Hertz Global Holdings Inc. (NYSE:HTZ) reported its first quarter results on 11th May,2020 which acted as a complete despair for the company. The worldwide popular vehicle rental company started its year with a constructive and positive momentum which has been consistent since three years and it expected the same in the current year as well. Social distancing norms have impacted the company in various ways.
Since last three years the company has overcome all the industrial challenges and as a result achieved a consistent increase in price and volume. It has improved its productivity as well as showcased best in class fleet management over these years. But this crisis has impacted the company to a large extent.
Looking at the first quarter results reported by the company it is evident that there was a massive impact on the financial results of the company merely due to the outbreak of the Covid-19 Pandemic crisis.This crisis has lowered the revenue and EBITDA of the company
(SOURCE: BUSINESS QUANT)
Considering the U.S. Rental car summary there was an increase of 8% in the revenue segment till February but after the outbreak of this contagion there was an overall 9% decrease in the total revenue of the company. The total revenue segment of company toppled down from $1520 mn. in 2019 to $1381 mn. in 2020.
The International Rental Car segment increased by 1% till February 2020 but after the outbreak of Covid-19 it decreased from $433 mn. in 2019 to $368mn. in 2020.
The U.S. Rental and International Rental car revenue was impacted because of the travel bans and shelter-in-place orders in the wake of Covid-19. Due to these orders, there was a complete shut down of services in the country resulting into a great loss for the company.
(SOURCE: BUSINESS QUANT)
The company’s ability to cut costs has been tested by the sharp decline in revenue and so far it has succeeded in it.This impacted the Adjusted EBITDA of the company to a certain extent. For the U.S. rental car market this sharp decline of revenue to reduce cost resulted into Adjusted EBITDA of $(199) mn. whereas in the International car market it was $(45) mn. It has entered the quarter with approximately $1.0 bn. of liquidity specifically in the form of unrestricted cash and cash equivalents while experiencing a net loss of $356 mn. at the end of the quarter.
The company in its quarterly report stated that “Depreciation Per Unit Per Month was impacted by residual values on certain vehicle models and lower year over year retail sales volume as a result of the COVID-19 shut-down of retail lots.”
The company has taken various measures in order to comply with the regulations stream-lined by the government. It has managed its costs and liquidity by simply right-sizing its staffing and operations which will further safeguard its employees and customers as well. Before the closure of the user car market, the company had started reducing capital spending, canceling new fleet orders and disposing excess fleet through multiple disposition channels. The company estimates that all these measures will lead to annualized cost savings of approximately $2.5 billion.
Also as the impact on businesses due to Covid-19 cannot be forecasted, in order to safeguard liquidity the company took various actions like in April, the company did not make certain operating lease payments for U.S. car rentals and in May, the company has practiced tolerance and limited waivers for its asset-backed vehicle debt. Thus company expects that all this will result into cost saving as well as it will safeguard its customers.
So it could be concluded that the company was consistent and efficient in its working but was affected massively due to the crisis going on in the economy. Because of the shut down of market and social distancing as administered by the government there is no demand for the rental cars which resulted into shut down of its service and as a result it faced a great loss.
The share price of the company plunged down after its quarterly results were displayed. The company is expecting chances of revival when the economy gets back on track. Thus this Covid-19 has impacted the quarterly results of the company greatly.