John Healy: Thank you. And Brian, congrats on the transition here and Izzy as well. Just wanted to ask a question about the plans to kind of defleet in Q1. The $325 in depreciation expense, is that a global number? And how do you see that number kind of faring compared to what you expect as we roll throughout the year? Are there some step-ups because maybe you’re selling cars sooner? I’m just trying to understand that $325 number because it just seems like a big step-up from where we were.
Izzy Martins: Okay. This is Izzy. Thank you for the warm welcome. So you’re right. When you went through the prepared remarks, actually, Joe mentioned that the Americas per-unit fleet costs were $306 at the end of the fourth quarter. I mentioned that on a total company basis, I expect us to be closer to $325 per unit. We also said that our fourth quarter gains were around $50 million, which is about $180 million or 60% reduction despite the fact that we sold a lot more vehicles in the fourth quarter. So the way I would think about it for 2024 is that our gross depreciation and our net depreciation should align. Now your question about is that a huge step-up I don’t expect as the exit trend being closer, call it, the lower $300s, but in excess of the $300 that we had been saying over time, I expect it to get to $325 and may not get to that $325 level by the end of the first quarter.
But I think the more important thing is I do expect the gross and net depreciation to be more in alignment.
Joe Ferraro: And John, let me just jump in here. Let me just jump in here for 1 second and just give you some strategies behind it. When you think about managing fleet in the long term, fleet rotation is extremely important. How you buy cars and deliver them into your business and then exit cars out at the proper time at the right place is extremely critical. And I think over the long haul, when you think about buying and selling, one of the more important and overlooked aspects is how you rotate your fleet because it allows you to have or maintain a certain age level or mileage level that is both operationally prudent from an efficiency standpoint as it turns out to be in light vehicle costs as well as from a customer acceptance.
And we’ve been doing that. I mentioned that throughout the entirety of last year, how we were rotating our fleet, thinking about how where we came from in post pandemic where the cars there were shortages of vehicles and the agent and mileage was getting up there. It was important to rightsize, and we will continue to do that even into the first quarter. And frankly, the way I look at it right now, we are going to get our fleet levels down as we continue to go from the first quarter, potentially into the second until we get to the peak
John Healy: Got it. Makes sense. And then a question for Brian. Just I was hoping, Brian, if you could give us maybe some color on kind of early day learnings about some of the initiatives or efforts that you’re trying to execute upon a way to maybe conceptualize the areas of the business that are the first set of priorities for you? And any way to think about the totality of maybe cost savings potential?
Brian Choi: Sure. John. So Joe highlighted a bit about the role during his prepared remarks, and I don’t have too much more to add at this time. At a high level though, let me describe it this way. I firmly believe that our teams are best at what they do given the resources that they have available. And I think our results have reflected that over time. But if we’ve modernized the tools at their disposal, if we rearchitected key functions of the business from a first principles perspective, that fully leveraged technology and data available to us today, I think our operators would deliver a step function improvement in productivity and efficiency. And that’s what the group here is going to be focused on providing resources to our teams that are embedded in the day-to-day workflow processes to make them even better at what they do.
Let me preempt kind of future questions on this. For competitive reasons, we won’t be providing regular updates on this going forward. We’re going to take the same communication approach to this function as we did with our EV group a few years ago. I would just say we’ll let our actions and outcomes speak for themselves.
John Healy: Got it. Thank you guys.
Operator: Thank you. Our next questions come from the line of Adam Jonas with Morgan Stanley. Please proceed with your questions.
Adam Jonas: Thanks, everybody. And congrats, Izzy and Brian. So your net vehicle suite is around $30,000 a per unit, then I’m using your average 4Q fleet. So just — I’m using the $700,000 number on that versus $19,000 in 2019. So carrying costs divided by fleet size, and that might not be the perfect metric, but just bear with me. It’s up 60% from 2019 to 2023. But yet your fleet cost guide is up less than half that kind of into the low $300s. So why wouldn’t depreciation per unit fleet cost per unit mean revert closer to $400 and $300 or continue to err on the side higher, given just the massive growth in the carrying cost per unit on your books. Thanks. I have a follow-up.
Izzy Martins: Hi Adam, it’s Izzy. Thank you for that question. I think what we see right now, given the increase to the $325 that we’re seeing, I don’t disagree that as time progresses, as you know, we evaluate our monthly depreciation actually depreciation rates on a monthly basis. So if things change, we will be changing. But based on our — what we’re seeing right now, the $325 is what we expect in the near term for 2024.
Brian Choi: Adam, just to add to that, sorry, this is Brian. Yes, the carrying cost is up 60% higher. So where we’re buying the cars is more expensive. But what we’re selling the cars is higher as well and depreciation reflects kind of that total carrying cost. So you won’t see a one-for-one step up that way.
Adam Jonas: Okay. Thanks, Brian. Just a follow-up. Hertz has really struggled with collision and repair challenges with their EV fleet. Now obviously, there — I know you don’t disclose the EV fleet and you’re not going to do that on this call. And I respect that there are a multiple higher than you in terms of the intensity of that fleet particularly relative to the infrastructure. But how much of that would you — are you kind of, let’s say, confronting some of the similar challenges on collision and repair? And if so, how much of a headwind has that been for you? And how are you mitigating it?
Joe Ferraro: Thanks, Adam. This is Joe. Let me just say this. We haven’t experienced any out-of-the-norm headwinds as associated with our EV supply chain and maintenance-related issues. I think if you think about what we tried to do with EVs, when I was visiting and talking to our OEM partners, back in 2021, they all talked about how there was going to be a larger portion of EVs coming in our — on our future buys. And I left those meetings thinking that we had a first and foremost, figure out how we were going to charge them. If you think about providing a vehicle to a consumer, you can’t provide a vehicle without gas and you certainly can’t provide a vehicle in this time without a charge. So we spent a lot of time doing that.
And then we dealt with a lot of OEMs. So we wanted a varied approach to fleet like we do with ice cars. We think it has a material benefit on supply chain or maintenance and damage related expenses over the long haul. It insulates us from recalls that may pop up from time to time, and it gives customers a more diverse product offering. We were watching what the demand curves will like from buying new car EVs versus gas cars. And there was uncertainty from us and from a rental standpoint about what demand would really be like in the rental environment because it was clear that people were buying them and charging them at their homes, but what was it going to be like when they took a car out on the road. And part of our strategy was to align and try to get as many of these rented at our airports in the places that would develop like the West Coast and more of the sunshine states.
So we went in a — like we do regular cars, more of a conservative approach on how we wanted to buy them, how many we wanted to have, while learning the logistics around what happens with them, how long it takes to charge them and get them ready for rental, the maintenance and damage associated with products and tried to rent them in segments that had the best possible drop through. I hope that helps. And you’re right about your earlier comment. It’s not a meaningful part of our fleet size.
Adam Jonas: Thanks, Joe.
Operator: Thank you. Our next questions come from the line of Chris Stathoulopoulos with SIG. Please proceed with your questions.
Chris Stathoulopoulos: Good morning. Thanks for taking my question. So the Americas RPD. I get the comp issue last year with the operational challenges experienced by some of the U.S. airlines here. But could you perhaps expand or give a finer detail on how core pricing track through 4Q and how it’s tracking into 1Q so far? Thank you.
