Hertz Q1 2025 slides: Sequential EBITDA improvement amid continued revenue challenges

Introduction & Market Context

Hertz Global Holdings (OTC:HTZGQ), Inc. (NYSE:HTZ) presented its Q1 2025 earnings results on May 13, 2025, revealing sequential improvements in key metrics despite ongoing revenue challenges. The company’s stock faced pressure in premarket trading, down 6.34% to $6.50, as investors digested the mixed results against the backdrop of the company’s strategic transformation efforts.

As a global leader in car rental with over 100 years of operations, Hertz maintains approximately 11,200 locations across 160 countries, generating $9.0 billion in annual revenue from a fleet of approximately 560,000 vehicles. The company serves approximately 25 million annual rentals through its portfolio of brands including Hertz, Dollar, Thrifty, and several international subsidiaries.

Quarterly Performance Highlights

Hertz reported Q1 2025 revenue of $1.8 billion, representing a 13% decrease compared to $2.1 billion in Q1 2024. Transaction (JO:NTUJ) days fell 8% year-over-year to 33.9 million, while Revenue Per Day (RPD) decreased 5% to $53.38. The company’s average fleet size contracted by 8% to 505,000 vehicles, reflecting Hertz’s strategic fleet optimization efforts.

Despite these declines, Hertz demonstrated significant improvement in several key metrics. Notably, Adjusted Corporate EBITDA improved to a loss of $325 million, compared to a loss of $567 million in Q1 2024, representing a 43% year-over-year improvement. Vehicle utilization increased by 240 basis points to 79%, and Depreciation Per Unit (DPU) decreased dramatically by 40% from $588 to $353.

When compared sequentially to Q4 2024, Hertz’s performance showed mixed results. While revenue declined 11% from $2.0 billion and transaction days fell 6%, Adjusted Corporate EBITDA improved by 9% from a loss of $357 million in Q4 2024. Direct Operating Expense (DOE) per transaction day also improved sequentially, decreasing 4% to $37.59.

Strategic Initiatives

Hertz outlined three key building blocks of its strategy aimed at driving performance improvement. The company is targeting DPU under $300 through fleet refresh and rotation out of high-priced vehicles, with MY25 deals supporting this target. For unit revenue, Hertz aims to achieve RPU over $1,500 through leveraging durable demand, removing low-yield RPD, improving technology, implementing dynamic pricing, and eliminating waste.

On the cost side, the company is targeting DOE per Transaction Day in the low $30s through operational excellence, improved procurement, footprint optimization, workforce management, and technology enhancements. Hertz expects these initiatives to contribute approximately $1.8 billion to Adjusted Corporate EBITDA in 2025, with DPU improvements accounting for $1.5 billion of that total.

These strategic initiatives align with comments made during the previous quarter’s earnings call, where CEO Gil West emphasized turning the fleet "from a headwind to a tailwind for the business." The significant 40% year-over-year reduction in DPU suggests this strategy is beginning to yield results, though revenue metrics continue to face pressure.

Debt and Liquidity Position

Hertz reported a solid liquidity position of $1.2 billion as of March 31, 2025, including $626 million of unrestricted cash and $549 million available under the First Lien RCF. The company has extended $1.7 billion of First Lien RCF commitments to 2028 and completed extensions of U.S., Europe, and Canadian vehicle debt facilities.

The company’s non-vehicle debt maturity profile shows minimal maturities in 2025 ($13 million) and 2027 ($18 million), with more significant obligations in 2026 ($652 million), 2028 ($2,362 million), and 2029 ($2,511 million). Hertz believes it has access to an additional $500 million to $1 billion of near-term liquidity levers, including fleet and other debt financings.

Forward-Looking Statements

Looking ahead, Hertz is focusing on executing its three-pronged strategy to improve financial performance. The company’s target of RPU over $1,500 represents a significant increase from the current $1,264, suggesting substantial revenue optimization opportunities. Similarly, the target for DOE per Transaction Day in the low $30s would require continued improvement from the current $37.59.

The expected contributions to 2025 Adjusted Corporate EBITDA—$1.5 billion from DPU improvements, $200 million from RPU enhancements, and $100 million from DOE/day reductions—indicate management’s confidence in the strategic roadmap. However, these targets come against the backdrop of challenging market conditions, as evidenced by the premarket stock decline.

Hertz’s Q1 2025 results reflect a company in transition, with sequential improvements in profitability metrics despite continued revenue challenges. The significant reduction in depreciation costs demonstrates progress in fleet optimization efforts, while the solid liquidity position provides financial flexibility as the company executes its strategic initiatives. Investors will be watching closely to see if Hertz can translate these early signs of improvement into sustained financial performance throughout 2025.

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