Joe Ferraro: Sure. I think there’s the strong demand that we’re seeing mostly coming out of the Americas in the last year and the year prior to that. So there is this demand curve that we are seeing, which causes us to have a lot of cars that we put on the road. And once you have a lot of demand, we have these — we have our system, which is DFP. It’s our proprietary system, which kind of measures, forecasting and prices in the marketplace and the amount of inventory that we have and gives us our best optimal price. One thing that I’m pretty pleased with is the fact that for the past 11 quarters, our pricing has maintained at a level above 2019. Now that’s a long period of time. And during that period of time, obviously, there was the supply imbalances in the early years, post-COVID that created enormous rate generation.
That is normalized and seasonality is certainly more apparent. I think as we go forward, you’re going to see those elevated prices compared to 2019, I look at our advanced reservations going out, that hasn’t seemed to change, certainly from a leisure standpoint. And if you think about our sometimes not spoken about our commercial book of business, which has grown since 2019. I know a lot of travel companies are talking about that getting back to 2019, but our commercial business has grown since 2019. And especially on the strategic ones, which are long-term larger commercial business have all come with a relative price increase. So the way I see it, the first quarter kind of be like a little more of the same as how we were compared to 2019, I fully expect the prices compared to ’19 to be elevated.
And I do believe that once we get into the peak, we continue to do what I said earlier about rationalizing and rotating our fleet out that it gets close to the 2023 levels.
Chris Stathoulopoulos: Okay. And as a follow-up, for you, Joe, or perhaps Brian or both. There’s a lot of moving parts here around these various enterprise-level initiatives. If you could perhaps just size those for the top three or five projects rank order and KPIs and more importantly, how do we — where and sort of how should we think about those ultimately flowing through RPD and your direct operating costs. Thank you.
Joe Ferraro: Yeah, thanks. Yes. I’ll start and Brian can add a little color. We’ve been talking about using the word transforming over the past number of calls. We’ve been heavily involved in generating efficiency in our business through an operational drop-throughs through cost efficiencies. We spent an inordinate amount of time looking at our productivity systems and how we developed and improve the amount of rate of efficiency, especially as it pertains to cleaning and renting cars. If you look at our overall performance, our productivity is better than where we were in 2019 with many more rentals. So I think we’ve established the framework of that level of activity. When you think about our in-life vehicle maintenance-related costs is in general.
As we de-fleeted as I talked earlier about rotating some of our fleet out, as we de-fleeted some of our age and mileage cars, we’ve seen a definite improvement in how we organize around our in-life maintenance-related costs, also with differentiators and processes and procedures to organize around particular spend as it pertains to tires and glass, vehicle parts and things of that nature. So we’ve done that. We’ve been proved by overall operating efficiency of our systems. And I think what gets me excited about the Brian role, and I’ll turn it over to him, is that we no longer what do we believe is our people need to be data miner. And Brian talked about earlier, getting the information, the technology, the data in front of them makes all boats rise at the same level and allows them to do what they do best, and that’s operationally execute.
So you’ll see a continuation of that and a more normalization around our business. While we get into some of the other things that deal with revenue generation through advanced segmentation or fleet dynamics on how we buy and purchase and sell cars. I hope that helps. Brian?
Brian Choi: Yes. I think Joe touched on all of it. Just maybe a little color I would think of the big towers that we have on our operational cost funds as being the initial focus of the group. So think of supply chain, workforce planning and our real estate portfolio. And these are big buckets of cost that you see inflationary pressures. And what we need to do is have 100% visibility and have that disseminate across our organization so that our operators can make timely business decisions. And you’ll see our focus around that. Kind of dovetail with the revenue side of things as the year progresses. But right now, we’re focused more on the cost side of things. And in terms of sizing it, we’re not getting into putting out numbers out there right now.
Chris Stathoulopoulos: Okay. Thank you.
Operator: Thank you. Our next questions come from the line of Ryan Brinkman with JPMorgan. Please proceed with your question.
Ryan Brinkman: Hi, great. Thanks for taking my questions. I wanted to start on some questions around the typically negative income tax rate in the quarter and any benefits you might have received from the Inflation Reduction Act that could have contributed to that. What is the potential do you think to maybe continue to generate such credits in the future? How does the timing of the credits work? I think when consumers buy EVs under the IRA is essentially like a refundable credit extended at the time of the purchase, but for corporates, maybe it’s more of a traditional credit. And so maybe results initially an increase to deferred tax assets rather than immediately convert to cash, but would be interested if you have any of the details around how the mechanics of that works? And then how should this inform our modelling of tax rate do you think going forward? Thanks.
Izzy Martins: Hi, Ryan. It’s Izzy. Thank you for the question. I think there’s a lot there to unpack. So let me just start with what happened in the fourth quarter. So as you mentioned, the Inflation Reduction Act does allow us to take credits on hybrids and EVs. And the other piece that’s happening that’s kind of not as one-for-one is the fact that full expensing is phasing out as of right now, right? There’s still a chance that the government reassesses that and brings back just full expensing. But in 2023, it starts phasing out. So as we were going through the years, not only the current year, but the future years, we felt it was prudent to actually record that credit. Now you hit the nail on the head. It is a deferred tax asset.
So it has an indefinite life. We won’t use it in the current year, most likely, but we have the ability to use it in future years. When it comes from a modelling perspective, I think the best way to look at it and when we file our K, you’ll see it. But I think the best rate to model would be around 26%. For ’23, and I would say for ’24, it should hover around that maybe up one or two points. I hope that was helpful.
Ryan Brinkman: Very helpful. Thank you. And then just as a somewhat related follow-up. Do the benefits that you’re receiving relate more to the purchase of plug-in hybrid electric vehicles rather than battery electric vehicles with no internal combustion engines? What is the split there in your EV fleet now between BEVs and PHEVs. And what kind of residual trend are you seeing out there for PHEVs versus BEVs? Because there’s been a lot of discussion about growing demand for hybrids amidst decelerating demand for EVs. And I just wonder if maybe you sidestep some of that EV depreciation exposure that your competitors have seen benefiting from the IRA but not being hurt by the depreciation via your BEV strategy? What could you say there?
Joe Ferraro: I’ll just start and then I’ll throw it over to Izzy for more of the depreciation aspect. I will tell you that we have vehicle makes models of all types and especially around the hybrid PHEV. So we it’s really early on those. We’ve gotten those in late during this past year. I can tell you the customer acceptance on them is pretty strong. But I think it’s early for us to kind of give a feel of how they are doing, whether it be from a residual value effect because we haven’t sold many or a supply chain effect as far as maintenance damage.
Izzy Martins: And Ryan, none of those, call it, mix or anything of that nature would have any impact as to how we calculate the credit under the IRA.
Ryan Brinkman: That’s helpful. Maybe just very finally, I wanted to get your thoughts on budget trucks as it might relate to electrification. Obviously, very early days there, too. But with vehicles like the E-Transit and BrightDrop beginning to enter, there’s been more discussion about those being in commercial fleets that operate in the same paths or routes every day. Just curious what any implications, maybe it makes more sense to proceed slowly there after some of the depreciation we’ve seen on the pass car side. But I do think the commercial side might be a little bit different. Just curious how you’re thinking about electrification as it relates to budget trucks.
Joe Ferraro: Great question. We normally get a question about that. But our budget truck business has — a large part of it is last-mile delivery. And you’re very right about, is there a business aspect to having some electrification of vehicles in that business. To answer your question, we have explored it. We have some in our fleet currently today. And like we explored the EVs in the rental fleet, it’s a little — this is a little bit different because you actually know the consumer who’s renting it for you. It’s a large package companies that go out and have skilled at managing their productivity and their teams. The only thing that we always look for in scenarios like that, they do operate in somewhat urban settings. So we are prudent about that.
But we have we have some in our fleet now, and we have explored that. And so far, the acceptances from a consumer — from a business standpoint, people are renting is pretty popular. Again, early on outside cost, but we haven’t really seen anything materialize that I would be apprehensive about currently.
Ryan Brinkman: Great. Thank you.
Operator: Thank you. Our next questions come from the line of Chris Woronka with Deutsche Bank. Please proceed with your questions.
Chris Woronka: Hi, good morning, everyone. And yes, congratulations to Brian and Izzy on the new roles. I was hoping we could talk a little bit about, I guess, mix, Joe. You mentioned normalization a lot. Clearly, we’re kind of seeing it throughout the business. Can you give us any sense kind of on where you were you trended through the fourth quarter, where you’re at now or where you expect to be in ’24 on kind of commercial versus leisure broadly? I know it’s something I think you normally put in the K, which isn’t out yet. So maybe any commentary you can give us there? And kind of what you see like-for-like pricing if we took all this mix adjustment away.
