On November 12, 2024, Hertz Global Holdings Inc (HTZ, Financial) released its 8-K filing detailing its third-quarter 2024 financial results. The company, a prominent player in the vehicle rental and leasing industry, operates through well-known brands such as Hertz, Dollar, Thrifty, and Firefly. Despite its efforts to transform and streamline operations, Hertz reported a challenging quarter with revenue and earnings falling short of analyst expectations.
Performance Overview and Challenges
Hertz Global Holdings Inc reported a revenue of $2.6 billion for the third quarter of 2024, a 5% decrease from the $2.7 billion reported in the same period last year. This figure also fell short of the analyst estimate of $2,695.59 million. The company faced a GAAP net loss of $1.3 billion, translating to a loss of $4.34 per diluted share, significantly missing the estimated earnings per share of -$0.25. The results were heavily impacted by a $1.0 billion non-cash asset impairment charge, primarily due to declining fleet residual values.
Financial Achievements and Industry Context
Despite the challenges, Hertz maintained a corporate liquidity of $1.6 billion as of September 30, 2024, which is crucial for sustaining operations and supporting its strategic initiatives. The company's focus on maximizing revenue per unit (RPU) led to a relatively stable revenue per day, although it resulted in volume declines in lower-yielding channels. This strategic shift is part of Hertz's broader effort to enhance operational efficiency and reposition itself within the competitive vehicle rental industry.
Key Financial Metrics
Hertz's adjusted net loss stood at $208 million, or $0.68 per diluted share, compared to an adjusted net income of $230 million in the prior year. The adjusted Corporate EBITDA was negative $157 million, a stark contrast to the positive $359 million reported in the same quarter last year. The increase in vehicle depreciation, which rose by $436 million, was a significant factor contributing to these results.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenues | $2,576 million | $2,703 million | -5% |
| Net Income (Loss) | $(1,332) million | $629 million | NM |
| Adjusted Net Income (Loss) | $(208) million | $230 million | NM |
| Adjusted Corporate EBITDA | $(157) million | $359 million | NM |
Analysis and Commentary
The third quarter results underscore the challenges Hertz faces in its ongoing transformation. The significant asset impairment charge reflects the volatility in fleet residual values, a critical factor for vehicle rental companies. The company's strategic focus on premium revenue per day business, while beneficial for long-term profitability, has led to short-term volume declines.
In the third quarter, we continued executing on our efforts to implement our transformation, focusing on our back-to-basics strategy to deliver sustainable, long-term returns for shareholders," said Gil West, Hertz CEO. "Our team’s commitment to both our customers and our strategic objectives were evident throughout the summer. This dedication is reflective of our ongoing endeavors to improve operational performance and reposition the Company to achieve against its value proposition. There is still work to be done, but I am confident that the enhancements achieved over the course of this quarter demonstrate that we are on the right track."
As Hertz progresses with its operational transformation, the company aims to complete its fleet rotation by the end of 2025, which is expected to normalize depreciation per unit to under $300. This strategic initiative is crucial for improving cost efficiency and enhancing the company's competitive position in the vehicle rental market.
Explore the complete 8-K earnings release (here) from Hertz Global Holdings Inc for further details.
