Hertz Global Holdings, Inc. (HTZ) Earnings Call Transcript & Summary

Okay. Great. Once again, I'm Ryan Brinkman, the U.S. autos analyst at JPMorgan, ready to get going with our next session. Very excited to have here Hertz, and their relatively new Chief Executive Officer, Stephen Scherr. Stephen, thanks so much for making it to the conference.

Thanks for having us. Appreciate it.

Absolutely. I thought a good place to start might be with what is the very latest that you're seeing out there in terms of the traditional summer travel season. I think that your business has a lot of insight into the consumer, the health of the consumer, the confidence of the consumer and their plans in advance relative to travel. What do you see?

Great. Well, I would say that at a headline demand remains very strong. We don't see through the lens of our business weakness in the consumer. In fact, quite the contrary. -- the consumer continues to spend considerably on leisure. And we're seeing that across a range of different geographies. So, in the U.S., leisure travel remains strong. not all demand is as attractive as others, but we're seeing quite considerable demand at very attractive rate and seeing it across all parts of the U.S. So in other words, the Northeast in the summer, as you would expect, is quite busy. Same with the Midwest and what we're seeing in the U.S. business, particularly on the West Coast, is beyond just domestic travel, we're seeing growth in inbound travel, particularly among Japanese and Korean tourists. By contrast and interestingly and maybe by virtue of the fact that visas are tough to come by for Chinese tourists who want to make their way to the United States, we've seen considerable traffic among Chinese tourists for demand in the summer in our European business, which takes me to the European business, where the summer has been very, very strong on the demand side amidst a very stable, if not slightly up rate environment even that which we anticipated. We're seeing Chinese tourists come in to Europe. We're seeing considerable leisure travel. Our business at the airports in Europe is strong, largely on the back of U.S. travelers who are making their way to a variety of European destinations. The last thing I would say on the European business is that I think summer extends into September and potentially beyond, meaning the forward, if you look at bookings, which are on a forward more reliable than ours, particularly around airlines, the airlines are continuing to show fairly elevated traffic into Europe from the U.S. And obviously, these flights are coming back to the United States quite full, not just with European tourists or U.S. returning tourists, but European tourists who are coming. So the inbound travel both from Asia, which is growing and the U.S. business is really strong.

That's interesting and encouraging color. Maybe just a follow-up on that relative to -- I always hear you talk about the international inbound. You just mentioned U.S. tourist in Europe. I don't hear the rental companies talk about that as much. Maybe it's less important because you're more likely to rent a car maybe in the U.S., use public transit in Europe, I'm not sure. But I did see those headlines about the European Union potentially requiring a Visa for Americans to visit. And it's going to be easy to obtain visa, I think. Nevertheless, I feel a little bit myth, can't go to Paris without a visa. Could that deter some people from going? What do you think?

I mean listen, theoretically, it could deter people, but I've read it the same way you did, which is the process is meant to be a bit of a perfunctory one, easy to obtain. You can be assured that the airlines that are transporting those travelers will make it easy and convenient to obtain the visa to come across. For our European business, based on the traffic that is coming from the United States to Europe, we're seeing, as I said, in response to your first question, very elevated utilization in Europe, which is really quite encouraging. I would say just to the broader question of the consumer, we have all been reading probably now for the better part of 3 or 4 quarters of the potential risk to consumer fall off, and it simply hasn't materialized. The cliff, if you will, that everybody had assumed the consumer was going to fall off, and we would see demand sort of fall away has simply not happened. And you could debate whether that's a reflection of the broader health of the consumer, which I suspect it is. I do think that we're well past revenge travel as a pattern and what this is illustrating at least to us is perhaps more permanent or long-lived sort of shift to experiential spending on the part of the consumer as opposed to spending on hard goods. But in all, the demand remains quite strong, and the health of the consumer through the lens of our businesses is healthy.

Great. Maybe moving from the consumer, the leisure traveler, the individual to the commercial customer. Because I think when we did have that revenge travel after Omicron, we were basically all the way back with the consumer. But there's a sense that I think that the corporate travel still has a way to go. Where do you think we are in terms of the normalization of corporate travel? And is there potentially a new -- Zoom is requiring the workers to come back to the office, right, but is there potentially a new normal with work from home, et cetera?

Well, it's always hard to make a spot judgment when we're talking about corporate as we enter the middle part of August. So I wouldn't render a judgment on where corporate business is going based on August itself. Having said that, we are about 80% back to where corporate business was. Now bear in mind that in the bankruptcy and the reorganization, we pulled away by design from about 20% to 25% of the corporate business that we had in part because we didn't see it as profitable business or business worth pursuing. So the notion that we're back as far as we are relative to the '19 levels, speaks to an elevated level of engagement on our part on the corporate side. I read an interesting Deloitte study that said that while corporate business was generally back in the 70% to 80% range, their view was that over the next 2 years, it would revert back to close to 95% of where it had been. If, in fact, that happens and I have no reason to believe it won't, then this will be of benefit to us in the context of the presence we have in the corporate space. And what we have been trying to do since I arrived, having shed ourselves of some of the unprofitable corporate businesses, look at that business in a very different light with the rigor of ensuring that we're not simply grabbing days and volume and running you high, but we're doing it at a profitable engagement. The other thing I would say about our corporate business, perhaps uniquely is that we're seeing continued growth in the utilization of electric vehicles in the corporate space. This is where companies are looking to satisfy not just the base need for an employee to be in a rental car, but satisfying certain sustainability objectives that they have and putting their employee in an electric vehicle. I'll just tell you, anecdotally, we engaged, I engaged in a series of letters and e-mails with the CEOs of most of our major corporate clients. And in that, I engage them in the proposition that, in fact, the EV did present an interesting opportunity for them to sort of satisfy sustainability objectives, which have been always elusive and the SEC has obviously been on everyone on the veracity of those claims, but this was a very real way to satisfy that. And I think without exception, we have seen in companies with whom we've engaged, a pickup, literally just in the last month or 2 around the take-up of EVs in the component of business. And so I think that's an edge that we will continue to sort of pursue in the growth in our corporate business.

Yes. That's very interesting. I mean, of course, when they release these corporations, their sustainability reports, it could help them with their metrics and whatnot. But it's also a very visible right? When employees -- all JPMorgan employees traveling around in electric vehicles, visiting clients in electric vehicles, right? That's interesting.

Well, JPMorgan was certainly one of the companies that we engaged in. And I think it is visible, but I think to those that run these sustainability objectives inside an organization, having done that in my prior life, you are looking for real and tangible ways to do this because you're otherwise subject to criticism on those that are less measurable and less tangible, and it becomes very obvious if we are renting EVs to you instead of combustion engine cars, what that means, like tangibly what that means in terms of numbers for the corporate customer.

Goldman Sachs, I hope, too, has rented vehicles from Hertz these days?

I believe they are.

Let me ask one follow-up.

At elevated rates, I meant.

Elevated rates? On the commercial demand, but also, yes, your unique kind of commercial exposure because there's also that American Express Global Business travelers contract or relationship. Maybe you could delve into that a little bit there, how that sort of small and medium businesses kind of complement your more larger corporate relationships? I think around the time of the IPO, there was a discussion that it could be a pretty material driver of earnings when corporate travel came back even $100 million. There was some float of even more contribution of EBITDA. What have you experienced so far? And what do you think the ultimate potential is of that relationship?

Well, I would say perhaps the most interesting part of that relationship is on the back of their acquisition of Egencia, which played to small and midsized businesses. Because bear in mind, we have a sales force that is engaged and that benefits from Amex GBT more broadly around large corporate clients that sign large corporate contracts with prescribed rate and days and the like. What Egencia brought to Amex GBT -- and we've taken quite a large market share in it is an entree into small and midsized businesses that use Amex GBT through that, that we would have more of a challenge in its absence to gain access to. This is now putting us in square into that small and midsized business at rates that we're obviously setting and prescribing. We see the take-up as being large customer acquisition through that channel is an attractive one. You're not deploying a more expensive sales force to do it. And so I think what we're seeing around that is really quite positive.

Great. I thought to ask on electric vehicles. You touched on it already. I mean, Hertz has been a clear leader there. It included really ever since that first announcement, and I'll never forget, I guess it was probably November of '21 that you would buy 100,000 vehicles from Tesla. I won't forget because I was about to reinitiate on Hertz. Your cap went from euros 10% cap went from $10 billion to $11 billion that day, but I also cover Tesla, and I have an underweight rating on them, and they rose 10%, taking the cap from 100 -- from $1 trillion to $1.1 trillion, an increase of $100 billion on the announcement that you'd buy $4.2 billion of vehicles from them. So that's etched in my memory. Maybe just update us on that?

I can assure you our intent was not to frustrate your call on Tesla.

Thank you. Maybe just update us on how many Teslas do you own now? And you also discussed on the last call, diversifying the EV portfolio, getting more of the Polestar in GM vehicles. Maybe you can update us on those relationships, too. And then what has been the early economics on EVs? I know that they're contributing really quite nicely to the revenue per day. But there was some talk to on the last call about -- I know the maintenance is lower, but some of the repair costs could be elevated. So just wanting to kind of net it all together what's the economic contribution from EVs?

So just by the numbers, we are now at about 40,000 Teslas, obviously, with room to grow and buy in the context of 100,000. We're probably halfway through in the commitment around Polestars, which was about 65,000. And I think the piece that is really most interesting to me is the prospect now of beginning to take delivery on the first cars in a 175,000 electric vehicle purchase that we will make over 5 years with General Motors. I'm focused on the GM component of it for a couple of reasons, which tie into elements of your question. First of all, I think just as a general matter to offer our customers more choice and to give us diversification against over-indexing to any one particular manufacturer is inherently a good risk objective for us to pursue. Secondly, I think the GM cars will come across a wide range of makes and models and cost points, which will also give us considerable diversity and choice for the customer. On the cost side, I would say that the challenge that we have had with Tesla is that they are obviously, a younger company, they don't have what GM has. What GM has is a very broad, well-worn part supply and we don't need one bumper for a model car. We need 1,000 of them. And the ability to sort of ascertain parts at affordable prices, but perhaps even more importantly, with speed around a company like GM that has a broad auto parts distribution will be of benefit to us. In terms of the overall sort of cost profile to running the EV fleet, I would say that maintenance is undeniably lower as had been forecast just in terms of day-to-day maintenance. I also think that length of keep around the electric vehicles will be much longer than what combustion engine cars are. And so we will, over time, begin to experience a flatter depreciation curve, a lower cost input to how we use these vehicles. And the idea is you could keep them for several years and re-kit the interior and not have sort of maintenance challenges and do that in a way that will suit us particularly in the context of the rental of those electric vehicles to Uber riders and rideshare drivers and the like. So the cost element will be attractive. The reference I made on the call, and this runs a little bit to sort of the cost analysis at the company generally, is that what we did experience, particularly in the rideshare and that we are addressing is elevated damage around certain of the electric vehicles and in particular, Tesla. This ran to the fact that parts are more expensive, repairs are more expensive and we've taken action to reduce that damage level down. We've done it in the way in which we underwrite to the drivers that we are renting these cars to, particularly in rideshare. So requiring a higher number of minimum rides before they're eligible to rent to Tesla or requiring that they have a certain point score above some threshold because these are better and more seasoned drivers. And we've even gone so far as to take certain actions with respect to the torque and the speed limitation on these cars because what happens is for an inexperienced driver, we experienced front-end damage because the torque is fast. And so these are some of the learnings that come with this. It is a -- it's an elevated cost that we had carried in Q2. I suspect we'll see it in Q3 but we have it in focus, and we know how to address it. And so that's an element of the cost sort of feature of those cars. Again, that will be less of a concern as we move to GM automobiles and I think less of a concern as we address this jointly with Tesla as well.

Very interesting. I didn't realize you could modify the torque like that. That's interesting. You mentioned Lyft and Uber. So let's talk a little bit about the transportation network, the TNC opportunity with regard to Lyft and Uber. A number of years ago, maybe back in '15, '16 as seen by investors as almost an existential threat to the rental car companies, which was probably always an erroneous take. But nowadays, I think it's obvious that you do a good business, right, with those longer-term rentals to the TNC drivers. What are the benefits to the drivers versus providing their own vehicle are the benefits for Hertz in terms of the revenue or the length of hold impacting depreciation? Is it maybe -- is it also like maybe a less cyclical business? What numbers can you maybe put around this for us? And would you say that Hertz is a leader in the TNC rental market?

Well, I think there's no question we're a leader just given the relationship that we have with Uber and the relationship we have with Lyft. It is a strategic irony in that, as you said, at the start some years ago when Uber got started, the view was that it would be a replacement for the rental car in places like Orlando and otherwise, and it's proving not to be that. People still enjoy the flexibility of a rental car and the mobility, whether on business or leisure. It is a really good and really strong growth area for Hertz. It doesn't run at a correlation of 1 to the RAC business, meaning we look at the RAC business as a business that will throw off really good returns. We can manage that business on a cash basis. We can improve upon that business as we are with respect to what we're doing around dollar and what we're doing in Europe. But I think the interesting aspect about the rideshare business is that it is a differentiated growth area for the organization. It is that by virtue of the cost elements that I described, particularly around electric vehicles. And obviously, we have an entry point for a driver at Uber, for example, of anywhere from $299 to $349 a week. That driver stands to take in or benefit almost $200 per week more in terms of incentives that are paid to them by Uber in addition to gratuities and in addition to a differential in charging relative to gas. So the customer, in this case, the Uber driver is benefiting by about $200 a week in the context of those 2 categories. That's a very strong incentive. Now what we're going to introduce as early as later this month or the beginning of September, is we're going to introduce kind of rewards, if you will, for the drivers to the extent that they keep the car for 5 or 10 consecutive weeks, there will be a benefit to that driver in terms of a free week or a partial week. This is not just to sort of gain attractive entry to the driver to get into a Tesla and drive that as part of what they do, but equally to extend out the length of keep because we're able to charge an implied lower RPD on that vehicle because the length of keep is measured in weeks and months. And therefore, the number of touch points around that car is lower. I would say, however, that the one or 2 other growth areas for us around this are what's going on in terms of regulation in New York City. So around regulation, by 2030, Uber and Lyft and frankly, all rideshare in cities like New York, L.A., San Francisco and others will be required to be all electric, okay? That's not a decade from now, that's 6-ish years from now. And the new car price, even though it has dropped, is still out of reach of most drivers there's unlikely to be a deep used car market around EVs by virtue of the longevity of those cars. And so we become the most affordable means by which drivers can enter the EV space and satisfy what Uber and Lyft are going to be subject to. So I think that the first mover edge, the unique relationship that we have and the impending regulatory requirements set up for continued and fairly consistent growth in that business. The second being New York City. This is the only city in the country that -- and it's a bit of a doughnut hole in that it requires TLC plates and the equivalent of a taxi medallion, which is a diamond to be affixed to our car. So we do not have, and no one has a significant presence in rental to rideshare in New York City. This is the largest market for those. Now the city is looking to go all electric by 2030. And I suspect there will be quite a bit of engagement in and around that. And again, to the extent that we stand as a viable and affordable means by which they can become electric, I'm quite optimistic about what that growth sort of value or growth proposition is for us, again, different than the RAC business. And all of this on the back of a flattening, i.e., lower depreciating curve, the longer we keep these electric vehicles. So the proposition becomes even more interesting over time both on a revenue and cost base.

Very interesting. Maybe looking down the road at the next generation TNC opportunity or what some are calling Transportation as a Service 2.0 or Mobility as a Service 2.0, TaaS, investors see that TaaS 1.0 is an opportunity. But what about when the cars drive themselves, right? And there's no drivers to rent the cars to? What do you see as Hertz' potential role in an autonomous robo-taxi world with your -- maybe your expertise in buying and selling vehicles, managing, maintaining repair and financing fleets, et cetera? What early experiments or partnerships have you may be explored so far in this area? And do you expect to be able to leverage your existing relationships with those TNC leaders as their business evolves?

Yes. Well, I must say, I mean, I always listen to anything as a service as a bit of an empty moniker that sort of suggests that it's ephemeral and that it's out there in the distance and it's ways in which you can leverage a network and the like. This is not -- this topic is not kind of out there as a theoretical in the distance. I mean we are engaged and in discussions with autonomous vehicle companies. We are in discussions with small and midsized businesses around the prospect of fleet management. This is what we do. This is what we are very, very good at. We have a real estate footprint just in the United States that touches or is in proximity to 90% of the U.S. population. As small and midsized businesses will either need to or want to go electric they will not want to engage in the sort of task of ensuring that they are all charged and ready to go, and they can own it, we can own it, they can rent it. This is an area that we are quite good at and are growing in our competency around electric vehicles by virtue of what we're doing with BP and others and understanding at a software and then at a physical level how you do this. And so I think that when you look at the autonomous side of the house, I would say that there are companies like Waymo and others obviously owned or influenced by Google, who have no particular interest in owning this fleet. There are other things they want from the fleet and I think that there's quite a bit of motivation for them to see this fleet owned and managed by others. And that other can be us and in fact, will be us. And I think part of what we're learning in managing a growing and sizable electric fleet, giving us a competitive edge as a first mover in it. is the knowledge and the idea and the cadence from how you in-fleet these cars to how you manage them, to how you charge them, to how you make decisions and choices around maintenance and the like that I think sets us up. Again, this is not tomorrow's business necessarily, but for a real play in the context of fleet management around electric vehicles.

Very interesting. You've spoken -- included on the last call about the underutilized potential of the Dollar and Thrifty brands about their ability to attract a younger buyer, a younger customer, maybe more interested in value than in renting the latest and greatest models like maybe a Hertz customer might expect. On the last call, you talked about the revitalization of the Dollar brand. What are your plans exactly for Dollar and Thrifty in what ways? And to what extent do you think you could use those brands to increase the earnings power of the company? How big of an opportunity would you say that this could be?

Well, I think it has the potential to be a big opportunity. I mean, credit to our competitor in terms of what they've done with their value brand, which, on any given day can often be larger than their main stake. And for us, I think that there's an offensive play in Dollar Thrifty and a corresponding defensive play, particularly around the price integrity of what we charge around Hertz. And the plan around Dollar and Thrifty is already in motion. First, we have redone the digital property, the dot-com for Dollar. Again, as I said on the call, the early days are proving positive in terms of conversion, in terms of revenue per transaction and in terms of our ability to sell digital value-added product on that. From that, we aim to sort of operationalize this. That is create a much better consumer journey. Think about it as version 2.0, which will be past the counter. It will be e-delivery of a rental agreement. It will be assignment of a vehicle. It will be QR code to pass through and the like. All of that's table stakes, but it's not irrelevant because right now, if you go on Expedia or you go on an OTA, level of satisfaction around budget is higher than it is for Dollar Thrifty, not surprisingly because we didn't put a lot of energy into it. As we improve that journey from the digital engagement all the way through to the return of the vehicle, our ability to charge a higher rate and not compensate for poor experience with a lower rate will be there. All the while, this will enable us to maintain strength in value -- in our prestige brand, which is Hertz. And in fact, just with the early introduction of Dollar and the new digital asset and against the demand that we are seeing in the market right now, this week, we've taken rates up on Hertz by about $5 a day or $25 a week. Again, having price meet what we are seeing and realizing in the demand component for our rental product, and with a defensive proposition that we can now use Dollar Thrifty to be the rate, if you will, against the value brand and not bring Hertz back into it. And so we'll see what happens with that rate, but I know Avis was here yesterday and talking about stability in the rate environment, I would agree with them. In fact, not only don't I see reason for rate to fall as they said, but we're taking an opportunity against a very strong demand backdrop in the summer to take our rates up and look to capture our fair share of business. But the distinguishing or the decoupling, if you will, of Dollar Thrifty, which will become more pronounced relative to Hertz will afford us that opportunity to, again, hold hard on the brand that people are looking for, for service and loyalty and points and so forth and are willing to pay a premium product for a better car as against a more organized approach toward Dollar Thrifty, which can be profitable and carry attractive margin at a lower RPD because we're running lower cost, older automobiles, because there is no choice, because we're able to sort of fulfill that obligation to that customer over time on a more digital and less human-intensive basis.

It does seem like a very promising opportunity. I wanted to check in on your approach to optimizing operations through automation. I read in an interview that you gave at a business conference, I think in Saudi Arabia, you described the rental car industry as being a sort of amalgamation of very complex math problems and saw the opportunity for more use of automation or even AI to better inform you as to the optimal approach to how much you should be pricing vehicles and where those vehicles should be and how long you should hold them, et cetera. It actually sounded somewhat reminiscent of what Avis has turned to their demand fleet pricing model, which their managers in the field, they say, have come to trust sometimes even over their own intuition and which they have, at times, attributed to their strong profitability and even higher than Hertz margin. My understanding was that Hertz was actually working on a similar system from the same vendor pre-bankruptcy, but that it was also very complex in terms of its implementation and maybe the firm moved away from it. So where do you stand currently on your regard for automating these different processes and other decisions? How much of an opportunity could there be? Does it require a full IT system, rework or not? And what kind of risks and opportunities are there involved with this?

Sure. Well, there's a lot there. Maybe I'll start with cost relative to the competition because it plays to an element of what we're investing in IT, which runs to revenue management and runs to fleet control. So -- when I look at a comparison of us and Avis, we ran at roughly a 10-point delta in EBITDA margin. I would say that about 50% of that would be attributable to scale, meaning they are running just a larger fleet through where we are. And we run on our cost base, roughly 30% fixed and 70% variable. So the mission we're on, obviously, is to tighten down on the fixed cost and reduce down kind of that delta, such that we can run more efficiently. The time horizon of doing that is going to be influenced by quite a meaningful spend that we are undertaking around IT that feeds the very nature of what you described. What played out pre-bankruptcy? I don't know if it was the same vendor as they used or not, but it didn't yield the type of technology and opportunity that I think this really presents to us. And so the 2 sort of variable, if you will, cost elements that we need to drive. One is the one I was talking about, which is damage and bring that down. And then I think there are issues around operational integrity relating to subrogation and the like, all of which are achievable are in focus, and we understand how to tighten that gap, which is, again, 50% related to scale and 50% IT damage and other operational elements. That brings me back to IT and the core of your question, which is, if you go to any of our managers that runs an airport, so go out to JFK, that person knowingly or unknowingly, is running a multivariable calculation every single day. They start off with a certain number of cars. They know how many are reserved and therefore will go out, and they know how many are scheduled to come in. But they don't quite know what the cadence of that is, and they rely too much on intuition and experience. So we are building with Palantir and other vendors sort of 2 tools. One is a revenue management tool and the other is what we're describing as a fleet control tower that is being knowledgeable about where your cars are, how they're moving, how that person in the field can -- is better equipped to think about the allocation of those cars over the course of the day, and obviously, how we optimize to the rate equation in the context of demand that is there. We're going to continue to invest in that. It's obviously a long-term investment. It comes alongside the migration of our entire sort of technology base from a data center to the cloud. And that we're probably 60% of the way through that journey. And I think some of the elevated IT expense that we're incurring will bleed off over time, but we'll start to bleed off in the back part of next year and continue down. And it will be a meaningful and consequential number when we get to where we are, not just by virtue of what the revenue will be on the back of these tools that you described, but equally on the cost base, both of running in the cloud but equally then not supporting multiple platforms, but only one that's cloud-based, API-driven and has the ability or enables us to be in a better position to run these two types of systems.

Very helpful. Thanks. And I think there's a broad sense amongst investors that rental car companies are over-earning given the degree of pricing and depreciation tailwinds recently. And you've also outlined there are a number of company-specific opportunities. So to sort of combine the factors that we've talked about, the various opportunities around American Express Global business travelers, the continued recovery in corporate travel, the TNC opportunity, the revitalization of the Dollar Thrifty brands, the cost-cutting initiatives, maybe some of the opportunity around AI or automated pricing you just referenced. You also combined that with some of the headwinds around potentially normalizing pricing? I think you see normalizing depreciation. How does it kind of all shake out at the end of the day in terms of do you think normalized earnings power, EBITDA for the company?

Listen, it shakes out at the EBITDA line. It -- this is an industry of 2 public companies that define RPD and utilization differently. So the comparative basis requires probably more mechanics than is that ought to be necessary. But it all falls out at the EBITDA line. This is a business that ought to run in the high teens EBITDA margin on a sustainable basis. There are variables that will play on revenue intake and the like. But I think targeting that as a sustainable EBITDA margin is one that we ought to aspire and deliver against. I think on the revenue side, we are in a period, I think, of rate stability. I don't disagree with what I understand our competitors said yesterday. And obviously, as I mentioned here, we're using the opportunity of strong demand to take rate up. So I think we're in a period of stability around rate. We continue to see strong demand to sort of feed it. We are running our fleet at an elevated level of utilization against historical standards, yet we're running fleet at a very tight tolerance as is the industry to where a sellout situation exists. It's not as acute as it was in '22, but the industry is not running at a fleet size that's 30%, 20%. It's low single digits above that, which the industry would otherwise be in a sold-out position. You've heard me on cost. I think that we're going to run the gamut on the reduction of our fixed cost. That will be helped on the back of lower IT spend over time. We know what we're focused on as it relates to the variable expenditure. And so I feel good about having the cost issue in scope and knowing exactly where we can drive it. And I think on the back of the stability on the revenue or on the rate side, continued demand, a focus on cost, the achievability of that EBITDA margin is one that, again, we ought to aspire to and deliver against for our investors.

Thank you. Let me check to see if there's a question in the audience. There is one. This will have to be the last question. one second for the mic.

With the rideshare drivers taking out EVs and taking them home where they're going to charge them?

Well, part of what we're doing with BP is building out a broader charging network. It's their financial capital against our fleet, knowledge of fleet movement where they dwell, where they move, and it's also using our real estate to locate and build charging stations. As you may also know, we are engaged in a series of projects called Hertz Electrifies with cities around the country. We've done Denver, Atlanta, Houston, Orlando, you should assume New York to be in focus. This is all in the context of taking up our EV fleet, working with technical schools around the development of a mechanic class around this. It is equally working with cities to build chargers. Cities are minded as a matter of public policy, and we're minded as a matter of just good business that we see these charging stations located in neighborhoods where our customers live and those are Uber and Lyft drivers. It means that it may not be in a city like New York in Manhattan, which is where the owners may be of Teslas and the like, but it may be in the outer boroughs where these drivers live. So there's a confluence of both public policy and good business and BP is proving to be a really good partner, and they're building GigaHub and sets of charging stations at places. And we work with differentiated pricing schemes for our rideshare drivers so that they occupy these chargers at off-hours where they get lower rates. And so this is a process that we're working through and showing some early signs of success.

Okay. And we are out of time. So please join me in thanking Stephen for all the great color and insight he shared today.

Great. Thank you. Thank you,