategy is to mitigate some of the fleet reduction, which then gives us another economic lever.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Got it. That makes sense. And then just one follow-up on the RPU specifically. I know you're still targeting the 1,500, which I think is like high teens ahead of where you were in 1Q, which I understand you had some headwinds to 1Q. But how should we think about the cadencing of getting those improvements in ARPU?

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Like can that happen this year or towards the end of this year? I know there's a bit of a dip in April, but how should we think about that and maybe kind of quantifying the moving pieces there of that improvement on pricing?

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Yeah. So Sandeep here. So in our view, that's not not the metric. Right? And that's what we aim for, as a business.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

I think, to Gil's point, we'll make a significant improvement on the utilization part of that equation. Right? That's there's a lot of effort being going on and that I won't recant, that story there and that those efforts there. I I think in the r our PDPs, right, that's there's a bunch of initiatives we have that I detailed on the call and then some beyond that that should provide a fundamental uptick, in our ability to produce RPD. And then that's gonna then be predicated with, what's happening in the macro macroeconomic environment as well.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Right? It's a business where, rates do depend on the macroeconomic environment and the combination of demand and supply. So that's a story that's, yet to unfold. But fundamentally, we're increasing we are improving the foundations of our business to produce better youth and RPT.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Great. Thank you.

[Operator]

Our next question comes from Stephanie Moore from Jefferies. Please go ahead. Your line is open.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Hi, good morning. Thank you.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Touching on your North Star long term DOE target, could you walk us through that DOE target? Can you achieve that target even on a lower fleet? Or is there some kind of fixed cost headwinds that would prohibit you from hitting that low 30s BOE? And maybe more clearly, what is your underlying fleet size embedded in that low 30s BOE target?

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yes,

[Scott Haralson, Executive VP & CFO at Hertz Global]

Stephanie, that's a great question. Yes, I think obviously, lower fleet makes that number more difficult. Ultimately, to get to the low 30s, we're going to need some scale to do that. But we have a number of initiatives internally to drive a reduction in fixed cost and more efficient variable cost production. So I think it's going to be a combination of all those things.

[Scott Haralson, Executive VP & CFO at Hertz Global]

But I think scale is going to be required to get to that North Star metric. Obviously, have inflation components that are headwinds as well. So it will be dependent on a number of factors. But we have a lot of initiatives in place. We've talked about a lot of those.

[Scott Haralson, Executive VP & CFO at Hertz Global]

We're not ready to give a ton of details on that at this point. But the basket is pretty large. But scale will be a contributing factor to it. No doubt.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Absolutely. So maybe just as a follow-up of that, when do you think as you think about the scale initiatives that you could be able to hit that target at current scale?

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yes. I mean, guidance right now is really thinking through 2027 as the point at which we get the scale and the efficiencies in the business, the initiatives to take footing. The estimate is that we get to sort of North Star metrics around the 2027 time frame.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Got it. And then just switching gears to the liquidity side, the 2Q liquidity number of, I believe, 1,000,000,000 that you pointed to, is that inclusive of the financing proceeds? Or was there some kind of working components of that $200,000,000 cash burn? And I guess just trying to figure out if that's inclusive of any cash proceeds from selling down fleet or just more color there would be helpful.

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yes. Stephanie, I tried to give some detail on the prepared remarks to walk through that. But we ended the quarter with about $1,200,000,000 We have some other liquidity initiatives that are taking hold as we speak. That will help shield against the potential Wells Fargo litigation payment in the quarter. And so as we think through all the pluses and minuses of the financings, the cash burn in the business, the in fleeting as well as the potential make whole, we think we'll end the quarter at around maybe slightly above the $1,000,000,000 number.

[Scott Haralson, Executive VP & CFO at Hertz Global]

And that does not include the ATM proceeds, as I mentioned. This is just sort of the pluses and minuses of our sort of financings and the business cash flows.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Great. And then just lastly, how much of your, in what is your percentage of your, travel that's inbound travel as a percentage of leisure for US business? Or I guess the inbound percentage of your

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

It's a single digit business unit for us. So, yeah, relatively small.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Yes. Thank you. Appreciate the time.

[Operator]

Our next question comes from Ryan Brinkman from JPMorgan. Please go ahead.

[Operator]

Your line is open.

[Analyst]

Hi, good morning. This is Josh Bhatva on for Ryan Brinkman. Thanks for taking our questions. I just wanted to take a closer look at the changes to your revenue management system. Would you be able to double click on how the new system is expected to support EBITDA margins?

[Analyst]

And would appreciate if you could quantify any expected benefits from this transition. You also mentioned that this is a part of a multiyear journey. So could you share more about the timeline and the pace of the rollout as you move forward? Thanks, and I have a follow-up.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Josh,

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

thanks for the question. You know, this is a very exciting journey for us. There's there's a lot of potential here. Unfortunately, on the details behind this, we don't we don't disclose that, but super excited about what this could do to our foundational ability to drive better margins for the business.

[Analyst]

Got it. And then we discussed about, you know, tariff implications from a fleet standpoint, but just wondering if you could spend a couple of minutes here on tariff implications from a DOE standpoint. Any insights helping us size the sensitivity of DOE to tariff induced inflation in vehicle parts and perhaps any other areas outside of fleet value that may be impacted due to tariffs? Thank you.

[Gil West, CEO at Hertz Global]

Yes, thanks. I'll start and Scott may want to chime in. I think both he and I mentioned, we've got an expansive list of opportunities to reduce DOE in general, right? Most of the exposure relative to tariffs would be on parts cost and maintenance. What I would say in terms of parts and maintenance, we got tailwinds and benefits from the newer fleet that we've been rotating into.

[Gil West, CEO at Hertz Global]

And we've also got, I think I say this objectively, the best tech ops team in the business and their innovation and execution and kind of rigor to run the business, we would expect our year over year maintenance costs to be down irrespective of any tariff headwinds and the momentum is really good in that space. So if you want

[Scott Haralson, Executive VP & CFO at Hertz Global]

to Yes. No, I think that's right. I mean the majority of the potential exposures in maintenance, the newer fleet will help counter that. We will also see potentials from IT spend and other components of the business, but that's our job to offset those things and we'll continue to do that.

[Analyst]

Great color. Thank you.

[Operator]

Our last question today will come from Dan Levy from Barclays. Please go ahead. Your line is open.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Hi, good morning. Thanks for squeezing me in.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Let me

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

just first start with a question on second quarter. You said second quarter was EBITDA breakeven. You're talking about $300 DPU. But to hit breakeven, I think you still need to have RPD to be down only slightly. And I think you talked to some softness in early April.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

So what's line of sight to improved RPD? And just remind us again on when that mix benefit comes through on channels and customers.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Dan, this is Sandeep here. So, I think the the mix benefit is, it's an ongoing effort from our end. Right? That's not a point in time benefit. That's that's something that we'll we'll drive.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

It's a journey that we're taking that will drive continuous improvement, but ongoing improvement in terms of how we channelize our our mix. Right? And the the RPD component. Right? You you you got it accurately.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

Right? The April, I think I'd mentioned the softness from an RPD perspective. RPD overall, we see it progressively improve as we get into the summer piece. I think the overall story on that is yet yet to be told. Right?

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

We generally have a short booking, window. It's a majority of that is within thirty days. So, we are progressing towards that. What I've seen is a stabilization in the rates. I've seen a stabilization in in the demand profile, coming through in the last few weeks.

[Sandeep Dube, Executive VP & Chief Commercial Officer at Hertz Global]

So there's been stabilization. But, yeah, there's uncertainty in in the environment, and we have to see it, play through.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Okay. Thank you. And then just as a follow-up, touching on one of the prior questions. So appreciate the commentary that you're depreciating at sub-300x gains. But can you just remind us how you would approach those gains how you would approach stronger residuals and flowing those through the depreciation?

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Or would you rather wait until you're actually disposing the vehicles and then take the gains there. So it's just when when would you recognize those benefits in depreciation?

[Scott Haralson, Executive VP & CFO at Hertz Global]

Yeah. Hey, Dan. This is Scott. I'll I'll talk a little bit about depreciation, but, you know, some of the stuff is a bit sensitive, so I won't give too many details. But as a general rule, we're going to sort of mark to market the fleet.

[Scott Haralson, Executive VP & CFO at Hertz Global]

And so we'll do that. And we have parameters by which we do that. But we do take gains in the period by which we sell vehicles. But our depreciation will move a bit as the market moves. Now maybe a little bit of a lag as the indicators and those parameters get flushed our accounting system and how we think about those things.

[Scott Haralson, Executive VP & CFO at Hertz Global]

But generally, it will move in tandem with the market for the most part, but at a lag.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Okay. Thank you.

[Operator]

This concludes the Hertz Global Holdings first quarter twenty twenty five earnings conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Johann Rawlinson, VP, IR
• Gil West, CEO
• Sandeep Dube, Executive VP & Chief Commercial Officer
• Scott Haralson, Executive VP & CFO

Analysts

• Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.
• John Babcock, Analyst at Bank of America
• Chris Woronka, Analyst at Deutsche Bank
• John Healy, MD & Research Analyst at Northcoast Research
• Lizzie Dove, Vice President Equity Research at Goldman Sachs
• Stephanie Moore, SVP - Equity Research at Jefferies
• Analyst
• Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank