Sixt:Quarterly Results/2024 Q2

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Management Guidance and Analysts Estimates

Management Guidance

• For Q2 2024, management expects a significant growth in revenue and EBT in the range of EUR 60 and 90 million (EUR 75 million or -43.1% at the midpoint)
• For 2024, management is also guiding significant growth in revenue and an EBT in the range of between EUR 350 and 450 million (EUR 400 million or -13.4% at the midpoint)

Analysts Estimates

Key Items	Q1 2024	Y/Y	2024	Y/Y
Revenue	EUR 991.2 million	7.1%	EUR 3.923 billion	8.35%
EBT	EUR 63.3 million	-52.2%	EUR 376.5 million	-18.9%

Analysts Opinions

Residual values starting to stabilize?

• Buy, €120->€135: Jefferies analyst, Constantin Hesse said according to Manheim data, residual values of the leasing vehicle fleet stabilized in June, and even slightly improved.
• Buy, €116: Analyst Michael Kuhn of Deutsche Bank pointed out that used car prices in the US and data from travel businesses are cautious.

Sixt should report solid Q2 earnings

• Buy, €135: Analyst Marc-Rene Tonn of Warburg Research expects Sixt's growth in Q2 to be solid. However, he pointed out that vehicle inventory costs are still at an elevated level.

Competitor Earnings Expectations and Results

Hertz

• Hertz said demand was healthy in Q2.
• It noted that depreciation increased $706 million quarter-over-quarter due to a decline in current and future residual values.
• Here is the Q2 results highlight;

Key items	Actual	Y/Y Growth	Analysts estimate
Revenue	$2.35 billion	-3%	$2.48 billion
Adjusted EPS	-$1.44		-$1.21
Revenue per day (Pricing)	$59.65	-3%
Fleet utilization	81%	-2.4%
Transaction Days (in thousands)	32,216	-1%
Americas segment revenue	$1.9 billion	-4%	$2.02 billion
International segment revenue	$425 million	1%	$445.72 million
Americas RPD (pricing)	$59.94	-3%	$58.91
International pricing	$58.38	-2%	$57.57
Fleet interest expense per unit per month
Depreciation Per Unit Per Month	$600	205%

Earnings call insights

Pricing

• CCO Sandeep Dube said in the earnings call that during the quarter they prioritized rate over demand.
• The company said it prioritized rate over volume during the quarter and that they saw signs that y/y decline in pricing is narrowing. "During the quarter, we deliberately prioritized rate over volume. This is especially true in the Americas segment. Collectively, our revenue initiatives are showing early promise and global RPD, while down year-over-year as we guided, was up 5% sequentially. June revenue per day (RPD) is marginally down year-over-year by 2%, an encouraging exit rate for the quarter and consistent with our expectations that year-over-year declines are narrowing," Sandeep Dube said.
• Scott said they expect RPD to be flat or up 1% in Q3. " For Q3, demand is strong, but we're intentionally culling low revenue per day (RPD) business, so we don't expect days to grow materially year-over-year and we expect RPD to be flat to slightly up 1%," he said.

Depreciation

• Hertz was able to negotiate lower pricing with OEMs. "...and the purchase prices recently negotiated with OEMs already reflect our targeted depreciation per unit (DPU)," CEO Gil West said.
• CFO Scott Haralson said its fleet rotation process will result in non-cash depreciation of over $1 billion from Q3 2024 to the end of 2025. He pointed out that this could be higher or less depending on where residual values will be.
• Scott said the fleet rotation process will result in fleet with DPU of less than $300 by the end of 2025, adding that at the end of Q2 more than 30% of their fleet had DPU of $325 or less and the rest at $600. He pointed out that the deals recently negotiated with automakers will bring in vehicles with DPU rates below $325 later this year and through 2025.
• Scott said the expected depreciation of over $1 billion through 2025 will not have a cash impact on P&L since when they sell the vehicles they unlock the initial equity invested in the ABS facility. He pointed out that majority of the cash impact has already been felt and that they are left with more than $1.5 billion which they will invest to acquire new vehicles at lower purchase prices.
• Scott pointed out that residual values have declined at a higher rate than expected in 2024. "In June, the Mannheim rental risk index dropped by 5%," he said.
• Scott added that they expect DPU to remain elevated throughout 2024. "We expect DPU to be elevated through 2024 before sequentially improving through 2025 until we near the end of the rotation," he said.

Liquidity

• Scott pointed out that they now have strong liquidity (liquidity at the end of Q2 was $1.8 billion). "The good news is that we believe we have plenty of liquidity to handle this. With our recent capital raise, we have bolstered liquidity to a place where we are comfortable that we can complete the transformation, even if residuals decline at a faster rate than we have conservatively forecasted," Scott said.
• Scott said they don't have any meaningful non-vehicle debt maturities until mid-2026 and that the fair market values of their vehicles currently exceed ABS facility.

Demand

• Scott said demand in Q3 is strong. "Global travel demand remains strong and inflation is tempering," CEO Gil West reiterated Scott's comments. "With global RPD rate parity expected in the third quarter year-over-year, the demand and revenue outlook remains strong," Sandeep said.

CrowdStrike software outage

• Gil West said disruptions to the business during CrowdStrike software outage was minimal.

EV fleet

• Gil West said EVs now make up less than 10% of their fleet.

Avis Budget Group

• Avis said its revenue in Q2 was driven by sequential improvement in revenue per day (RPD). “As the second quarter progressed, demand elevated with pricing and vehicle utilization sequentially improving. June pricing finished down slightly and vehicle utilization up a point in the Americas compared to June 2023,” said Joe Ferraro, Avis Budget Group Chief Executive Officer. “Our actions to get our fleet size in-line with demand enabled us to start the third quarter with strong pricing around the Fourth of July holiday, setting us up well to take advantage of the summer peak.”

Key Items	Q2 2024	Y/Y	Analysts estimates
Revenue	$3.05 billion	-2.4%	$3.18 billion
EPS	$0.41		$2.60
Revenue per Day	$71.74	-3%
Per-Unit Fleet Costs per Month	$361 million	115%
Vehicle depreciation and lease charges, net	$733 million	95%
Vehicle depreciation and lease charges, net-Americas	$559	119%
Vehicle depreciation and lease charges, net-international	$174	45%
Vehicle utilization	70.2%	-0.8 bps
Revenue per day - International	$56.85		$59.47
Revenue per day - Americas	$71.67		$72.30
International revenue	$687 million	-1%	$709.10 million
Americas revenue	$2.36 billion	-3%	$2.47 billion
Adjusted EBITDA	$214 million	-71%

Earnings call insights

Pricing

• CEO Joe Ferraro said though pricing was down 3% y/y, it improved sequentially. "Sequentially, pricing improved 7% quarter over quarter this year compared to only 4% over the same period last year. Denoting an accelerated improvement in price," he said.
• Ferraro expects pricing to remain up in the summer and around flat for the quarter.
• Ferraro said they will continue to prioritize pricing over volume.

Used car prices

• Ferraro said their 2025 fleet negotiations with OEMs are ongoing but their current prices are below what they have achieved in recent years.

Demand

• Ferraro said demand in Q2 was up 1% in the Americas in Q2 and that he expects this to continue.
• In the European market, Ferraro said summer reservations are strong and and trending positively with demand arising from inter European cross border and international inbound travelers.
• Ferraro pointed out that Europe continue to be a popular cross border destination in their reservations metrics.
• In general, they expect demand in Q3 to be at the same level as in Q2.

Interest expense

• CFO Izzy Martins said they expect interest expense in the second half to be similar to that of first half.

Outlook

• Avis is guiding Q3 adjusted EBITDA to be in the range of $500 million and $600 million.