Hertz Global Stock

Welcome to Hertz Global Holdings First Quarter 2026 Earnings Call.

[Operator Instructions]

I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to Bill Kakowski, Senior Vice President, Finance. Please go ahead.

Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call, and these can be accessed through the Investor Relations section of our website.

I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance, and by their nature, are subject to inherent risks and uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances.

Additional information concerning these statements, including factors that could cause our actual results to differ is contained in our earnings press release earnings presentation and in the Risk Factors and forward-looking Statement sections in the SEC filings we make with the Securities and Exchange Commission.

Our filings are available on the SEC's website and in the Investor Relations section of the Hertz website. Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business.

On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss strategy, operational highlights and our fleet. Our Chief Commercial Officer, Sandeep Dube will share insights into our commercial strategy; followed by Scott Haralson, our Chief Financial Officer, who will discuss our financial performance. I'll now turn the call over to Gil.

Thanks, Bill. Nice work. Good morning, everyone, and thank you for joining us. I want to begin by saying thanks to the Hertz team. Quarter after quarter, their discipline and execution or what turn strategy into results. We are halfway through 2026, and it's been more than 2 years since I stepped into this role. In that time, I had the chance to get into the detail of every part of this business, the fleet, the operations and the economics that drive them. What's become clear is that this transformation is about both fixing what wasn't working and building for what's next.

We've done that under real pressure. Over these 2 years, we've navigated tariffs, vehicle recalls, inflation, parcel government shutdown elevated TSA weight lines and storm disruptions on top of the normal volatility of the rental car industry. None of it has changed our approach. We're staying focused on what we can control. Fleet cost, our revenue performance and the customer experience we deliver. Through disciplined execution, we're building a financial footing strong enough to withstand whatever pressures today and tomorrow bring. We're both running our core rental business better and building a platform spanning rent-a-car, fleet, service and mobility that diversifies and strengthens Hertz for the future. This quarter is more proof of that progress, where our disciplined execution is showing up in our results.

Led by our continued commercial momentum, revenue was up [indiscernible] year-over-year with a 1% smaller fleet and came in ahead of both consensus and our latest guidance. By continuing to sweat the assets and increasing total fleet utilization by 80 basis points to 79%, we achieved this despite elevated recalls compared to the year before. This performance was driven by our strongest second quarter RPD on record, excluding the peak COVID year of 2022. RPD was up 9% and RPU was up 8% versus last year coming in at $1,542. RPU exceeded our North Star target, and we saw sequential improvements in both throughout the quarter. Adjusted corporate EBITDA came in at $81 million, a $63 million year-over-year improvement and above our latest guidance driven primarily by an even stronger RPD in June than we anticipated. We continue to execute on our annual DPU North Star target through our disciplined rotation strategy that is defined by our buy right, hold right and sell right approach.

At $302, DPU remains in line with target. However, we did experience 3 quarter-specific items that caused the total gain on sale to be lower than originally expected. First, the seasonal decline was more pronounced than we anticipated as wholesale volume temporarily outpaced demand. Second, our disposition channels were not as optimal as we would like given the volume of cars we sold. And third, during the quarter, we altered the mix of vehicles and prioritized older and certain models.

These dynamics temporarily drove down the proceeds from sale, resulting in a lower gain on sale. However, this didn't impact our go-forward view. The seasonally adjusted Manheim rental index increased 3.5% month-over-month in July, recovering from the declines experienced during the second quarter and remaining strong up [indiscernible] [ 6.1 ]% year-over-year. The used car market is good and we're set up well for it. At the end of Q2, our model year '25 and '26 units made up nearly 94% of our U.S. core fleet. We believe we have an exceptionally healthy fleet, and we expect DPU will benefit as we rotate out of those vehicles over the coming quarters.

Turning to cost. Total BOE per day increased slightly, primarily driven by costs that were both revenue related and were margin accretive associated with stronger RPD performance. Now this brings me to a broader point. The North Star metrics have given our teams a steady compass over the last 2 years, but as the business evolves, it's important to recognize that these metrics do not operate in isolation.

As revenue grows, a portion of our DOE naturally grows alongside it, and many of those costs are tied to higher revenue and stronger profitability. As a result, we're also increasingly focused on the relationship between those metrics. And we expect our performance framework to evolve as our transformation continues. So while DOE was higher, our RPD to DOE per day spread improved by 17% year-over-year, and it was our third consecutive quarter of year-over-year spread expansion. We remain extremely focused on managing core operating costs and the improvements we're seeing are the result of productivity initiatives, encompassing people, processes and technology.

One of our biggest levers we have is labor productivity. Supported by Palantir, our new labor planning model align staffing with real time [indiscernible], reducing overtime third-party labor and improving workforce planning. We're also leveraging technology and AI-driven data insights to improve throughput and productivity across our operations to reduce our vehicle turnaround time. Additionally, we're making progress in leveraging our supply chain network, expanding part out capabilities, strengthening collections recovery and improving maintenance processes, all to drive greater productivity with existing resources while lowering unit costs.

Although these results demonstrate the progress we've made in strengthening the economics of the business, recalls remain a significant headwind. Recall volume was up 300% in Q2 from the year prior, impacting an average of 15,000 vehicles per month across the first half of 2026, recalls represented more than a $55 million EBITDA impact, and we're pursuing regulatory, operational and contractual solutions to address this issue.

More importantly, our ability to deliver this level of performance despite that headwind, reinforces our confidence in the path to our long-term targets. That said, while 2027 and $1 billion of adjusted corporate EBITDA are important milestones, they're not the final destination. As we've shared, we focused on something bigger, we are applying our commercial, operational and fleet management capabilities across the 4 strategic areas of our platform to drive greater efficiency create diversified growth engines and strengthen the company for the future. Our platform is the unlock to the next phase of value creation, deleveraging the balance sheet and growth and one of the greatest opportunities to grow is by more effectively leveraging the power of the Hertz brand.

Hertz is an iconic century-old brand recognized the world over. It's one of the most valuable assets with a strong reputation that we believe is under-monetized today. One way that we think we can use the power of our brand is in franchising. It is a strong asset-light, capital-efficient part of our business with attractive and predictable economics. It's not new either, Today, more than 25% of the Hertz branded revenue is generated by franchises. However, we haven't grown it in years, and it hasn't received the level of focus necessary to full -- to realize its full potential. We're now changing that, and we're evaluating near-term opportunities across global footprint through both white space expansion and conversion activity and thinking strategically about whether Hertz should look more like our partners in the hotel industry.

If our goal is to achieve higher quality earnings stronger free cash flow conversion, more durable shareholder returns and improved balance sheet franchise there. In the next area of our platform, fleet, we are building on our unique competitive advantage of one of the largest car dealers in the country, enhancing the capabilities of our used car factory. We're continuing our journey of moving from primarily post sale disposition towards more lucrative channels. We expect that expanding our ability to move additional car sales volume through these higher-yielding channels will have a significant effect on net DPU, and we're working on to unlock those opportunities. We're exploring how we build strategic relationships with the leading used car companies, creating more mutual value and structurally reducing our cost of sale alongside new partnerships with best-in-class retailers.

We also continue to make progress on our direct retail channel. Wins this quarter included growing direct retail sales volumes, reducing reconditioning costs, delivering strong F&I performance. In mobility, Oro is gaining momentum. For over a century, Hertz has mastered the ability to operate complex fleets reliably, efficiently and at scale. Today, Oro is extending those capabilities to a new era of mobility, filling a critical gap in the industry's transition towards commercially operated driver-led and autonomous fleets. The capabilities we built from acquisition and financing to efficient fleet management and maintenance would be incredibly difficult and costly to replicate from scratch today. We're putting those capabilities to work through Oro's driver-led business model, where we own, maintain and operate vehicles on rideshare platforms.

Oro is now active on the Uber platform in 4 markets: Atlanta, Los Angeles, San Francisco and Northern New Jersey. We've expanded into these new offerings on the app, including Uber Black in New Jersey and Uber team in San Francisco and Los Angeles. And our drivers have logged more than 6 million miles today. This business validates our ability to deliver high quality and turnkey fleet solutions safely and at scale, supporting an enhanced customer experience. At the same time, we're developing the operations, processes, systems and infrastructure that directly translate to operating AVs at scale. Earlier this year, we announced our first AV partnership with Uber's robotaxi program, supporting lucid vehicles equip with neuro autonomous technology, we're on track to begin operations later this year in the San Francisco Bay Area. We continue to see encouraging traction as we scale this part of the business. Oro already has meaningful scale and momentum. Through these offerings and the existing rideshare rental business, we expect it to generate more than $600 million in total revenue this year the ability to grow dramatically over the next decade, opportunities for expanding capabilities, new partnerships and new avenues for value creation are emerging, and we're focusing our resources on unlocking that growth.

This quarter is an exciting proof point in Hertz transformation. We're making tangible progress across the business and we're focused on execution and accelerating the improvements ahead of us. As I look at the quarter, there are 4 key takeaways I'd highlight. First, our core rental car business continues to improve, and our commercial momentum is strong. The actions we've taken over the last 2 years are driving better unit economics, creating a clear path to stronger margins and potentially more than $1 billion of adjusted corporate EBITDA run rate in 2027 and beyond.

Second, our fleet, by right, hold right, sell right strategy should continue to yield strong near-term results and solidify our ability to deliver net DPU below $300 per month. Third, our strategy to expand the franchise portion of the rental car business has the potential to accelerate that progress. We see it as a way to generate consistent earnings, strengthen free cash flow, unlock liquidity for growth initiatives and ultimately create a more durable value for shareholders while also supporting deleveraging.

Finally, Oro may be new, but it is rapidly emerging as a meaningful growth platform. We believe it will continue to scale in revenue this year across all of its business lines. And we have a plan in place that we think can reshape Hertz's growth trajectory for years to come. The opportunities in front of us are significant. We're encouraged by the momentum across the business and the opportunities ahead. Ultimately, results speak louder than words, and we're focused on continuing to execute and demonstrating that progress quarter after quarter. With that, I'll turn it over to Sandeep.

Thanks, Gil, and good morning, everyone. In Q2, we delivered revenue of $2.4 billion, a 10% increase from the year before. RPU increased 8% from the prior year, even when factoring in elevated recalls, RPD increased 9% year-over-year, our highest second quarter RPD per our record, excluding the peak COVID year of 2022. The result was even better in the United States. U.S. airports car rental RPD increased 12% year-over-year. This was the second quarter in a row where we achieved double-digit year-over-year revenue growth globally, coupled with year-over-year RPU and RPD improvements in the mid- to high single-digit percentage range.

Let's detail our RPD improvement a bit. The majority of the improvement, roughly 6 to 7 percentage points came from our commercial actions. Of the remainder, roughly 2 to 3 percentage points came from positive industry pricing and roughly less than 0.5 percentage point came from the World Cup. Our commercial strategy is gaining momentum based on the initiatives, we have been executing over the last several quarters, and the results of which are now clearly evident. Each quarter, we're getting more value from the same levers we have discussed previously.

Let me break those down. First, improving our customer experience. Our pursuit of a more consistent, convenient and caring customer experience is tangible across each area of the business as teams work together to develop more precise alignment between demand and available supply, enhanced customer communication throughout the entire rental journey, expand the capabilities of our mobile app and more.

One aspect to highlight is service recovery. Even when we fall short of customer expectations, we have significantly strengthened our service recovery capabilities over the past year.

Now overall, customers who go through our service recovery process have a positive Net Promoter Score. Second, generating greater durable demand from higher-margin channels. We continue to invest in the brand to drive further direct channel growth while also making meaningful gains with corporate and government customers. Partnerships remain a key priority and Q2 wins include our strongest year-over-year performance in the AAA partnership in more than 4 years. At the same time, we continue to drive consistent growth in our off-airport and rideshare rental businesses; third, improving our icing tactics and strategies. Our key commercial objective is to drive positive RPD for comparable asset classes. And so far, the actions we have taken to implement and refine our pricing metrics continue to bring greater precision in the way we price demand, playing a part in this quarter's strong RPD results.

Fourth, improved monetization of our higher RPU assets. With our new fleet management tools in place, our team is better equipped to get the right vehicles in the right location at the right time, supporting more refined pricing; fifth, better value-added product sales. We have grown sales of our value-added products by improving both conversion and pricing while providing customers with greater clarity and consistency in their experience. And finally, local level profitability and optimization, we continue to manage our business with increased granularity, enabling greater profitability in each of our markets. Taken together, these actions are driving stronger demand for our brands and creating conditions for more durable pricing performance, enabling us to achieve a primary commercial objective, which is driving RPD gains beyond the industry pricing environment.

Talking about the industry pricing environment, it has been quite constructive. Some context might be helpful here. Over the past few years, industry costs, including fleet financing, depreciation and operating expenses moved materially higher while pricing did not fully keep pace.

However, more recently, the industry has just started recapturing ground lost over many years rather than simply keeping pace with current inflation. In the last 3 quarters, we started to see the beginning of a reversal of the pricing declines that characterize much of the post-COVID period. Before the industry reaches a more mature level of profitability, where pricing primarily offsets ongoing cost inflation there remains an opportunity for pricing to continue normalizing towards levels that better reflect the economics of the business. In Q2, consumer demand and willingness to pay was greater than what TSA numbers would imply. And that, combined with a more disciplined industry supply environment, supported positive pricing trends. Early Q3 results indicate that we are on track to deliver meaningful RPD gains again.

In July, we hit a major achievement 200 consecutive days of positive year-over-year RPD, a milestone which reinforces that our growing commercial acumen coupled with consistent execution, is translating into consistent commercial performance. Looking ahead at the rest of the quarter, the industry pricing environment, as we sit here today, continues to be supportive. Demand for our brands is healthy. Our fleet mix is expected to be a positive factor going forward.

Most importantly, we have a long list of meaningful initiatives slated to come live in the next few quarters, which will be a rising tide for our customer experience, our demand generation and our pricing capabilities, thereby improving our ability to continue delivering strong RPD outcomes enabling us to better control our destiny. In summary, our commercial strategy is translating into strong revenue performance.

And importantly, those results are driven by deliberate actions. We are seeing clear proof points that these actions are gaining traction. And with a strong pipeline of initiatives in front of us, we expect commercial performance to be a continued tailwind for the business. And given the positive trajectory for full year 2026, we now expect RPU to trend above our North-South target of $1,500.

Now I'll hand it over to Scott to walk through our financial performance.

Thanks, Sandeep. Good morning, everyone, and thanks for joining. Before I get into the financial results, I'd like to step back for a moment. In any transformation, it's easy to become consumed by the next quarter, the next milestone or the next challenge and lose sight of how much has already changed. While we're not declaring victory today, we are seeing a business that is executing with increasing consistency operationally, commercially and financially. Every successful transformation reaches an inflection point where the conversation begins to change. Early on, the question is, can this company recover? Eventually, through consistent and disciplined execution, the question becomes, how do they do that? We believe that shift comes through consistent execution over time. We believe we are doing that, and this quarter represents another meaningful step in that journey. Not because of any one single metric, but because the underlying economics of the business continue to improve. We recognize that it's hard for the market to fully reflect the progress we believe is occurring inside the business. That's understandable.

We recognize that investors remain focused on our capital structure and upcoming debt maturities. That's appropriate. Strengthening the balance sheet remains one of our highest priorities. What gives us confidence is that the business supporting our capital structure today is fundamentally different from the business of 2 years ago.

We have continued to improve our fleet, the customer experience and operating efficiency, which has resulted in better operating performance and strengthened free cash flow, plus we continue to create additional strategic options. Our focus remains on continuing that progress while thoughtfully addressing our capital structure in a disciplined manner. And while this quarter's results are a really good outcome, and they are important we believe the more significant story is the trajectory of the business and the strategic initiatives that are beginning to reshape our earnings profile. You'll outline the takeaways for where we are today.

I'd like to spend a minute discussing one on his list, and that's franchising because I believe it represents one of the most underappreciated value creation opportunities within our business. I believe that our business today is ripe for an increasing level of franchising. It's already a consistent contributor to our adjusted corporate EBITDA results, and we haven't capitalized on this side of the business in the way that we should and will. Over the last 2 years, much of our work has been focused on transforming the operations.

Increasingly, the next phase of our strategy is about transforming the quality of our earnings. Franchising has the potential to accelerate that evolution through a more capital-light model that enhances margins, free cash flow generation, returns on invested capital and financial flexibility. It could give us more flexibility to allocate capital toward higher return opportunities across the platform while also providing meaningful deleveraging benefits. We have already started down this path and will likely start to see evidence of this progression in the near future.

Taken together, the near-term benefits of a more focused franchise strategy plus the opportunities in our fleet business for retail car sales as well as the longer-term potential in Oro on top of a consistently improving rental car business gives us a broader set of levers to improve margins, strengthen returns on capital and enhance how Hertz creates value over time. We recognize there is significant work ahead, but we have been building towards this for some time, and we expect to share more as these initiatives progress.

With that, let me pivot back to the Q2 results. I'll also cover liquidity and insights into Q3, the full year and the bid on 2027. For Q2, we generated revenue of $2.4 billion, up 10% year-over-year, notably with a 1% smaller fleet. This was driven by strong pricing performance with RPD up 9% year-over-year, and total fleet utilization was 79%, up 80 basis points even with a nearly 200 basis point headwind on utilization due to continued elevated recalls. This utilization increase allowed us to keep transaction days at prior year levels even with less available vehicles for rent.

Also, despite elevated recalls, RPU surpassed our expectations reaching $1,542, up 8% year-over-year. GAAP net income for the quarter was $64 million, and diluted GAAP EPS was $0.05 with an adjusted net loss of $47 million. GAAP net income benefited from gains on the sale of real estate locations on which we completed sale-leaseback transactions as well as revaluations of other exchangeable notes and warrants issued in prior years.

Adjusted corporate EBITDA was $81 million, representing a $63 million year-over-year improvement and coming in at the top of our most recent guidance. Adjusted corporate EBITDA margin improved by 260 basis points to 3.4% from 0.8% in the second quarter of last year and in line with our guidance expectations. These results included a total impact of recalls of approximately $55 million on revenue and $30 million in EBITDA. Despite this, we still produced a strong year-over-year improvement in EBITDA.

Turning to cost. Adjusted DOE per transaction day was $37.49, slightly higher than our expectations and higher year-over-year, primarily due to higher revenue-related variable costs and higher expenses related to sale-leaseback transactions. When normalizing for these factors and the days impact of recalls, adjusted BOE per day improved approximately 2% year-over-year. While these dynamics can make DOE appear less favorable in isolation, A large portion is tied to revenue growth and our adjusted corporate EBITDA accretive.

In fact, approximately 25% of our DOE cost structure is influenced by RPD movements, including airport facility costs or concessions, commissions, credit card processing fees and fuel related expenses. Because of this, the spread between RPD and DOE per day is a key measure of the value we create each from each vehicle day and the effectiveness of our commercial and operational execution. This quarter, our RPD to DOE per day spread was approximately $24.36, up 17% year-over-year, and it's the third consecutive quarter that spread has increased. SG&A increased slightly year-over-year, driven primarily by investments in sales and advertising, which contributed to this quarter's strong RPD growth. As a percentage of revenue, SG&A declined from 11.3% to 10.8%, reflecting improved operating leverage. Gross depreciation per unit per month was $298 during the quarter, net DPU was $302, reflecting an incremental $4 per unit per month, driven by the loss on sale of a concentrated mix of older vehicles and pressure on the wholesale dynamic market dynamics that have since normalized.

With that said, we've seen the overall used car index and rental car index, both show positive signs of stability. And year-to-date, gross DPU has been fairly stable. We now have our youngest rental car fleet in over a dozen years at just under 9 months and believe those vehicles are well positioned for good economics over their life cycle. Our 2027 fleet acquisitions have been picking up steam. And while total volumes are still unknown at this point, what we have secured to date are at similar economics to the 2026 model year vehicles. Our young fleet gives us a lot of flexibility to be picky about model year 2027 vehicles and consider growth given we can extend the life of vehicles a little further or sell during peak periods to monetize gains. This could be a useful lever going into 2027.

Turning to liquidity. We ended the quarter with $984 million of liquidity, which includes cash and cash equivalents and the available capacity under our revolving credit facility. This was in line with guidance of just under $1 billion. And in June, we completed an exchangeable senior first lien secured notes offering for a total of $350 million, which used capacity created through expiring revolving commitments as well as from term loan amortization.

In addition, we added another $30 million of notes offering in July as part of the exercising of the green shoot, which will bring our pro forma liquidity post transaction to slightly over $1 billion. As mentioned on prior calls, we had anticipated refinancing the first lien capacity that was being freed up from the reduction in revolver capacity at the end of June.

With that in mind, let's discuss guidance. For liquidity, we expect to end the year between $1.0 billion and $1.4 billion with sufficient levers to fund strategic growth initiatives. This contemplates some amount of free cash flow generation in the back half of the year as we enter the peak Q3 period, balanced with a somewhat off-peak Q4 period. The broad range contemplates the potential for strategic transactions, including franchise-related agreements that could take place during the back end of the year. It also includes the payment of the remaining $200 million [indiscernible] portion of our December 2026 maturity in cash. This is also slightly lower than our previous guidance due to the fact that we removed proceeds from the ATM program from our forecast.

However, it will remain available should that become a viable option in the future. An additional potential benefit to 2027 liquidity, we're also evaluating the seasonality of our fleet moves. As we reflect on what we're seeing throughout 2026, across the supply, demand, rental car pricing and used vehicle pricing. We're taking a fresh look at the timing of our fleet and investments and how we manage fleet levels throughout the year, particularly as it pertains to working capital, recognizing net decisions around fleet timing and seasonality can have a 9-figure impact to the timing of cash flows in the year.

This analysis balances the fact that peak demand for rental cars overlaps heavily with the peak periods to sell vehicles. For profitability, we expect Q3 adjusted corporate EBITDA production to be between $275 million and $325 million, with positive earnings per share for the quarter. Transaction days should be up approximately 1% year-over-year, and net DPU was expected to be in the $285 to $295 per unit per month range. Also, for the full year, we expect EBITDA to be in the $225 million to $275 million range. With net DPU at approximately $300 and transaction days up approximately 2% year-over-year. For 2027, we continue to target $1 billion of adjusted corporate EBITDA and but we will need some scale for that number to be within a reasonable reach.

However, at a minimum, we do expect that in 2027, we will finally reach full year net income profitability, and we will be free cash flow positive for the full year. We expect our year-end cash balance, together with our projected 2027 profitability to provide the liquidity necessary to support some modest growth in '27. Any liquidity above the midpoint of our guidance range could be deployed toward additional growth investments. This highlights perhaps the most meaningful change in our business. We are increasingly shifting our conversations from how we finance the business to how we allocate capital to create the greatest long-term value. This is an important distinction, and it's one that we believe reflects the progress the business has made.

I'll leave you with one final thought. Every quarter tells part of the story. The transformations aren't defined by individual quarters. They're defined by the accumulation of hundreds of operational decisions, disciplined and smart capital allocation consistent execution and an organization committed to improving every day. That is exactly what we believe we are building here at Hertz.

I'll now turn it back to Gil for closing remarks.

Yes. Thanks, Scott. We're proud of the progress we've made in our transformation to date. We've made great strides in shoring up our core rental car business. Adjusted corporate EBITDA improved $1.2 billion in 2025 and another $200 million in the first half of 2026. We are on track to deliver more than $500 million of year-over-year adjusted corporate EBITDA improvement and positive margins this year. That would represent nearly 2,000 basis points of margin expansion in just 2 years with more to come in 2027. This quarter, our commercial momentum and operational initiatives continue to translate into results. Looking forward, we know exactly where the work is, revenue, depreciation, cost and customer experience. Sustaining our progress means executing with discipline across all of these, and we're encouraged by the momentum building across the business by what we're seeing in the opportunities ahead and by the actions already in motion. With that, let's open it up to questions. Back to you, operator.

[Operator Instructions]

Your first question is from the line of Stephanie Benjamin Moore with Jefferies.

So it looks like a good -- so honestly, it looks like a good trend and it sounds like you guys feel pretty confident about where the business is going. So in your eyes, what do you view investors are missing here? Because it feels like the drop in market cap, just over the past 45 days or so is disconnected from the story you guys are telling and the confidence you have in the direction of the business. So any insight there would be helpful.

Yes. This is Gil. I'll try, and I'm sure Scott will want to add. Well, I mean, great question. Certainly keeping this up at night. Candidly, the valuation of the business today is tough to understand. It's hard not to be distracted by the stock price. And of course, we remain focused on the long game, but there really does appear to be a disconnect between how the equity markets view hurts over the last quarter. And the way I think about it is at the end of the first quarter, we said at roughly $1.5 billion in market cap, which we felt at the time was undervalued. And then during Q2, we refinanced the debt that fell off the revolver. And just prior to the earnings announcement today, for the third quarter, we were only at about 1/3 of that market cap that we were 90 days ago. So I would argue we're in a much better position than we were 90 days ago, and there's clear evidence of the momentum that we've been talking about. The core business is performing again. And then first on liquidity, we've navigated the seasonal low point with liquidity and came out, as Scott mentioned, at roughly $1 billion, which was consistent with what we guided and we expect to build liquidity throughout the year and to be free cash flow positive in '27.

And as we talked about, we're exploring franchising that not only can add liquidity but also a path to delever the business. And then I think the EBITDA results as well, right, for the quarter and year-over-year improvement despite some headwinds. And the commercial momentum, revenue that Sandeep talked about really doing more with less. Revenue up 10% with a 1% smaller fleet. So the strategies and the hard work the team has been doing is paying off, and we expect more ahead. And then depreciation as well, right, effectively hit our North Star target. And even though we accelerated the rotation of older vehicles, we got a really healthy fleet and add all to bode well for DPU as we sell those through more lucrative channels.

So I think the other upside we see as the platform. Scott and I both talked about that. But that's all upside, but it's building momentum. Oro is an example. And then the valuation of Oro by itself could be very material in the mix as well. So look, I think we're focused on executing the strategies that we have, we know ultimately, the stock price will take care of itself. So that's really key for us to stay focused and keep moving.

Yes. Stephanie. Look, I think Gil outlined it well. I think the point is the the fundamentals of the business are different than they were 2 years ago. How we're talking about the business today is different. The traditional rental car portion of our business is strong, foundational elements of RPD. DPU are in a good position, if not improving. So that platform, coupled with the strategic plan that we've outlined I think the feeling in the building is really a lot different than what we're seeing in the marketplace. But -- and that's understandable. Look, I mean, I talked about in the prepared remarks, we recognize that our investors are are focused on the capital structure and the upcoming debt maturities, and that's okay. Our job is to continue to execute over and over again, and all that stuff will play out over time.

I appreciate the insight there. Just a follow-up for me. I mean I agree. I do think investors are focused on the liquidity profile and the capital structure. So it sounds like you have a plan in place. So it's kind of a 2-part question. Are you -- do you have to do some of these franchise deals from a liquidity standpoint? Or is that just more so another option that you have. And then secondly, as you think about what keeps you up at night, Gil, as you think about just your liquidity profile, what could go wrong? I mean, at this point, it does sound like you've made a lot of actions on your own within your own control. But if I'm an investor and I'm concerned about overall liquidity, is it mostly just a weaker deteriorating macro. Help me alleviate maybe that downside scenario?

No, I appreciate it. So I'll start, and I think, Scott, you can talk a little about the liquidity and the franchising piece. Yes. Look, I mean, we're -- as I said, earlier in the prepared remarks, we've been facing a lot of headwinds, right, for different reasons. Some are some macros that I mentioned. Others are just working through issues historically not to re-litigate some of the fleet discussions, but we had to rotate the fleet for a variety of reasons. That was hard to do, is the liquidity add, but we've come out the other side. So look, I think we've been facing headwinds and attacking them head on. We know things continue to change and happen. But I think given our starting point and the headwinds that we have faced and the things that could go wrong and did we manage through that and then come out in a much better place. So we're -- we've got what I would say, the momentum, the team, candidly, and the more durable strategies, especially in fleet and revenue that can sustain us. So we're eyes wide open and we'll manage all the variables as we see them materialize.

Yes. Stephanie, real quick on liquidity and maybe a lot of franchise. Look, I think over the last 2 years, much of our discussion has centered around capital structure and really centered on liquidity. I'm ensuring that we have the right resources and needed to support the business and rightfully so. But today, the conversation is increasingly different because the underlying economics of the business are materially stronger than they were 2 years ago. So as a result of all that, our focus is expanding beyond financing the business to thinking about capital allocation and long-term value. So we believe our current liquidity provides us with a lot of flexibility to execute our operational and strategic plans while continuing to evaluate the opportunities to further strengthen the balance sheet. So as we think about liquidity, we think we're in a good spot to fund the business. The idea of franchise is we think that is a tremendous idea regardless of our capital structure, it's the right move for the business.

At this time, particularly with the strategic options around Oro and our fleet, these are capital allocation decisions, not capital structure decisions. So we think it's the right move for Hertz today.

The next question is from the line of Chris Woronka with Deutsche Bank.

Thanks for all the details. So I was hopeful we could maybe unpack the residual issue a little bit, and you guys covered a lot of ground for Q2. So maybe we can just focus more on the forward-looking relative to what you thought maybe 3 or 6 months ago, is this more an issue of the market temporarily moved against you for a specific kind of model or something? Or is this really about channel mix not being quite what you thought or hoped. And if it's the latter, if it's channel mix, what -- how confident are you? And what were some of the steps you're taking to to get the mix more favorable going forward? And then I'll have a follow-up.

Yes, sure. Chris. Good question. Yes, what I would say on residuals, and I tried to cover it in the prepared remarks, but I think we saw some things that were unique to the quarter that affected us. The broader outlook -- and keep in mind the backdrop of the dynamics, right? We saw record tax refunds. We saw that and forecasted that the market would go up. It did. It ran up strong in the first quarter, right? And February, March, up, I don't know, 7%, 9% in the rental car index. So I think what we saw in the second quarter again is those kind of elevated levels on a year-over-year basis started to normalize in the 1% to 2% year-over-year range. So you saw a monthly fall off. And I think that was -- part of it might have been a pull forward or a tax refund.

Keep in mind, this is principally the wholesale market. And then the other dynamic there was volume, right? I think what we saw was a lot of volume, we played a part in that. The rest of the industry did. There were a lot of lease returns coming back as well. So that supply-demand in balance, I think just prices the lever there, especially on the wholesale side. So we saw all that play out. I think ideally, in a perfect world, we would use more lucrative channels that aren't exposed to that. But the challenge that ultimately we're trying to solve is, one, to build additional capacity in those more lucrative markets. But then periodically, we have volume to move and we need the capacity to do that. So the channel mix side is a problem we've been focused on. We're obviously driving towards higher-yielding channels there. A variety of strategies to do that. We're -- our direct retail, both physical and digital area we focused on partnerships or another area. But just now we continue to iterate and figure out how do we move from kind of, call it, 70 to 80 plus percent wholesale volume into flipping that equation to more lucrative channels. So it's a big area of our focus and has the opportunity to create a lot of value for us.

Okay. Appreciate that. And then on the franchising, just to kind of follow up there, and I don't want to put the cart before the horse, I know it's still very early days of what you might do there. But at a very high level, do you envision that you would have some kind of requirements or standards for franchisees on the liquidity side so that they would remain in good health. Is that something you think you would consider if you go forward on this? And just in general, how much regulation do you want to put out there for franchisees?

Yes. Chris, this is Scott. I'll start. Look, I think it's probably a little early in the process to talk a lot of specifics around this. But I think a couple of things. One, this isn't new for us. We've been doing this for a long time. We just haven't said that business the way it should, and we think it's an interesting option for us to expand that percentage. Today, we're north of 25% branded revenues franchise. We think that number could be directionally higher. We're not going to today tell you where we think it could end up because we're not sure yet. But we do think it's a very interesting channel. And we have very high-quality franchisees today, and we'll continue to look for high-quality franchisees that can operate this complex business. But we're excited about where it goes, especially from a a capital perspective. I think it's a much more efficient use of our capital and creates a consistent level of EBITDA, and we'll give you more as we go down the path on this, but we're excited where this can go.

The next question is from Rajat Gupta of JPMorgan.

This is Josh [indiscernible] on Rajat Gupta. I just wanted to start on the retail disposition mix. And if we could get an update where that stood in Q2 and how should we think about the run rate to expand it from your -- is there a natural ceiling or a clear path toward that higher aspiration will also be helpful to understand how the partnerships you've built over the past couple of years with Amazon, eBay, Cox, how are those factoring into your retail disposition channels? And I have a quick follow-up.

Yes, sure. comments [indiscernible] some of this may be repetitive. But again, I think it's obvious why we want to try to lean heavier -- excuse me, into the higher margin channels. And when we think of it as any process. It's how do we increase throughput in those in that yield. And so we've taken a multipronged approach as we've talked about, our do-it-ourself model, direct and physical approach or digital and direct retail approach. We've also got partnerships now with a number of the larger used car dealerships. And I think the point I would make there is as we look at this with those partnerships, it's how do we move from more a transactional type relationship to a more strategic relationship, right? Because ultimately, that that approach can create a lot more mutual value between us, which then we can each share in, right? Right now, it's it's been more transactional, if you will. And there's value to create certainly on the price, certainly on the back end, F&I, reconditioning cost, also kind of -- or what I would call work in process of our cars sitting there, waiting to sell, right? We would like to be able to operate those and leverage the working capital with that. So I think there's a number of opportunities to create a lot of value between the scale matters in that environment. And then we partnered with other retailers, Amazon, eBay and others, right, for really to leverage in Cox as well to leverage our own direct retail car sales. And progress is being made.

I want to indicate otherwise. But as I said earlier, as we think about kind of flipping the volume model from wholesale to the more lucrative channels, right, from, call it, I don't know, 70- to 80-ish percent wholesale now, depending on seasonally in the month and the volume we're moving to more of -- we want to see 70% to 80% moving through the more lucrative channels. So that's been the approach.

That's very helpful. Just as a quick follow-up on Oro. I was curious like what's the magnitude and nature of the investment going into the San Francisco autonomous ramp? And how fungible should we think about the infrastructure? Is it built to flex across a range of autonomous players as the ecosystem shakes out? Or is it purpose to this one specific partner?

Yes. No, thanks. Great question. Yes, as I mentioned earlier, we're really excited about where Oro's heading kind of the capabilities and kind of our rightful place in AVs. What I would say about the infrastructure, and this is really the benefit of Hertz as a background is we have a lot of infrastructure footprint. We're operating on it. We can pivot and adapt into AVs with that. From an investment standpoint, A lot of that's already there. The biggest item to make sure we have the capability, of course, EV charging networks in that distributed footprint.

As you know, we've got a lot of EV experience, and we have charging networks across the system. So it's another infrastructure investment that we've made in prior years that help help play out with Oro as well. So -- and I think as I said earlier -- I mean if you think about kind of the infrastructure that we have, the ability to operate fleets at scale own and finance vehicles, trying to replicate all that would take a lot of time and a lot of money. So that's kind of the going in foundation with Oro that we have. And we're excited about the role we will play in AUVs. We see it as kind of that operating layer. And I mean, the way I look at this, candidly, is the analogy is what data centers are to AI, the operating layer is that we play a role in is to AVs. So I think it's required, and we've got a big running start on it.

The next question is from Dan Levy from Barclays.

Great. I wanted to start first with a question on the DOE. And I think you you referenced this before that the challenge with the DOE is that as you are tight on your fleet, you're not getting the scale that you need to drive that DOE per day down to that low 30 North Star metric. So can you just give us a sense of the path to drive it lower if the intention is to keep the fleet levels tight.

Yes. Dan, this is Scott. And I also apologize everyone to, we're going to be close on time here, given the extended remarks and some of the answers were extended at all. But yes, to DOE, look, I mean I think scale is one of the components we've talked about, not the only one, obviously. We think that a lot of the initiatives that we have in place. We're obviously moving in the right direction. We talked about core operating expenses down 2% year-over-year on basically flat dates, like that's an important baseline to start from. I mean, obviously, we have a headwind thinking about RPD related costs and sale leasebacks, financing costs, like the core business is getting more efficient every year. And we haven't even hit all the levers that we think are available. So there is room to run on unit cost efficiency. Now mathematically, scale is important. No doubt that it is important -- so it's a combination of all those things. But one thing I do want to add, too, we talk about North Stars and the ability to get to $1 billion or beyond, cost is not our only lever here. It's make it that's the case. We do think there is room to run on DOE per day and unit cost. But it's 1 of multiple levers, including RPD, RPU, DPU, all of those things are going to be contributors. So room to run, but it's not the only lever that we have.

Okay. Great. As a follow-up, I wanted to ask about the liquidity dynamics. And just a, maybe you can talk about what changed in the liquidity guidance you previously said ending the year with -- in excess of $1.5 billion that you're saying $1 billion to $1.4 billion. But as you're looking at this at the maturities on the debt side in '28 and '29, $2.5 billion a year. What is the confidence that those maturities can be addressed? Because I'm assuming you're already thinking about the different options for those right now.

Yes. Dan, just to clarify on the liquidity, yes, previous guide was about 1.5, and I outlined in the prepared remarks that we removed ATM proceeds from that forecast. So that's naturally going to bring it down, but we did say that, look, we're going to have the ATM in place and that remains available and it's a viable option, but it's not in the forecast really given where stock prices are, but look, we think we have the right amount of liquidity to fund the the strategic plans and a little bit of modest growth into '27. So we feel good where that is. On the debt maturities, look, I mean we know we have a number of debt maturity starting in the front half of 2028. And it's an important topic to investors. But we're not going to give specific views on the process today or even think about probabilities and confidence levels and all these things.

I think as you've heard in our prepared remarks, and have seen over the last 2 years, the underlying business is strong and the economics are improving. Plus, we have a good strategic plan that we're executing to and talked about Oro and franchising and fleet management, retail car sales, service initiatives, all those things. So liquidity is good. We intend to pay a 2026 maturities and cash and maybe most importantly though, to reiterate, with our views on free cash flow production for the remainder of this year and next year, means that we're expecting that we're no longer going to be funding operating losses with debt or other outside capital. So it's an important distinction of where we have been historically. And we also have a number of levers to pull to generate growth capital and a number of those levers lined up with our strategic initiatives around franchising in Oro. So we feel good about where we are and where the business is headed, and we'll deal with the maturities in due course.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Welcome to the Hertz Global Holdings First Quarter 2026 Earnings Call. [Operator Instructions] I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to Bill Kocovski, Senior Vice President, Finance. Please go ahead.

Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call, and these can be accessed through the Investor Relations section of our website. I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance, and by their nature, are subject to inherent risks and uncertainties. Actual results may differ materially.

Any forward-looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements includes factors that could cause our actual results to differ. This is contained in our earnings press release and in the Risk Factors and forward-looking statements section in the SEC filings we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website. Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website.

We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business. On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss strategy, operational highlights, and our fleet. Our Chief Commercial Officer, Sandeep Dube, will share insights into our commercial strategy, followed by Scott Haralson, our Chief Financial Officer, who will discuss our financial performance. I'll now turn the call over to Gil.

Good morning, everyone, and thank you for joining us. I want to start by recognizing the Hertz team. The hard work, discipline, and resilience they bring quarter-after-quarter is what makes results like Q1 possible. When we laid out our Transformation Strategy, we framed it around 3 financial North Star metrics: Fleet Management, measured by DPU below $300; Revenue Optimization, measured by RPU over $1,500; and rigorous Cost Control, measured by DOE per day in the low $30. These are our guideposts on a path to $1 billion EBITDA in 2027.

Over the last 2 years, we fundamentally turned fleet from a headwind to a tailwind through our Buy Right, Hold Right, Sell Right strategy with tangible sequential improvements that have compounded over time. We hit our DPU North Star target last year and are tracking to hit it again this year. Over the last few quarters, we have also been building steady momentum on revenue, and we're tracking to hit our North Star RPU target for full-year 2026. This quarter, the results show that our strategy is working. We set aggressive targets, and we hit them.

Adjusted Corporate EBITDA was up $141 million year-over-year, a nearly 50% improvement. Revenue was up 11% year-over-year and both beat Consensus. It was, in fact, our strongest year-over-year revenue growth in 3 years. We delivered our strongest year-over-year Q1 RPD improvement since the travel recovery in microchip-driven spike in 2022. We saw sequential improvements in both RPU and RPD throughout the quarter, a clear sign that the Hertz unique commercial strategies are paying off, along with broader market strength. These results are especially meaningful given the environment we were operating in.

The quarter brought headwinds, including elevated recalls, a partial government shutdown, higher TSA wait times, and storm disruptions across key markets. Amidst this environment, our performance underscores that this transformation is driving structural improvements. On fleet, while DPU is an annual North Star target, this quarter's gross DPU beat that metric, while net DPU, which fluctuates based on net car sales gains and losses was in line with our expectations and supported by continued disciplined fleet rotation.

With our youngest fleet in nearly a decade, we're seeing our strategy translate directly into better economics. After a slow start to the year, the residual values improved significantly through the quarter. With all this, we expect Full Year Net DPU to remain below our North Star target of $300 per month, even with an enriched fleet mix. Adjusted DOE per transaction day increased approximately 2% year-over-year, driven primarily by revenue-related costs, which are EBITDA-accretive, and real estate sale-leaseback transactions executed last year. Normalizing for these impacts, core DOE per day continued to improve year-over-year.

We still have work to do, and we need to continue to build scale to achieve our North Star target in the low-$30s. The progress is there, and we have a variety of initiatives in flight. This quarter, recalls were up nearly 300%, temporarily shrinking our rentable fleet. That required us to carry more fleet than planned, impacting utilization by about 200 basis points year-over-year. Our team is strategically managing through this making progress by working proactively upstream, we are undertaking numerous initiatives to mitigate the impact, including working with OEMs and government officials for both tactical and structural improvements.

While normalizing for the higher recalls, utilization was 140 basis points higher for the same period, showcasing our team's achievements in asset efficiency. Even with higher recalls, reported utilization was 90 basis points above where we were in Q1 of '23 and 2024. On the customer front, -- we're raising the bar to build on last year's 50% improvement in Net Promoter Score to deliver a truly gold standard. That work recently earned us a spot as the only Rent-a-Car company on USA TODAY's list of Most Trusted Brands of 2026. We also saw the highest year-over-year improvement of any car rental company on Business Travel News satisfaction survey.

As we discussed last quarter, Rent-a-Car remains the foundation of our business today, but our transformation is about building more than one single value stream. We're running today's business with discipline while deliberately investing in the capabilities that will define Hertz's future. That work is creating a more diversified platform, spanning Rent-a-Car, Service, Fleet, and mobility. I'm pleased to share that we made progress across our highest priority areas this quarter.

In Rent-a-Car, we launched an advanced fleet planning engine, which leverages Navidea's decision-optimization engine and Palantir's Foundry data operating system. This system will enable us to deliver the right car to the right place at the right time more efficiently than ever before, delivering positive impacts across the business from Utilization to Customer Experience. By continuing to improve our operations and strengthen our customer trust and loyalty in our brands, we're delivering greater value to our franchise partners. At the same time, we're sharpening our focus on Franchise with new leadership and a fresh look at how to unlock additional value by expanding and optimizing our franchise footprint.

In fleet, Hertz Car Sales continues its evolution into a truly omnichannel business. Building on our strength in physical and digital channels, we're establishing a scalable sales model that expands the top of the funnel and drives volume through partnerships like Amazon Autos. This week, we also announced a new partnership with eBay, putting our near-new, certified inventory in front of more customers than ever before. And as more leads come down the funnel, our partnerships with Cox Automotive is helping drive conversion through AI-generated pricing, revamped digital tools, and better upstream lead generation tools like Autotrader.

In addition, we've continued to make great progress on Finance and Insurance. As car sales volumes grow, F&I scales efficiently and enhances overall unit economics. This was our best quarter in 3.5 years for F&I revenue, and we're building on this progress with more favorable financing partner arrangements. And finally, the breakthrough this quarter was in mobility, where our platform really came to life. We said that for some time that Hertz has a role in the future of mobility. And over the last few quarters, we've been building the skills and capabilities to make it real.

Now we're coming out of stealth mode. Last week, we announced Oro, our mobility business with an expanded Uber partnership. But here's the bigger picture. AV technology has the potential to unlock a multitrillion-dollar market. But as the industry transitions from personally owned vehicles to commercially operated fleets, whether driver-led or autonomous, a critical layer has been missing. Tech providers are focused on autonomous software and hardware; OEMs are focused on vehicles. App-based platforms are focused on aggregating demand. What is missing is the operations and orchestration layer.

That's where Oro comes in. Oro is purpose-built to fill the gap between autonomous technology, vehicles, and demand platforms, managing and servicing fleets reliably, efficiently, safely and at scale. Backed by Hertz's century of expertise in complex fleet management, Oro brings a distinct advantage to the market. Hertz operates one of the world's largest rideshare-rental fleets with over 40,000 vehicles and has deep experience with EVs and a management team with a direct AV-operational experience. What's more, the company has a network of over 2,700 chargers, over 11,000 service locations and car washes, and thousands of maintenance technicians.

Oro harnesses that scale with agility of an independent entity to deliver flexible, vertically-integrated rideshare solutions for fleets of all sizes. Oro is partnering with Uber to provide rideshare fleet services across both driver and AV fleets, delivering capabilities directly relevant for the transition to scaled autonomy. Today, Oro owns, maintains and operates a fleet of vehicles, employing and managing over 1,000 drivers under a high-quality turnkey operating structure. Oro creates value by optimizing pre-planned supply to meet growing rider demand on Uber's platform with an elevated customer experience and additional safety protocols.

Oro is currently active on the Uber platform in Atlanta, Los Angeles and San Francisco and Northern New Jersey just launched this week. Our drivers have logged over 4 million miles to date. With Uber's nearly 200 million monthly active platform consumers, there's plenty of room to scale. Oro has joined -- Oro has also joined Uber's autonomous robotaxi program, supporting Lucid vehicles equipped with neuro AV technology. Starting later this year, Oro will provide the program's orchestration and operation by leading charging, maintenance, repairs, cleaning, and depot staffing.

By managing both driver-led and driverless vehicles, we're widening our scope and deepening our experience with more complex and dynamic fleets, testing and refining economics, asset utilization, and workforce models, so we'll be ready for the transition to scaled autonomy at whatever pace that occurs. While it's still early innings, Oro represents -- Oro presents meaningful upside and reinforces the progress we've made thus far on our transformation, marking the beginning of a new chapter for Hertz. We're strengthening our core business and innovating for the future, all while furthering our mission to advance the way the world moves.

With that, I'll turn it over to Sandeep.

Thanks, Gil, and good morning, everyone. Last quarter, we saw tangible progress that underscored the positive momentum our Commercial Strategy was driving. And in our last earnings call, we said that revenue was off to a positive start in 2026. Q1 2026 full-quarter results tell an even better story. We achieved Hertz's strongest year-over-year revenue growth in 3 years, with revenue totaling $2 billion, an 11% increase from the year before. This was primarily driven by the structural improvements we have made to our commercial strategies, which resulted in meaningful gains in year-over-year RPU, RPD, and Days. RPU was up 4.5%.

We hit our North Star RPU target in March, and we have line of sight to achieving our North Star RPU metric for full-year 2026. Our Q1 RPU results showed positive momentum despite headwinds from elevated recalls and were primarily driven by our focus on delivering positive year-over-year RPD, which was up 5%. This RPD performance marked our most significant year-over-year improvement since Q2 2022. U.S. airports showed particular strong improvement with RPD up about 8%. These revenue headlines are the product of strength across the entire quarter.

During this typical seasonal trough period for the industry and amidst headwinds, we delivered sequential improvement in year-over-year revenue and RPD throughout January, February and March. This steady progress reflects Hertz's increasing commercial maturity. As our playbook continues to yield results, we are executing with greater sophistication, leveraging the same drivers outlined in our Q3 and Q4 2025 earnings calls. Let me dive into the details. First, enhancing our customer experience. We are making systemic improvements across every customer touchpoint, leveraging deep research and insights to create a more consistent, convenient, and caring experience.

We have redesigned our customer service training framework, and the results from our pilot were immediate. NPS scores rose. We have now rolled this out across our top 50 U.S. airports. Importantly, the changes we are making are being delivered consistently across the business with our European team achieving a record Net Promoter Score for the quarter. Second, generating greater durable demand from higher-margin channels. Direct website demand is showing strong growth. Our corporate business is gaining ground.

We are continuing to strengthen our partnership segment with last week's launch of a new Hertz 5-star status benefit for American Express Gold Card members and yesterday's launch of a new strategic partnership with Air Canada's leading travel loyalty program, Aeroplan. We are now driving consistent growth in our off-airport business, and our rideshare rental business is growing strong. Third, improving our pricing tactics and strategies.

Our multiphase approach continues to bring more precision to the way we price demand, and we remain focused on continuing to drive positive RPD for comparable asset classes. The new pricing matrix we spoke about in Q4 continues to contribute to RPD gains. We are seeing exciting results from an even newer version of our pricing matrix, which we executed towards the end of Q1. Early signs indicate its ability to deliver improved revenue production, the positive effects of which will show up in revenue results for mid-Q2 and beyond. Fourth, improved monetization of our higher RPU assets. Our new fleet management tools are helping advance our ability to get the right vehicle in the right location at the right time, enabling a more precise pricing approach.

Fifth, better value-added product sales. We continue to drive sales of our value-added products with higher conversion and improved pricing sophistication. Q1 showed particular strength in year-over-year gains in RPD due to value-added product strategies. Finally, local level profitability and optimization. We continue to improve our ability to manage our business at a more granular level for profitability. Quarter-by-quarter, these initiatives are demonstrating their improved capability to enhance our revenue engine. Throughout April, our playbook drove strong performance for the month, particularly in total fleet utilization gains and mid-single-digit RPD gains.

In particular, Easter weekend provided a clear example of our engine in action. Utilization reached its highest level for any Easter since 2017, and RPD increased 10% compared to last Easter, which occurred later in the month. Together, these results drove a 16% year-over-year increase in RPU on our rentable fleet. Importantly, we generated more revenue over Easter weekend than we did last year with approximately 20,000 fewer rental vehicles. This marks the seventh consecutive major holiday where we have grown both Utilization and RPD year-over-year, highlighting the consistency of our execution.

In summary, the revenue momentum, which has been building for the past few quarters through build-to-last structural improvements has now improved to a level where it is translating to positive year-over-year revenue, RPD and Days. Fleet mix, which was a headwind for RPD in 2025, will be a tailwind through the remainder of the year. Demand from our customers continues to look strong for the rest of Q2 and beyond. And we have line-of-sight to achieve our North Star RPU target in 2026, primarily through a plan that delivers positive RPD. This quarter reinforces our commercial strategy is delivering.

With that, I'll hand it over to Scott to walk through our financial performance.

Thanks, Sandeep. Good morning, everyone, and thanks for joining. The first quarter demonstrated continued progress across the Business. Revenue momentum continues to build. Our unit economics are improving, and we are managing the business with discipline. While Q1 is seasonally our most challenging quarter, the better-than-expected results reinforce that the Structural Improvements we continue to make are translating into tangible financial outcomes. Before I get into the quarter, I want to briefly touch on the platform. You heard Gil talk about Oro, which we are excited to unveil.

We obviously view this business as an important piece of the platform that has the potential for high-growth at good margins and therefore, could have a sizable value accretion to the enterprise. As we have said before, Oro has the potential to be the most valuable asset in our platform, especially when we unlock additional value streams within Oro that are not being discussed today. Plus there's more to the platform than Aro. We are diligently working on similar strategic unlocks for both the fleet and services side of the business that will be rolled out over time. In short, there is a lot more this business is capable of than just renting cars.

Now, let me walk you through the quarter in more detail. I'll also cover liquidity and our updated views on Q2 and the full year. For Q1, we generated revenue of $2.0 billion, up 11% year-over-year, driven by continued strength in pricing with RPD up approximately 5.5% and transaction days up around 3%. GAAP net loss for the quarter was negative $333 million with an Adjusted Net Loss of negative $224 million, an improvement of approximately $105 million year-over-year. GAAP diluted EPS was negative $1.06 and adjusted EPS was negative $0.72, which was an Adjusted EPS improvement of $0.35 versus the first quarter of last year.

Adjusted EBITDA was negative $161 million, representing a $141 million year-over-year improvement. EBITDA margin improved by 860 basis points to negative 8% from negative 17% in the first quarter of last year and coming in better than our guidance expectations. Recall activity was a headwind in Q1, up almost 300% higher than a year ago, taking an average of over 16,000 vehicles out of service each month. While we expected an elevated number of recalls, the lack of fixes to prior recalled vehicles and additional new recalled models drove a larger-than-expected number of sidelined vehicles in the quarter.

To partially offset the impact, we carried more fleet than originally planned. This drove higher depreciation expense and pressured utilization and transaction days. In total, elevated recalls reduced utilization by roughly 200 basis points, impacted transaction days by approximately 930,000, and resulted in a revenue impact of about $50 million. The total impact to Adjusted EBITDA was more than $25 million. Despite that, we still produced EBITDA results that beat our expectations.

Turning to cost. Adjusted DOE per Transaction Day was $38.43, representing a 1.7% increase year-over-year. DOE per day was impacted by higher RPD-related variable costs that are EBITDA-accretive and EBITDA-neutral damages cost that are recovered through revenue. The reported increase was also partially driven by higher real estate expense tied to sale-leaseback transactions executed after Q1 of last year. When normalizing for these costs, DOE per day improved approximately 1.6% year-over-year, in line with what we would expect with an almost 3% increase in days.

More importantly, our RPD-to-DOE per day spread, an important indicator of profitability, improved by approximately 12% year-over-year. SG&A increased modestly year-over-year, primarily driven by higher advertising spend as part of our strategy to invest during seasonal trough periods. Importantly, as a percentage of revenue, SG&A declined from 12% to 11.6%, reflecting improved operating leverage. Gross depreciation per unit per month for the quarter was $296. Losses on the sale of vehicles drove an additional DPU per month amount of $16, resulting in net DPU of $312.

We typically experience losses on sale of vehicles in Q1 with expected gains on sale in the second and third quarters. This puts our expectations for Net DPU for the full-year below our North Star target of $300 per unit per month. Turning to liquidity, we ended the quarter with $837 million, which includes cash and cash equivalents and the available capacity under our revolving credit facility. In April, we completed an additional ABS financing that added $200 million of liquidity in the second quarter. With other liquidity enhancements planned, we expect to end the second quarter with just under $1 billion and look to end the year at north of $1.5 billion.

Now before I talk about guidance for Q2 and the full year, let me talk about how our views on capacity growth for Q2 and the full year have migrated, particularly in relation to what our expectations were as we entered the year. We exited Q4 with positive pricing momentum and a desire to grow the different parts of our business, and new liquidity was going to be necessary to grow, given the abnormal drains on liquidity that are occurring this year, like the Wells Fargo litigation settlement and the reduction in our revolver size that occurs in June.

Early in the year, the plan was to add liquidity to fuel our growth for the year. We have since decided to limit capacity growth in the first half of the year and reevaluate it later for the second half of the year. One of the benefits of this business is that we can be nimble with supply, unlike in other businesses that can't efficiently pivot capacity that quickly. While we believe the majority of the RPD improvements Hertz has seen to date are from our Commercial Strategies and tactics, we do know that industry supply has been limited and that obviously has played a role in pushing RPD to healthier levels across the industry.

As with other businesses that have significant fixed costs like ours, there is constant tension between pricing, supply and unit cost. We appreciate that there is a balance between limiting supply for pricing power and the pressure that it puts on unit cost, and we are constantly assessing the impact of all of these on profitability and the Return on Invested Capital. We have North Star metrics that help guide broader, longer-term company initiatives that are particularly helpful in the transformation, but these are many times moving numerical targets. But they are grounded in the solid tactical strategies around revenue optimization, fleet efficiency, and disciplined cost management.

Those don't change, but as we have mentioned before, there are many ways to win in this business. We still have our eyes set on growth in the right places at the right time, but also look to optimize the balance between capital deployment, supply, unit revenues, and unit cost that produce the desired EBITDA and Return on Invested Capital outcomes in the short run. So with that preamble, let's talk guidance. For capacity, given the backdrop I just discussed, we're going to slightly reduce our outlook on days in fleet for the full year versus our original guidance expectations.

Days are now likely up in the mid-single-digit range versus the mid- to high-single-digit range we originally expected. Fleet is expected to be up low-single digits year-over-year versus our original expectations of up mid-single digits. Obviously, this puts some pressure on DOE per day, but we hope to keep that roughly flat year-over-year even with sizable pressure on revenue and related expenses. RPD should, however, continue to improve for the year to the point that we think we can produce a level of total revenue for this year that gives us a similar expected EBITDA outcome just with higher RPD and lower days than originally expected.

So, in total, we are maintaining our EBITDA margin guidance in the 3% to 6% range for the full year. As for Q2, we expect days to be down 2 to 3 percentage points year-over-year and fleet down about 1 to 2 percentage points as recalls continue to weigh on days production. With April RPD production strong, we expect the Q2 year-over-year improvement in RPD to be higher than Q1. We also expect Net DPU will be well below $300 per month, as we expect to take sizable gains on the sale of vehicles in the quarter. Altogether, we expect an EBITDA margin in the low- to mid-single-digit range for the quarter. As for 2027, we still continue to target $1 billion of EBITDA for the year.

With that, I'll turn it back to Gil for closing remarks.

Thank you, Scott. A big story this quarter, of course, is our progress on the commercial side, especially in our revenue growth. But the even bigger story is cementing our position in the future of mobility with Oro. We haven't just been executing a turnaround, though make no mistake, that alone has taken a tremendous effort. We've been building quietly, deliberately, and with real conviction about where this industry is going.

Driving innovation at a century-old company isn't easy, but we're proving it can be done. Oro is not a bet. It's the result of doing the hard work, finding the gap, selecting the right partners, and putting our capabilities to work in new ways. We're strengthening our core and building what comes next. That's the Hertz story right now, and I couldn't be more confident in where it's heading. With that, let's open it up for questions. Back to you, operator.

[Operator Instructions] Your first question comes from the line of Chris Woronka of Deutsche Bank.

Thinking through all this news with Oro and some of your platform messaging, and I guess just trying to kind of assess how much Hertz is really worth today. I mean it seems like given all the changes, maybe some of the traditional valuation framework or metrics that we typically look at are potentially becoming a little bit less relevant and maybe could lead to a different approach in how we look at your company. I mean, how are you guys kind of internally thinking about valuation in light of some of these transformations and other business changes that you're making?

Yes. Thanks, Chris. Great question. I'll start, and then I imagine Scott will want to chime in, too. So it kind of sounds like you've been sitting in our meeting rooms and Boardrooms. But I think candidly, the valuation of our business today is tough. The problem with our current valuation is that it's almost entirely based on traditional Rent-a-Car business, which is understandable. So that's a paradigm that's hard to overcome. It's hard for us just to say, hey, we are and we will be more than a traditional Rent-a-Car business and expect people to immediately assign different valuations to our business.

And then I'd just point out, historically, the company subordinated all parts of the Hertz Platform to optimize the Rent-a-Car business, which ironically might be the least valuable part of our platform. So, we're shifting that paradigm to really look at all parts of our platform as interrelated, stand-alone businesses to manage and create value around. So to change the way Hertz is valued, I know we're going to have to provide evidence and this week, we unveiled Oro and that business, if valued as a stand-alone, could have a sizable valuation. And then our Fleet business, as it continues to develop, should also have a sizable valuation.

As we think about it, after the Rent-a-Car transformation is largely complete, all these businesses together could have a real sum-of-the-parts impact that could be material to the overall valuation of the company. In fact, one of the issues we got to deal with will be each of the pieces of the platform, as we talked about it, have different growth rates, right? So also different margin profiles, different capital requirements and we will probably attract different investor types and different valuation methodologies and probably even different multiples to the business. So that's how we're starting to look at it.

Yes. Chris, this is Scott. Thanks for the question. I think to Gil's last point, I think that's likely part of the disconnect between how the equity markets are beginning to view our stock versus maybe some of the price targets that the analysts on the call set. That traditional view of Rent-a-Car company valuations and multiples will probably need to be reevaluated to take into account the different aspects of the platform Gil was talking about and the sum of the parts attributes. I might even urge each of you to potentially even take a different approach to how you think about it, appreciating the nuances between transformational Rent-a-Car and valuing what is really a top 5 used car dealership.

And really, that has a competitive supply advantage. And then you have the mobility platform that provides what will be critical nuts-and-bolts infrastructure to rideshare, delivery, autonomous transportation. So I would just be curious how you guys view it after you take that sum-of-the-parts view. But I will say in fairness, Chris, that I have to acknowledge that we haven't made it easy for you guys to really value us correctly yet, given the limited information we give you. So that's on us. We'll figure that out. Along with figuring out the strategy around how to create the value, we also got to figure out the best way to report it, honestly.

I think, in the end, we'll need to figure out things like how to structure the company, the businesses that unlocks the greatest shareholder value and even how to structure the P&L and to report the businesses differently. We'll have to adapt the messaging and to this changing landscape. But I think more of these alterations over time, different viewpoints, I think, will definitely help people correctly value the business as we go forward.

Yes. Super helpful. I really appreciate the thoughts, guys. If I could get a quick follow-up, you kind of hit on this in the prepared remarks, the DPU -- or sorry, the DOE per day, understanding your North Star targets, and I think DPU is pretty well understood at this point. But on DOE, do you envision a situation beyond '26, maybe it's '27, where you're not quite in that low 30s on DOE per Transaction Day, but you're maybe higher on RPD or RPU, whichever you like to look at.

Is that -- could that be kind of a -- as you mentioned, the same way to get to -- or a different way to get to the same outcome of $1 billion next year. I wasn't sure if your comments about the being higher on RPD or RPU and higher on DOE exclusive to '26? Or could that be kind of a go-forward thing, too?

Yes. Yes, certainly. Chris, this is Scott. I'll start. Yes, I think you kind of hit on it. Obviously, the spread between RPD and DOE per Day is the critical one. There's different ways to move the business that would change RPD and DOE per day, and that spread is critical. Obviously, we have targets around unit cost and everything. And so there's components of this that will have a bit of a longer tail. I would argue our cost management discipline is as much around long-term cost efficiency as it is just short-term cost cutting, which is complex in a transformational Rent-a-Car business setup.

And look, we got to return some scale back to the business that's been reduced over the last 5 or 6 years. And we'll also look to grow other parts of the platform. I'll argue a bit that today, our DOE expenses are 70% driven by labor, facilities, and maintenance and repair. We've done a good job on labor, workforce planning, collision repair has seen some increased volume, but we've done a good job with reducing rates, the way we pay for repairs. But facilities is a stickier cost. We probably have more footprint than we need given the current size of the fleet, and these costs are not the easiest to reduce given the lease terms.

But over time, we'll continue to manage that. But at the end of the day, we're going to need some scale. We've talked about this. But the good news is we don't need a ton of scale, right? There's a lot of leverage here. In fact, I would argue probably 10% to 15% more scale, we'd have a sub-$35 DOE per day number. So it's in front of us. I think it's just going to take a little time, but it's just something we're going to have to deal with as we think through all the parts.

Your next question comes from Chris Stathoulopoulos of SIG.

Scott or, on the inflection here in RPU, if you could -- you called out a few things on the quarter, the partial shutdown, storms recall. If you could perhaps break those out, I just want to get a sense of how core is looking and then your confidence around maintaining that positive growth through the year. I know you're pulling in your fleet guide to low-single-digits. Just want to understand if there's other areas that give you confidence around that. I typically think about your booking window as the shortest within my coverage, so [ 030, 040 ]. Just want to understand your confidence around maintaining that growth through the balance of the year.

Yes, Chris, thanks for the question. This is Sandeep here. I'll talk about basically RPD and how we think about that, right? So the RPD improvement that we saw in Q1 is primarily driven by Hertz's unique commercial strategies and supported by broader market strength. I'll touch upon both of those. First, let me briefly cover the broader market strength reference. We've seen more pricing discipline in the market. I'd say, starting late Q4 and certainly more so all through Q1 and into Q2 so far, right? So the industry pricing has been positive, I'd say, and especially since mid-Feb, and consistently so.

From an industry-discipline context, it feels like we are now swimming downstream, and it's a contrast from what we felt before. So that's definitely encouraging, and that provides a good platform. But here's the main kicker, right? It's basically Hertz's unique commercial strategies, which we detailed a bit in the script. And I would characterize those strategies as the follows: first, unique in terms of the positive impact it creates for us. Second, largely durable and persistent in their accretive impact to our business. And this is largely irrespective of broader market conditions. And third, I'd say, growing in strength quarter-over-quarter.

We first articulated these commercial strategies in Q1 2025. And you can see the sequential improvement in year-over-year revenue and RPD since then. So 4 to 5 quarters of consistent year-over-year improvement. And the positive impact of these has now cumulatively led to positive revenue, RPD, and days in Q1 2026. I think what excites us is the journey ahead. We have a clear commercial strategy and execution plan of initiatives over the next few quarters that will keep building momentum and a motivated team. Chris, we are on a different and a more exciting trajectory commercially than what we have had in multiple years prior to that. So yes, this is fun now.

Yes. I would just add to, I think a big part of it is it all starts with demand, right? I mean when we talk about the sustainability of this, sustainable demand underpins everything on the pricing side. So I think the team has done a really good job structurally over the last couple of years building that demand. So whether it's direct demand through our dot.com type hertz.com loyalty channels, that's been big through partnerships, through commercial agreements, Corporates.

All of that really has helped us develop the demand side of the equation that then the RM-type strategies and initiatives can really resonate on. So I think Sandeep said it well. I think if anything, we feel confident those -- all of that is going to help us sustain improvements and where we're at and build off that as we go forward. In addition to whatever the broader market does on top of that is more of an amplifier.

Okay. And then it sounds like at some point, you're going to give us a little bit more disclosure on Oro and Hertz car sales. But in the meanwhile, as we look at your North Star RPU above or more than $1,500 and the DOE low-$30s. As we think about, I guess, the back-half and '27 and these segments start to grow, any color you can give us as we think about things like revenue and margin contribution until these segments are ultimately broken out?

Yes. I think a little bit on maybe Oro to talk about that one first. I guess maybe in the materials, you've seen it. But I'd just point out that we have -- within that construct, we have 3 different businesses there. All of them kind of at different maturity levels, different growth rates, et cetera. So we're not just starting from scratch. We have kind of a platform we're building on. So we should see growth really across all 3 of these, but at different rates. So the first one I would describe as what would be the more traditional rideshare Rent-a-Car business where we're renting cars to rideshare drivers through the partnerships we've got with Uber and Lyft.

We've been at that couple of years. And now we're among the largest in the world. As I mentioned, I think, in the script, we've got over 40,000 vehicles, combination of EV and ICE vehicles, right? So that's kind of the existing platform. We continue to lean in and build off that. But then the other 2 businesses that really are new in a sense, at least to the broader market. We've been working both of these for at least the last couple of years. But the first one is where we've got the Oro-driven fleet where we've got this high-quality turnkey capacity we're providing to Uber. We've leaned in. We've leveraged technology to better manage the driver-life-cycle productivity.

We're also leveraging it to scale and in our safety performance. As we think about that, we're in a -- we're ramping through a measured market-by-market expansion, and we're scaling proven programs now. There's a clear line of sight to demand. This is a large addressable market. But as we move forward, we got to make sure the economics work at a market level. We've got to make sure we got the operational controls in place. And ultimately, we're scaling with discipline. So -- and we're gated by things like operational readiness, safety thresholds, economic returns.

We're just not after top line here. I want to emphasize that. But we do think this is going to be more and more a meaningful contributor to the overall company's results. And then the third piece of this is AV operations, right? And there, of course, with the partnerships that we've announced over the last week, we know we're -- we've got the ability to be a major player in this space. We've got unique capabilities that only a handful of companies can bring. The pace of AV growth, I think, is going to be probably maybe a little longer tail, but potentially much higher ultimately. So we've got kind of a whole spectrum here of 3 businesses within mobility with different growth rates, all with good margins that should be accretive to the company. But that vintage, we'll have to give you more color as we move forward.

Yes. Chris, this is Scott too. I'll add a little bit to that. Oro is obviously an important piece of it. But as you think about the near-term P&L, '27, '28, I mentioned the spread. So RPD definitely moving in the right direction. I mean you heard Sandeep's commentary. U.S. airports were up 9% alone on RPD. So, definitely positive RPD stuff. Oro is going to be great. Also, too, I mean, we have grown our fleet car sales F&I income, which sits in the revenue line. It's been the largest line we've had seen in recent history, and there's a ton of room to grow that without corresponding DOE and expenses associated.

Plus the other piece is we've talked about growing franchise, which has a direct revenue benefit with very little corresponding costs associated. So as we talk about growing revenue without cost, those are the things that are going to create that big spread going forward. So it's not just about Rent-a-Car RPD and the costs associated. There's other pieces that will create that gap.

Your next question comes from the line of John Healy of Northcoast Research.

Would love to spend a little bit more time on the Oro opportunity. I love how you named it Oro. I think that means gold in a different language or a couple of different lanes.

Very cool move. But I would just love to get your thoughts about -- and I think, Scott, you mentioned we need to figure out how to monetize or get value for some of these pieces of the development that we haven't gone to market with. Can you get more granular with us on that? I think with Oro, you guys are actually hiring drivers in certain markets to kind of go with the fleet you're providing. So would just love to get your thoughts on just how some of these aspects of the operation might evolve from here?

Yes. Maybe around the Oro-driven fleet piece. I'll talk just a little bit more about that. Scott, you may want to add some additional broader color on the valuation side. But I guess the first point I'd make here is that Oro is not entering into just a generic human capital business. I'll just say that upfront. But really, what we're trying to do here is provide -- think of it as turnkey rideshare capacity to Uber. Okay, turnkey. And we're really just -- we're putting the pieces we already have out there in place here. None of this is really new. So what we're doing really is operating fleets end-to-end under a contracted capacity supply.

And we're employing drivers as part of that equation. Keep in mind, we've got thousands of people already driving our cars that are employees. And so we're well positioned. We have all the pieces. We're just putting them together to fill a gap here. And we already manage a really large distributed workforces across the operations. We own the fleet. We have the maintenance and logistics. And I'd just point out, I think the model is superior to the traditional gig structure since it provides really a more predictable, more predictability and control along with higher quality in terms of the customer experience as well as safety performance. So there's value created around that.

And again, we're really deliberately scaling this, and we're gated, as I mentioned -- just mentioned about kind of the operational performance, safety thresholds, the economics, all those things. So the real focus is getting it right.

And the other thing I've got to point out here is that this is a real stepping stone to running AVs at scale, right? This is an operational cadence that's not normal for a Rent-a-Car company, even though we have all the pieces. So as we're kind of building that rhythm, it's directly applicable to the AVs. It's just without the drivers at that point. We're bridging really all the aspects of rideshare, but it's got application in other businesses like delivery, right, other potential partners. So this is -- these are big markets. We've got all the pieces and we can play in it.

Yes. No, I think that's right on Gil. John, Look, I think we're not going to be able to talk a lot about the economics of the deal here. But I think what Gil pointed out is exactly right, which is this plays into the strengths of what Hertz does well. We're a big human capital provider. We employ thousands even those that drive cars today for us. And this is an extension of that, plays into the real estate footprint that we have today, the maintenance capabilities, the fleet management and control.

All of these things are most of things that we do today with a slight twist. But as Gil said, is a massive bridge to tomorrow's AV world. So this is a very nice extension of what we do today that will provide near-term benefit to the P&L while also setting us up for longer-term AV infrastructure capabilities.

That's great. And Scott, just one follow-up question on the expectations for Q2. Did I hear you right and you said that you're expecting global days to be down, but for the year, we're going to be up mid-single digit. I was just hoping you could just run that past us again.

Yes, that is right, John. We'll be down in Q2, which would imply up in Q3 and Q4. And obviously, there's some year-over-year nuances as days were probably a little smaller in Q4 last year. So there'll be some year-over-year nuance in the math. But yes, we won't be as big in Q2 as we would have liked given the macro demand economics, but that will recover a bit in Q3 and Q4.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Welcome to the Hertz Global Holdings Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to our host, Johann Rawlinson, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information and these can be accessed through the Investor Relations section of our website.

I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance, and by their nature, are subject to inherent risks and uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements including factors that could cause our actual results to differ is contained in our earnings press release and in the Risk Factors and Forward-Looking Statement section in the filings we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website.

Today, we'll use certain non-GAAP financial measures which are reconciled with GAAP numbers in our earnings press release available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business.

On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss strategy, operational highlights and our fleet. Our Chief Commercial Officer, Sandeep Dube, will share insights into our commercial strategy followed by Scott Haralson, our Chief Financial Officer, who will discuss our financial performance.

I'll now turn the call over to Gil.

Thanks, Johann. Good morning, everyone, and thank you for joining us. I want to start by thanking the Hertz team, their focus, discipline and resilience, especially those serving our customers in the field was evident throughout the year but particularly during the fourth quarter holiday travel season, which is historically one of our most operationally intensive periods. Together, they executed consistently against our goals and made real progress, building momentum for the year ahead. 2025 marked the first full year operating under the back-to-basic strategy, guided by our North Star metrics, we brought greater discipline to fleet management, revenue optimization, rigorous cost control and improving the customer experience. The work is far from finished, but the progress we made this year materially strengthened the foundation of our business for the long term.

In 2025, we achieved a full year adjusted EBITDA improvement of more than $1 billion year-over-year. We drove sequential improvements in revenue, RPU and RPD and improved utilization by sweating our assets and drove DPU down in line with our North Star target. We brought DOE per transaction day down despite lower volumes. We also completed our fleet rotation and successfully secured our model year '26 buys at our target prices and volumes. That allowed us to begin selling model year '25 through our enhanced retail channels, continue our short hold strategy, introduce a more optimized mix of car classes and achieve our lowest average fleet age in almost a decade. And we delivered a nearly 50% improvement in customer satisfaction.

As we turn to the fourth quarter, a typically challenging seasonal environment was amplified by a number of external headwinds that were primarily isolated to the quarter from government shutdown, coupled with FAA cancellations, multiple technology vendor outages and unfavorable residual value environment to elevated recall volumes. Taken together, these created outsized pressure of well over $100 million on our business and kept us from hitting some of our targets. But even within that environment, we made progress.

In the fourth quarter, adjusted EBITDA improved $150 million year-over-year, but our strongest result this quarter was revenue. In fact, it was our strongest revenue result in nearly 2 years. If you remember, we entered 2025 with revenue down double digits year-over-year. And by the end of the fourth quarter, we were nearly flat revenue with a 3% smaller fleet, significant accomplishment, driven by our ability to sequentially improve RPU and RPD and sustained utilization and transaction days, all with a smaller fleet. We also saw a more stable industry pricing backdrop throughout the quarter, which is especially noteworthy given the very polarizing peak and off-peak dynamic that plays out during this period every year. This is evidence that both our commercial investments in pricing and demand generation are paying off and that the industry setup is more positive than in prior periods.

While DPU, as I mentioned, was in line with our North Star target for the year, in the fourth quarter, it moved above our North Star target due to a revised Black Book residual value forecast and lower-than-expected whole sale prices from heavy OEM and rental car company deflating during the car market seasonal low period. While we monitor multiple market trend sources, we have historically indexed heavily on Black Book forecast, which tends to be more seasonally volatile. As of the end of the year, it was down nearly 5% year-over-year, resulting in a $60 million noncash charge to depreciation. By contrast, Manheim average rental vehicle prices in December were up 2.85% year-over-year. And as we look ahead, updated projections from our partners at Cox Automotive show that their Manheim used vehicle value index is expected to end the year roughly 2% higher than in December 2025.

While our forecast is not predicated on such a positive outlook, our internal analysis is encouraging and we've seen early signs of recovery in Q1 in line with these Manheim values, which in January were up 2.4% year-over-year.

On the cost side, we brought adjusted DOE per transaction day down 6% year-on-year. This moved us closer to our North Star target in the low 30s. Recall volumes peaked in mid-November and December, taking over 20,000 cars out of service, which is almost 3x higher than the normal rate. This resulted in us having to carry more fleet than we had planned and limited our performance, which had ripple effects across the business, impacting our fleet utilization, particularly for our rideshare business. We have strategically managed through this by redeploying available fleet where it would have the most impact. And as a vast majority of these recalls lack available fixes and restrict us from renting and selling vehicles. We are actively working with our OEM partners to find solutions to minimize fleet downtime. Recall volumes have moderated slightly throughout the first quarter but remain elevated.

With this in mind, we're staying disciplined in our capacity planning to ensure our rentable fleet stays well utilized and inside of demand. It's clear Q4 presented real challenges, but the decisions we made throughout 2025 held up under pressure and reinforced that our strategy is the right one.

Today, Hertz stands on a meaningfully stronger foundation than it did a year ago. A healthier fleet, improved unit economics, a more disciplined operating model, a better customer experience. And what I want to be clear about is this, the improvements we're seeing in the business are structural, they're permanent. The headwinds we faced and continue to navigate are transitory. That difference matters, and it's what gives me confidence in the trajectory ahead. That confidence is already being validated as 2026 is off to a good start. Q1 trends in both revenue and RPD are positive year-over-year, a particularly encouraging sign given that this is typically a seasonal trough period for the industry. This means we're entering the upcoming peak period from a position of strength.

Looking ahead to the rest of the year, we remain focused on accelerating revenue, RPD and RPU growth while staying disciplined on cost, putting core rental business firmly on the path to profitability. While rent-a-car remains our core business today, this transformation is about becoming more than a single line of business. We're executing with discipline in the business that powers us now, but we're intentionally building the capabilities that will power what's next. We're laying the groundwork for a diversified value-creating platform that will unlock value beyond the core. The Hertz platform spans rent-a-car, service, fleet and mobility. It's still early days. And while the areas of our platform sit at different maturity levels, each presents meaningful upside, both near and long term.

In rent-a-car, we'll maintain steady momentum in our mature airport locations by driving pricing, utilization, demand generation and asset management. We see real near-term upside from growth in our off-airport locations in areas like insurance replacement local commercial agreements and small business. We're also sharpening our focus to unlock additional value in our franchise footprint while piloting new offerings in service. We see a particularly strong runway in fleet through Hertz car sales and in mobility, where the long-term opportunity has the potential to become as, if not more meaningful than our core rent-a-car business. We're transforming Hertz car sales into a truly omnichannel experience, meeting customers where they are online, in person through rent to buy and delivery right to their door. The opportunity here is significant. We are a used car factory with a building customer base, and we're building the shopping experience to match one that can ultimately rival the largest used car dealers in the country.

We have a constant supply of preowned vehicles and sales volume that already puts us in the top 5 used car dealerships in the country. Our improved website has a wide variety of vehicles for sale and intuitive interface, enhanced imagery and more detailed descriptions to help customers shop more confidently. We already have scale in shifting our primary sales channel to retail as a major unlock. We also have established key partnerships with Cox Automotive, Amazon and Palantir that gives us the capability to scale this business profitably, Hertz car sales value proposition has never been more compelling as new cars are increasingly out of reach for many buyers with prices topping $50,000 on average. With our shorthold strategy, we deliver best bang for the buck as consumers can get a nearly new car for around half the cost. This is an important differentiator as we head into spring, typically a peak buying season, which will be bolstered this year by record high tax returns.

Now to Mobility. Hertz owns and manages fleets at scale with core strengths and fleet ownership, large-scale operations, world-class maintenance and vehicle fleet financing. Along our physical infrastructure, operating capacity and leadership experience, this business is evolving to meet the mobility needs of tomorrow, whether driver led or autonomous. Our journey in mobility began in ride share by renting cars to Uber and Lyft drivers. Today, we operate the largest rideshare rental fleet in the world. And it has become one of our highest growth potential businesses with double-digit revenue opportunities. And in the background, we're developing and testing new approaches in this space with strategic partners. While it's difficult to quantify the full growth potential of our Mobility business at this stage, the opportunity undoubtedly is significant.

For context, Uber's CEO has described autonomous vehicles as potentially a multitrillion dollar market. We're building the capabilities now to ensure Hertz is positioned to play a significant role in that ecosystem. Today, our rental car business remains the largest consumer of our time and operational focus. But as we scale the broader platform across rent-a-car, service, fleet and mobility, the mix will evolve. Rental will become one part of a more diversified value-creating enterprise.

With that, I'll turn it over to Sandeep.

Thanks, Gil, and good morning, everyone. I want to jump right into the headlines on revenue this morning. The fourth quarter, the industry's typical trough period with volatile seasonal demand, represented Hertz's strongest year-over-year revenue result since Q1 2024. After adjusting for Q4 2024's onetime loyalty gains, in Q4 2025, we drove year-over-year revenue growth with the primary driver being RPD, which was nearly flat on a year-over-year basis. Most importantly, RPD for the airports in the Americas, our largest segment, was positive year-over-year for the quarter. We achieved this meaningful sequential improvement despite several headwinds, including a lower car class mix, the extended government shutdown and elevated recalls.

In Q4, we achieved a difficult feat by improving both year-over-year pricing and days sequentially, primarily driven by Hertz's commercial strategies. Our revenue metrics showed good sequential progression. Q4 2025 adjusted revenue was sequentially 4 points better, going from down 4% to about flat. RPD mirrored the same sequential improvement on a loyalty adjusted basis as well. The driving factors of these improvements were the same as detailed in our Q3 earnings call.

Let's dive deeper into the details a bit. First, driving a better customer experience. Our Net Promoter grew by nearly 50% year-over-year and it is driving better organic demand for our brands. Second, generating greater durable demand from higher-margin channels. Direct website demand is showing strong growth. Our corporate business is gaining ground. We are now driving consistent growth in our off-airport business, and our mobility business is growing revenue double digits.

Third, improving our pricing tactics and strategies. We are on a multiphase approach to bring more sophistication in the way we drive demand with a focus on driving positive RPD for comparable asset class. Mid-quarter in Q4, we executed a totally new pricing metrics and we saw immediate results from that change in driving positive RPD. Our next situation is going into test mode in a few weeks. I expect phase improvements in the sophistication of our pricing approach.

Fourth, better monetization of our higher RPU assets. This was achieved by improved asset deployment, having the right vehicle at the right location, ensuring that higher RPU assets are effectively monetized.

Fifth, better value-added product sales. We drove better sales of our value-added products through improved operational performance and pricing sophistication. Lastly, local level profitability and optimization. We continue to manage our business at a more granular level of profitability. These commercial strategies and tactics primarily drove the positive momentum in Q4 2025. Most importantly, these foundational changes raised the baseline productivity of our revenue and RPD production, and we expect these gains to largely persist irrespective of the macroeconomic environment.

And just a reminder, we are still in the early innings of a transformation of our commercial strategies, and we expect more foundational improvements in the coming quarters. If you step back even further, the takeaway here is the sequential improvement through 2025 as a result of our back to basic strategy. We started 2025 down double digits year-over-year on revenue and down mid-single digits year-over-year on RPD. This narrowed to near parity on both metrics by the end of the year, and they have both turned positive in the early part of 2026. We also delivered improvements in utilization across our total fleet in each of the quarters in 2025, including Q4, where we were able to offset the impact of higher rate of recalls and delivered an improvement of 200 basis points year-over-year. Total fleet includes all vehicles irrespective of operating status, whether in service, out of service or in our car sales inventory.

Looking [indiscernible] we are delivering clear results and building momentum for the year ahead. 2026 is off to a strong start as the strength we saw at the end of December for the holidays carried forward into the new year. In January, we are seeing year-on-year positive revenue and unit revenue growth, mostly driven by a couple of percentage points increase in global RPD, reflecting pricing growth in both our Americas and our International segments. February is trending even more positively and March looks to continue on that trajectory. As a result, we expect Q1 2026 revenue to be up mid-single digits year-over-year with fleet growth of only low single digits. Q1 2026 is also supported by a more constructive industry environment compared to Q4 2025, with the industry demand environment looking better.

For the rest of 2026, we will manage our growth in a disciplined manner. This means holding airport growth at or below TSA levels, while pursuing off-airport and mobility opportunities. At the same time, we are focused on doing more for our customers. The improvements we have seen in our Net Promoter Score is a clear indicator that our work to create a more consistent, convenient and caring customer experience are resonating. We are deeply grateful to the millions of customers who choose Hertz, and we have recently lowered the threshold for achieving 5-star status to reward them even more for their loyalty. At a time and status across the travel industry feels harder to earn than ever, we are offering a faster, more transparent part, providing more value with every booking and one more reason to continue choosing Hertz.

So in summary, our commercial playbook is working, and the results are starting to prove it. With that, I'll hand it over to Scott to walk through our financial performance.

Thanks, Sandeep, and good morning, everyone, and thanks for joining us. As you heard from Gil and Sandeep, the fourth quarter had a number of items that cloud the results. But once you get past the transitory impacts in the quarter, you can see some interesting foundational elements. The revenue trends are improving. Our fleet is rotated and model year 2026 buys have been secured at prices and volumes we expected. In spite of a richer fleet mix in 2026, which will provide a tailwind to RPD, we still expect to keep DPU for the year below $300 per unit. NPS took a big leap forward in 2025 and that's prime to continue in 2026.

Our digital customer experience, operational consistency and customer-focused initiatives are being recognized by our customers. We have found a good balance between utilization and NPS scores, but have our eyes set on improving both at the same time. The moves we made last year to create a rental car fleet with an average age of less than 10 months which is the youngest it's been in almost a decade and to drive record-setting utilization are now strategic tailwinds. The cost and efficiency actions paid dividends and will get even better in 2026. Throughout 2025, we pulled off a difficult task. We lowered unit cost while also reducing units. That's difficult to do in a heavy fixed cost and operationally complex business like ours.

We have real opportunities for growth in 2026. The focus of that growth will be at our off-airport locations and in our Mobility business. Our expansion of the platform outside of traditional rental car is progressing nicely. Our digital car sales business has made some important technological advancements on both the back-end website and the merchandising capabilities as well as the digital transformation of the car sales process. While early, we think 2026 digital expansion could produce a meaningful progression in the percentage of our car sales that will be transacted through retail channels.

On Mobility, while we are the industry leader in rental ride share, we are growing and developing the business to meet evolving needs. We also have been actively building in the background a substantial set of capabilities that we will be leveraging to position Hertz to be a significant player in the aggregation of the supply of mobility in the future, whether that is driver led or autonomous. This will ultimately be the future of Hertz, but we are balancing the current optimization of the mature part of our business while building the platform for the future. Even though the absolute financial results are not where we want them to be yet, the actions we have taken over the past year or so are showing real sustainable results and the opportunity in front of us is exciting.

So with that preamble, I do want to quickly walk through some details in the quarter, where we are with liquidity and cover a bit of our 2026 outlook. Starting with the quarter. For Q4, we reported revenue of $2.0 billion, which came in ahead of consensus expectations with RPD broadly in line and down approximately 1% year-over-year. Importantly, excluding the prior year loyalty adjustment, revenue growth was up year-on-year with RPD nearly flat. Adjusted EBITDA for the quarter was a negative approximately $200 million. While this is a $150 million year-over-year improvement, it was still about $100 million off of our target. This was entirely in our vehicle carrying cost. We incurred about $20 million of additional costs resulting from the additional fleet to compensate for the elevated recalls. We also had a $20 million loss on the sale of assets due to the large number of cars available in the marketplace that weighed on residuals in the quarter. We also took a noncash depreciation expense of approximately $60 million due to the late in the quarter residual value adjustment by Black Book. While we do believe the adjustment on the forward view of residuals to be a bit conservative, we did take the entire impact to the P&L. We view these items as mostly isolated to the fourth quarter, albeit recalls will likely remain elevated throughout the first quarter. We expect the residual value market to improve as we head into the peak car sale cycle starting in Q1 into Q2.

The government shutdown duration and timing also weighed on results. We were able to recoup most of the days lost in the period, but it did come in more off-peak days production since the shutdown came in what was becoming an improving October with positive demand and pricing momentum. While difficult to quantify and while the revenue for the quarter was still positive, we estimate the government shutdown cost us an additional $10 million to $20 million of adjusted EBITDA in the quarter. In total, the underlying business performed better than the reported adjusted EBITDA would suggest as we performed well on the items within our control.

Transaction days were almost flat year-over-year as we kept the higher fleet to mitigate the recall issues and recoup some of the days lost due to the transitory events. Utilization remains solid. And even with the additional fleet, the global fleet was 3% lower than prior year. Adjusted DOE per day was another positive story. It improved 6% year-over-year, coming in at $36.39 as our cost initiatives are taking hold. It did, however, reflect higher collision severity and repair cost and ongoing elevated insurance costs. We still have more to do, but have done good work on addressing operating expenses in our big 3 categories: Labor facilities and vehicle maintenance and repair. With further work to be done in growth in transaction days in 2026, we do expect lower unit costs this year. Core SG&A remained flat with total year-over-year variances primarily stemming from the timing of expenses in 2024, with 2025 being a more normalized expense level.

Turning to depreciation and DPU. For 2025, we produced a full year net DPU of $300 per month. While this is right at our North Star metric, we were certainly not happy that we had to take a late charge to depreciation due to the move from Black Book. We were expecting to be below $300 per unit. However, if residual values end up where we think they will in 2026, this will prove to be timing of the expense and will benefit us with less depreciation this year. The fourth quarter ended at $330 per unit, down 21% year-over-year, but nonetheless, higher than we expected.

Now let's talk liquidity. We ended the quarter with approximately $1.5 billion of total liquidity, including revolver capacity. This reflects the impact of the partial redemption of $300 million of the 2026 notes in Q4, leaving $200 million outstanding. The Wells Fargo [indiscernible] liability, which had been reserved for some time, was primarily concluded with the $346 million payment made in late January. This reduced our available liquidity to just under $1.2 billion. This number was about $100 million lower than expected due to the timing of vehicle dispositions that were delayed and the early acceptance of vehicles in Q4 due to the larger number of recalls and the impact of the government shutdown. Other than the cost to carry the additional vehicles in the quarter, the timing of the vehicles in and out of the fleet is not expected to have any meaningful positive or negative impact on our expected liquidity at the end of the second quarter.

Also, our ABS programs remain healthy with ABS vehicle fair values comfortably above net book values and market access is solid. We recently entered into financing transactions that we expect will result in an increase in our liquidity by approximately $200 million at an attractive cost of capital. We also have several other liquidity enhancement opportunities that we'll be evaluating in the coming months, that could total more than $500 million. In addition, we also have approximately $400 million of first lien capacity to refinance the expiring revolving credit facility commitments in June of this year. With the disciplined growth that we have planned for 2026, we have access to the liquidity capacity to make that happen. We expect to reach the low point of liquidity at the end of Q2 at something likely below $1 billion, as we invest in the fleet in the first half of the year and then expect to end the year well north of $1 billion as free cash flow generation improves after Q1 and from the return of capital that happens in the fleet rotation cycle in the back half of the year. To be clear, this assumes we action some of the liquidity enhancements we have available to us.

Finally, let's turn to guidance for the year. For Q1, we expect transaction days and fleet to increase low single digits year-over-year. Total fleet utilization will likely be flat in Q1 year-over-year due to the impact from the heavy winter storms and continued elevated fleet recalls, which should decline throughout the quarter. On the revenue front, as Gil and Sandeep noted, January saw positive year-over-year RPD and revenue growth, with February trending even better and March bookings to date showing a similar trend. However, Q1 is still an off-peak quarter for us and the recall levels are still going to impact our results. Given this, our Q1 expected margin range is in the negative high single-digit to low double-digit range, which is a year-over-year improvement of approximately 600 to 800 basis points, assuming DPU at around $300 per unit.

For the full year, we previously communicated an outlook of a 3% to 6% adjusted EBITDA margin range. While the revenue trends were positive and the internal expectations for DPU are in line with prior expectations, it is early in the year, and we would like to see more game film before we revise the guidance upward. That's why we are maintaining the guidance for the year in the 3% to 6% margin range. We continue to target $1 billion of adjusted EBITDA in 2027.

With that, I'll turn it back to Gil for closing remarks.

Thank you, Scott. 2025 was a year of back to basics, focused on rebuilding the core and transforming Hertz for the long term. We first tackled our fleet, the biggest problem to solve, along with cost and revenue, all while elevating our customer experience. Through our fleet strategy and rotation, we operated as an asset management company, and the team turned our fleet, which was once a massive headwind, into a competitive advantage positioning us well for 2026 and beyond. We delivered year-over-year improvements in unit cost even with a smaller fleet and we see a long runway of cost and productivity initiatives that cut across all aspects of our business. This, along with operating leverage from growth should help propel us forward. Unit revenue growth has been a key area of focus. The team's work around customer service, demand generation in the right segments, revenue management strategies and initiatives are paying off and we have the talent, tools and technology to continue this momentum and return Hertz to solid profitability this year and achieve over $1 billion in adjusted EBITDA in 2027.

But our transformation does not stop there. We're both pragmatic and ambitious, focused on what's in front of us while also planning for the future. We're making progress in developing our platform to unlock value beyond our core business, leveraging the same operational discipline, rigorous cost control and revenue optimization that would define this turnaround.

With that, let's open it up for questions. Back to you, operator.

[Operator Instructions] Our first question comes from the line of Chris Woronka with Deutsche Bank.

I guess, Gil, to start off, one of your competitors recently took about a $500 million write-down related to EVs. And you obviously heard went through a process a couple of years back that I think you as complete or largely complete. Can you maybe give us a refresh on where you guys are [indiscernible] your strategy has changed or evolved at all recently?

Yes, Chris, thanks for the question. Yes, I think a lot of headlines across all the automotive industry on of course, of late. And I think we're probably a little further down the road than most, and we do have a bit of a different strategy now. In that, I'd just start with some context. We're the largest fleet supplier to rideshare in the world, as I mentioned, it's really important to get that fleet right because the ride share just has different fleet needs in our traditional rack business. And EVs remain central to rideshare and remain a long-lived asset in that fleet. So we're just probably more experienced than anyone as an EV fleet operator at scale. We've been building a lot of operational muscle around EVs over the years, and that includes the technical expertise as well as operating infrastructure. So -- and as part of our transformation, as you well know, we've gone through and rightsized our EV fleet based on what the natural demand is for EV.

So essentially, we've redeployed that fleet in the right channels with the majority of that fleet moving towards rideshare business. And that puts EVs into real high intensive operating environments. And that helps us accelerate our learning curve. So specifically with our Tesla fleet, just to give you an example, we're in the process of doing an interior refresh on that fleet. So it's really given the where we've encountered on the interiors over the last several years. So this is a low-cost investment per vehicle for us. And then the vehicle condition comes out looking nearly new and then extends the life of the -- useful life of that asset and, of course, has considerable economic benefits for us on that fleet.

So we've got a world-class maintenance and tech ops team. And they've done this all their life really on older generation aircraft, applying a similar approach where we refurbish the interiors and do it at a low cost. So what's happening with our Tesla fleet. And ultimately then, I think with that fleet, the limiting life factor will be battery life at this point kind of given the current battery replacement cost. But even that could change in the future. But we got to remain agile with our EV fleet. It's really set us up well, though in our rideshare position. And then it's probably worth noting that, that experience we've been building with EVs really sets us up well in the future for AVs because I think every future autonomous vehicle will likely be an EV. So all that will bode well for us in the future.

Our next question comes from the line of Chris Stathoulopoulos with Susquehanna International Group.

So Gil, if a lot of commentary here on the Mobility business, your prepared remarks, I think you said Mobility has the potential to more than surpass rental cars. So could you dig into a little bit more here on the future potential of the Mobility business for Hertz. What does that look like? What is the plan for the next year, 1, 3, 5 years, if you could. Just want a little bit more detail on how you're thinking about that.

Thanks, Chris. I mean, obviously, as we mentioned in the call, the potential significant here, and we continue to position Hertz for the future of Mobility. And I think we'll be a big part of that because we've got -- we've already got great partnerships in the rideshare space. So as you think about kind of the next step of mobility, it's really [indiscernible] the evolution of rideshare into autonomous. So we've been piloting some innovative new models with a strategic partner, and we're starting to scale some of those. We'll talk about those in the future. But I think we're a natural player in mobility and ultimately, the AV space as it continues to evolve. So we've got really an incredible team leading our Mobility business. I'm extremely bullish about what that future looks like. So maybe just to recap, as I see it, at least how the space plays out.

First of all, it will be a huge TAM, if you will. We had some comments in the script about that. And it's not a winner-take-all game. It's very big. And I think we're -- Hertz is really one of just a limited number of companies that have all the necessary ingredients to be a major player in AVs, right? Our our core business is owning and operating large fleets of vehicles. And that's a foundational requirement in AVs and a model for mobility going forward. So we've got an iconic brand. We've got a global footprint. We've got operational excellence. We got really advanced maintenance capabilities and then, of course, large fleet management skills. And as I mentioned -- just mentioned, experience managing EVs. And again, I'll just reiterate, I think in the future, almost all AVs will be EVs. So that experience will be a big stepping stone for us. But we've got rideshare experience and infrastructure. We're an asset-heavy business, but we got the vehicle financing capability. And then we've got a team literally with years of direct AV operating experience.

So I mean, in sum, I think we've got the right ingredients to do it. We're focused on it, but be remiss if I also didn't say we're also focused on making sure the core business is turning head in the right direction, and we're not going to be distracted by anything around that, but we can do more than one thing, and we are and Mobility is a big part of our future.

Our next question comes from the line of Dan Levy with Barclays.

I wanted to go back to the question of DP. And I know your North Star metric is the $300, but perhaps you could just walk us through again the path to how you can sustainably be at that $300 given some of the vehicle inflation that we've seen. What offsets do you have? Because just mathematically, if you're holding a car for 18 months and the price is going up, that DPU is going to just increase above $300. So what offsets do you have to get it to that $300 and what's the confidence on that?

Yes. Thanks, Dan. Appreciate the question. I'll start, and Scott, feel free to add. But yes, we've got confidence that kind of our end-to-end fleet strategy that we've talked about in the past, will work in any environment, first of all, and we can maintain the sub-300 DPU this year and beyond. So although as we noted, there's some seasonality in the trends and some volatility, but we've rotated the fleet. We got model year '25, '26 vehicles to sustain our depreciation North Star and the used car market set up well this year as we move forward. We're also pivoting into heavier retail car sales along with shorter hold periods. And I think both of those will be tailwinds for us as we go forward. But ultimately, it's about managing the right buy, hold and sale at a make-model trim level in order to maximize the retention value over that whole period. It's not necessarily the cap cost. It's the retention value from what we buy it for the net purchase price and what we sell it for. And that retention value then over that whole period is the key. So -- and managing that really gives us the ability to hit our DPU targets.

Dan, it's Scott. I'll just add an important sort of mathematical component here. Obviously, we buy a ton of vehicles sort of large volumes that are significantly below MSRP. And at that sort of discount level, I mean, ideally, you turn around and sell the vehicle the next day, obviously, to monetize that discount. But obviously, we can't do that and we rent the car for a period of time. But to Gil's point, the idea of a shorthold has significant mathematical components, albeit operationally complex because you do need a large inflow of vehicles, you need the piping to be able to exit vehicles at that volume. So the combination of all those things create the ability to optimize DPU that we think will be below 300. And we have the capabilities to drive it a good bit further once all of the components sort of start humming. So I think mathematically, you could easily get to that point. And historically, the rental car business has been well below 300. So I don't think we're charting new territory here respectively, but I think there's a lot of components that we've definitely gotten good at, and we'll continue to do that. But I think mathematically, it's important to sort of think of it around those factors.

Great. And if I could just ask a follow-up on the liquidity standpoint. So I appreciate the commentary on Q2 being the trough and some other liquidity actions. But just given you're still going to be a ways away from being free cash flow positive, maybe you could just comment on the free cash flow dynamics. But in the absence of that, what other capital raise options you have to keep the liquidity in line until you hit free cash flow positive?

Yes. Let me touch on a couple of points there, Dan. I think we'll make pretty sizable strides and free cash flow generation in '26. Obviously, post Q1, if you sort of look at the margin profile, we'll be somewhat cash flow neutral in the year post Q1. And so the -- obviously, we got to drive the business in '27 to the point where we become cash flow positive, covering all of the components within our working capital needs. But we talked about a few things that we have in the pipeline, the $200 million initiative that we created, which was an alternative [indiscernible] credit facility that reduces the need for those funds to be taken out of the RCF. We have a large number of initiatives that are not your typical sort of first lien offering, which we have as well that talk about things like more capacity within our ABS structure. We have real estate assets that are both locations we no longer need. I mean, we're a 100-year-old company. So we have some excess assets that we need to monetize as we optimize our facility footprints.

But we also have other locations where we do operate and want to continue that we may do sell leaseback transactions on at a very good cost of capital, that's a better capital allocation than owning real estate across the entire network. We also have a number of strategic initiatives to grow our franchise base, including new geographies where we don't operate today plus some locations that are corporate owned and operated, which are desirable franchise opportunities that are both strategically interesting, but also create an upfront capital infusion opportunity. So there's a whole host of items here that give us a good bit of flexibility, including the first lien capacity that we have, which is roughly $400 million. A lot of that comes from the rolling off of some of the RCF capacity that we can refinance in the year.

Your next question comes from the line of John Healy with Northcoast Research.

Gil, I wanted to go to a comment that you kind of weaved into the prepared remarks a few times, you used the word off-airport. And you seem to use it in separation with the word mobility. So would just love to get your view on the word off airport, what you guys are doing there. If it is separate than the mobility business, and is it related to maybe a desire to get back into the insurance business that the company was in a while ago.

Yes. Thanks, John. Yes, just to clarify, I appreciate that question. The way we were using the term off-airport was in respect to our rental car business, not for Mobility. So it's a separate and included part of our rental car business. And we consider, of course, on-airport and our what we call Hertz Local Edition off-airport volume in that mix. And maybe just for context, that growth in that, we do see the growth, and it's profitable growth for us, and we're disciplined about that. But if you recall, as we rotated the fleet, we had to shrink our fleet in order to accelerate the rotation of the fleet. We're managing capital. We're managing vehicle availability. We're managing working our way through depreciation, all those things. So we had to shrink to accelerate the fleet rotation.

Essentially, we kept our airport capacity more or less flat during that period. And we shrink in our off-airport HLE location and to some degree, our mobility business. So as we think about all airport and growing that business in '26. It's really just kind of going back to where we were in prior years is certainly the first step of that. The demand is there again, in various segments. And so that's really the context of off-airport Mobility is separate, right? We're growing that business and it's even at a much faster rate than off airport and it's through the partnership. And again, that's got, we think, a long runway.

John, this is Scott. Just a quick comment. I think we view those businesses differently, too, by the way. The airport has different demand profiles, obviously driven by airlines and TSA demand, our off-airport business has a different cycle to it, obviously, related to insurance replacement and even some of the leisure demand and commercial components operate on a different cyclical component. So as we think about growth profiles, profitability profiles. We do view those a bit differently, which is why when we talk about growth, we segment it out into the sort of airport off-airport, rideshare components just because they behave differently.

Great. And then just one question on cap structure and balance sheet. You guys have said the, I believe, 300 to 600 basis points of EBITDA margin this year. If you're at the high end of that range, does that get you towards kind of cash flow breakeven for the year? And just longer term, any thoughts about the approach to deleveraging here? I mean, even on the '27 goal of $1 billion in EBITDA, even if we earmarked a lot of that improvement to debt repayment. We're still an awfully levered company. So I just wanted to get your thoughts about how we bring down leverage. And I know you talked about sale-leaseback and some of those things. But I would just love to get your view on ideal cap structure and hypothetically, like maybe when we could be below certain leverage levels?

John, it's a good question. Obviously, the business has to get to the point where it can cover its sort of debt servicing and working capital needs. I mean you could probably do the math within our balance sheet. But the sort of free cash flow breakeven number sits in that sort of 6% to 7%. So yes, at the high end of that, we're going to be pretty close the sort of free cash flow breakeven for the year. And I've said this before, obviously, the business has to get to the point where it's producing free cash flow to start thinking about using those funds to delever. There are other components that will take place in the future as well as we refinance we may have the capability within our stock price to use equity at some point in the future that we've talked about that we're definitely price sensitive to that because we are so optimistic about where the business goes. And the other components of that, that we think through are how the platform and the initiatives will play out in informing the ability to delever. We think the components of mobility and fleet car sales will both drive operating profits to the business as well as an infusion of equity capital that may also participate in all the holistic views of capitalizing those components and necessary to grow those businesses, but also helping the cap structure at the same time. So there's a lot of moving pieces, and this is going to happen over time. But the first step is getting the business on solid profitable footing.

Our next question comes from the line of Ryan Brinkman with JP Morgan.

With regard to the Hertz car sales strategy, what are you expecting in terms of the percentage of vehicles disposed of the various channels and 2026 relative to 2025? And maybe looking beyond this year also, what is assumed already in your North Star target for per unit depreciation of under $300 per month or $1 billion of EBITDA in '27 versus what level of disposition performance would be incremental to those targets?

Yes, I'll start with the latter point, Ryan. Nothing, right? We're not assuming that Hertz car sales factors into the $1 billion of EBITDA in '27 or really anything material this year. The real key from a growth standpoint, there's 2 points I would make here on Hertz car sales because we do want to grow the percent of car sales that we have into retail. Keep in mind, historically, what we've done is to move volume through the rental car seasonal periods and do it through the wholesale channels in order to match the timing of kind of the ins and outs of that. So we're shifting our strategy to move the bulk of that volume through retail channels and shorten our sales time to do that. Today, we're roughly at, call it, about 1/3 of our cars move through retail channels today. That's both Hertz car sales or direct sales along with retail partners that we have established to move volume through. Aspirationally, we want to grow that to about 80%. So there's a path there. and we're pushing hard to do that.

And then if you peel that back, as I think we tried to cover a little bit of this in the script, but we see kind of a couple of pieces to that, right? We've got a physical footprint today. We've been investing in our digital channels and e-commerce as well. And the combination of those creates a really good model for us, right? So we can meet our customers where ultimately, they want to be, right, rather than just relying either or on a physical channel or a digital channel. So that combination is really important for us. We've got a lot of great ingredients to drive this, of course. We've got a building customer base. People are test driving our cars every day. We've done rent to buy. We partnered with Cox to revamp our website. Again, I would encourage you guys to go see it. It's really impressive. I would also just mention, on a customer basis, the cars we sell to customers. The Net Promoter Scores of those buyers are as high as anything I've ever seen anywhere. They're over 90% Net Promoter Scores. That's almost impossible achievement candidly. So the experience is already good. We've got a great trusted brand. And then it's a matter of top of funnel demand. We've got big partnerships that drive that. And then the real problems for us to solve are distilling that into qualified leads and conversion rates. And the team is really focused on that. We've got some great people helping us. And those are the real keys along with driving up our net margin per sale. It's not just about volume.

Ultimately, it's about adding a few thousand dollars to the net selling hundreds of thousands of cars where we have the material impact. So the net margin is key in the equation. We've been focusing really hard on reconditioning costs along with capturing F&I that on the back end of the transaction that we've never had. So combination of those 2 plus selling more digitally reduces the overall selling expenses. So -- and we're seeing the margin side heading the right way on a per car basis and then it's about increasing volume. This isn't easy, obviously, but we got the ability to again, we've already got the scale. It's just a matter of channel shift in the way we're selling. So a big opportunity for us.

Okay. And then lastly, with regards to the more sophisticated approach to pricing that you referenced in your prepared remarks is leading to higher revenue per unit, and you expect to contribute more, are you utilizing a refining a new or existing software system? Or what would you say are the drivers of the progress so far and the catalyst or further improvement?

And just to clarify, are you talking about the car sales or our rental business, rental car business.

Now the rental [indiscernible] the pricing that's going to the RPD.

So we're doing the same, by the way, on the cars. But go ahead, Sandy.

Yes, this is Sandeep here. Yes. Thanks for the questions there on pricing sophistication. So see, we are relooking broad scale how we price demand overall, right? And it's a combination of improved systems, and we've talked about this in prior earnings calls around our work around there. And that's a longer term and we are well on that journey. On top of that, you have to always relook how you structure your pricing and the approach that you use within the systems, right? And that's the piece that I referred to when I talked about Q4, where we've infused the revenue management team with some new talent. There's some really good thinking that's going on there. And we've applied different queries into how we actually price for demand. And that's leading to a different outcome there. So I think it's a combination of systems and different thinking. And by the way, this is still in the early innings of how we kind of go about on this. This is a journey, and I expect continuous improvement on this front.

Our next question comes from the line of Chris Woronka with Deutsche Bank.

The second question Yes. So the second question is going to be kind of as we think about the $1 billion target for next year on EBITDA, we know that the North Star targets are kind of numerically. But if I think about how much fleet maybe that requires. And then also more importantly, on the revenue side, maybe you can at a high level, directionally bucket for us where you think -- is this market share on corporate? Is it market share on leisure? Is it more ride share where you don't maybe have quite as much direct competition. If you can maybe at a high level bucket those out for us, what you think drives that [indiscernible] would be super helpful.

Okay. Well, I'll start, and I would encourage Scott and Sandeep to dive in. Thanks, Chris. Yes, first of all, I think in terms of the $1 billion EBITDA in '27, I mean, a little bit of context, at least from my view, mean these aren't uncharted waters, right? We've been in there in the past. Others in the industry are there now and achieved that level of performance. So it's clearly achievable. I think the North Star financial targets that we've given on DPU, a DOE along with some just modest growth get us there conceptually. And we can talk about any of those assumptions. And then, of course, the approach we've taken on back to basics lay the foundation to get there. the trajectory of all those metrics are heading that way, right? They turned. They're heading that direction. I think the biggest economic lever, as you know, is the fleet, which we've addressed and that economic engine. And we're tracking really with all the North Star metrics directionally where we want to go. We'll never be satisfied with the timing and we'll keep pushing hard. That is the one variable that's always a little difficult to gauge given the kind of nature of the significant transformation we've been doing. But there's a strong sense of urgency at the team, everybody's full throttle, the needles are moving. So we talked about [indiscernible], maybe the revenue piece you want to touch on.

Yes. On the revenue piece, I think, again, it's going to be very, very disciplined growth, right? And going back to our business lines, right. On the airport side, we're going to be very clear that our growth is going to be at or below TSA levels. And the beauty in there is, we're going to keep refining the segments that we -- the segment mix there so that we generate a higher and higher margin out of our airports. And for the off-airport business, again, there's more growth there, and we'll keep working on that. I think Gil alluded to that earlier on. By the way, there's a segment mix play within the off-airport segment, business line as well, which would help us enhance the margins there. And then lastly, mobility, again, we've talked about that. There's more growth there. We're growing that business at a pretty good clip and we'll continue on that journey. But I would say, discipline in where we grow and discipline on how we fleet is the answer there.

Yes. I think just real quick before we wrap up the call here, Chris, is that, I think, mathematically, all 3 levers levels of the North Star gets you well above $1 billion. I think the point here is that there's a number of ways to get there. They all don't have to hit a billion. Plus you got the fourth dimension of scale which plays into here. And then we really haven't even talked about the platform component that adds on to it. So Gil talked about timing, but I think the takeaways are sort of multiple ways to get there.

There are no further questions at this time. This concludes the Hertz Global Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. Thank you for your participation.

Welcome to Hertz Global Holdings Third Quarter 2025 Earnings Call. [Operator Instructions] I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to our host, Johann Rawlinson, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call, and these can be accessed through the Investor Relations section of our website. I want to remind you that certain statements made on this call contain forward-looking information.

Forward-looking statements are not a guarantee of performance, and by their nature, are subject to inherent risks and uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements, including factors that could cause our actual results to differ is contained in our earnings press release and in the Risk Factors and Forward-Looking Statements section in the filings that we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website.

Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on the website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business.

On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss strategy, operational highlights and our fleet. Our Chief Commercial Officer, Sandeep Dube, will then share insights into our commercial strategy, followed by Scott Haralson, our Chief Financial Officer, who will discuss our financial performance and liquidity. I'll now turn the call over to Gil.

Thanks, Johann. I want to start by thanking our teams for their exceptional work this summer. Their disciplined execution is moving this transformation forward, and I'm grateful for their continued commitment of delivering for our customers every day worldwide. We said it would take consistent dedicated effort to rebuild this company's foundation no matter the macro environment by focusing on what we can control, disciplined fleet management, revenue optimization and rigorous cost control, and that is exactly what's happening.

This quarter, we achieved $2.5 billion in revenue and delivered adjusted corporate EBITDA of $190 million, a $350 million year-over-year improvement and positive EPS for the first time in 2 years. In Q3, we completed our transformative fleet refresh hitting another major milestone and setting a new standard for our sales and the life cycle of our vehicles.

With our younger fleet, we also achieved a record high utilization rate since 2018. While we could not control at 2% of our U.S. fleet was under recall, being able to drive record utilization in that environment shows that even when headwinds get in the way, we're able to deliver strong results. Managing with rigor also means keeping our customers at the center of everything we do. Our Net Promoter Score continues to rise, up nearly 50% year-over-year in North America with measurable improvement in ease of rental and confidence in vehicle quality.

Fundamentally, Hertz is an asset management company built on a century of buying, renting, and selling vehicles at scale. That's why we set North Star metrics to guide the improvements to our core rental business and ensure operational excellence comes first. This quarter, we maintained our sub-$350 DPU goal, overcame cost headwinds and inflation to lower DOE per day, both year-over-year and sequentially while continuing to execute initiatives that are driving us closer to the low $30 and made solid progress towards our annual target RPU of over $1,500. These results continue last quarter's momentum and show we're doing what we said we'd do.

Our progress is steady, our heads are down, but our eyes are on the horizon. Transforming a 100-year-old company requires executing with discipline today while building, testing, and innovating for tomorrow. That's why our North Star metrics aren't the finish line. They're the stakes we're putting in the ground to rebuild our foundation. Through this work, we're sharpening our skills, enhancing our systems and creating a platform for growth.

While our near-term priority remains transforming our rent-a-car business with operational rigor and a relentless customer focus, we're simultaneously laying the groundwork for a diversified value-creating platform. That platform spans four strategic areas: rent-a-car, fleet, service, and mobility. Today, these fuel our core rental business, but we see unique opportunities for each to scale and synergies between them all, unlocking new revenue streams across the entire enterprise. It's still early, but the actions we're taking are already revealing what a bright future for Hertz looks like.

Let's start with the fleet, a powerful economic lever. We've transformed our fleet from a headwind to a competitive advantage by continuing to hone our skills, sourcing vehicles optimally, deploying them effectively, and monetizing them strategically. Today, our U.S. fleet is newer and more aligned to customer preference than it's been in years. With the refresh complete, our average fleet age is now under 12 months and we're positioned to sustain a modern fleet aligned with our DPU North Star metric. Model year 2026 buys landed with both price and volume hitting our targets, unlocking model year 2025 sales and activating our short-hold strategy.

Shorter vehicle life cycles sustain favorable fleet economics and enable additional unit cost efficiencies in our service operations while also driving stronger residual values in the used car market, reinforcing our retail car sales momentum. which brings us to the big story this quarter, Hertz car sales. For 50 years, Hertz car sales existed as a valuable but under-leveraged business line and dormant brand. We've been working to transform it from a simple fleet rotation mechanism into a profit accretive engine, one that not only strategically monetizes our fleet but expands our relationship with our customers from rental to ownership.

We have all the tools traditional dealers have, plus significant built-in advantages. We own and service hundreds of thousands of cars with a consistent inventory pipeline. We're essentially a used car factory that rents to millions of loyal customers who test drive our cars every day. Those differentiators guide our strategy. As such, we're meeting customers where they are and capitalizing on what makes Hertz unique. A great example is our rent-to-buy program, which offers a 3-day test drive before you buy. This leverages our competitive advantage to convert renters into buyers and is now available in more than 100 cities and is working. 70% of our rent-to-buy customers purchase their vehicle, far exceeding traditional dealership conversion rates.

With a few notable exceptions, car buying remains a largely antiquated and fragmented industry, and we're here to compete. Our view is simple. Customers shouldn't have to choose between digital ease and dealer confidence. Our strategy connects both worlds, meeting them however they choose to buy with a trusted global brand. So partnering with Cox Automotive, we're further advancing our digital retail channels. We now have a full-service e-commerce site with financing and delivery, turning a browsing tool into a transaction engine.

In August, we launched Hertz car sales on Amazon Autos, letting customers browse and purchase our vehicles with one of the world's most trusted retail services. These digital innovations create an omnichannel experience that we believe only Hertz can offer. We strengthen -- our strengthened foundation enables partnerships like Cox and Amazon, giving us flexibility and speed to move from strategy to execution. It's early, but by scaling our direct-to-consumer and e-commerce channels, we're positioned to capture $2,000 or more incremental margin benefit per vehicle versus wholesale channels. And this is all while maximizing fleet utilization by renting vehicles right up until they're sold, reducing holding and selling costs, leveraging real-time AI pricing and capturing back-end finance and insurance revenue.

This is just the start. Our goal is to scale these channels so the vast majority of vehicles sell through e-commerce retail. We will execute this effectively, harnessing our fleet size and broad customer base. Every Hertz renter becomes a potential buyer and vice versa. Just as Hertz car sales will create new value and scale, we see the same opportunity across other areas. This company cannot and will not rest on rent-a-car alone. The skills and capabilities we're building through our transformation are strengthening our operations while creating the foundation for diversified growth. It's a platform spanning rent-a-car, fleet, service and mobility that can expand into complementary revenue streams from servicing customer vehicles and scaling Hertz car sales to expanding rideshare partnerships and managing AV fleets.

With each area sits at a different maturity stage. But together, they reinforce one vision, turn Hertz into a value-creating mobility platform that meets customers wherever they are. And wherever mobility goes next, from today's rental and ownership models to tomorrow's connected and autonomous vehicle ecosystems, we'll share our momentum as these capabilities mature and demonstrate the tangible results behind our strategy. Near term, our focus remains disciplined fleet management, revenue optimization and rigorous cost control and ensuring each area of our business powers the next and can grow. We're proud of this transformation's progress, but we are most excited about what is to come. What excites us most is how much more the Hertz platform can become.

With that, I'll turn it over to Sandeep to walk through the strategic actions we're taking and the progress we're making on our rental business.

Thanks, Gil, and good morning, everyone. As we continue to improve fleet economics and agility, we are leveraging that momentum to action our commercial strategy. By maximizing asset productivity and strengthening pricing through enhanced customer experience, diversified durable demand and advanced revenue management actions, we have positioned ourselves to deliver both near-term gains and long-term value. This quarter, we delivered sequential year-over-year improvement in revenue, RPU and RPD while achieving record utilization.

While we actively manage RPD, we prioritize RPU because it captures both rate and utilization. This helps our team balance rate and days, giving us a truer measure of the revenue generated by each vehicle in a given month. This is especially relevant for lower rate, longer keep rentals like those in our rideshare and off-airport segments, where costs are lower and rentals are longer.

RPU came in at $1,530, nearly flat year-over-year and sequentially improved through the quarter on a year-over-year basis. Internally, we also track RPU across our total fleet, which includes all vehicles irrespective of operating status, whether in service, out of service, or in our car sales inventory. RPU on total fleet better measures our economic progress, and that metric improved 2% year-over-year.

Breaking RPU into its components, let's dive into utilization first. As Gil mentioned, we delivered record utilization since 2018 of 84% this quarter. Days were nearly flat, thanks to our strategic ability to offset the impact of recalls despite our decision to operate a 7% smaller fleet overall. This utilization rate, which excludes vehicles being held for sale, improved by 260 basis points year-over-year.

Utilization across our total fleet, a term which I just defined a moment ago, showed a more substantial improvement of 460 basis points. This improvement was driven by better process management of our car sales inventory. This utilization performance didn't happen by chance. It's the product of sharper coordination between fleet planning, technical operations, and revenue management, aligning capacity to demand in real time, reducing out-of-service units and accelerating vehicle redeployment.

Turning to pricing, which as we discussed last quarter, remains our largest unlock to fuel RPU growth. Our sights are set on delivering a positive RPD for a comparable asset class. Global RPD was down approximately 4% year-over-year. RPD was negatively impacted 2% year-over-year by changes to the fleet mix. Within the quarter, July RPD was down over 3% for a comparable fleet mix and improved by September to down 2%. Encouragingly, October RPD performed even better.

The results in late Q3 and October incorporate some of the short-term wins that have come from a critical review of our commercial strategies and tactics. Many of these haven't been innovated for years, and we have been acting upon them with urgency, including driving a better customer experience, which leads to better pricing power, generating greater durable demand from higher-margin channels and segments, including continued diversification beyond airport, improving our pricing tactics and strategies, elevating our revenue management tools and processes, monetizing our higher RPU assets more effectively and integrating world-class commercial talent into our team.

The improvement in Q3 was powered by an updated booking curve strategy, enhanced revenue management tools, stronger value-added service monetization and local level fleet mix optimization. As I mentioned earlier, October RPD performed better than September. Looking ahead at the rest of the fourth quarter, there is some softness in the remaining months, driven by seasonal leisure troughs combined with the impact of the government shutdown. Over the next few quarters, we expect our efforts to gain further traction, fueling our ultimate objective of achieving absolute price increases across comparable asset classes.

For an insight into what's to come, let's detail the initiatives a bit, starting with delivering better customer experience, a pathway to greater repeat business and brand advocacy. Our focus is on delivering greater consistency, convenience, and care across our customers' rental journey, knowing that when we invest in our customers, they invest in us. Great customer experiences start with great employee experiences. This quarter, we focused on reconnecting our employees around the world through new communication channels and giving them the right tools to succeed.

We rolled out a new customer experience training, empowering our customer-facing teams with new approaches to get it right and make it right each time. We also leveraged technology to deliver a smoother customer experience, including making it easier to modify reservations and purchase upgrades digitally, enabling self-service rental extensions and building on customer trust through improved post-rental communications. The AI-powered chat and call support launched earlier this year now services 72% of U.S. inbound chats, delivering faster resolutions and improved satisfaction while also delivering cost efficiency. As Gil said, these improvements translated into a nearly 50% increase in our North American Net Promoter Score versus last year, a clear signal that customers are noticing the difference.

To help build further momentum, we welcomed a seasoned leader yesterday as our new Chief Customer Experience Officer. This last quarter, we made progress on growing and diversifying durable demand, a strategy important in growing RPD as it enables us to curate our portfolio by weaning off lower-yielding demand. In the U.S., app bookings increased by 800 basis points year-over-year, making the app our fastest-growing channel. We simplified membership sign-up and added exclusive benefits, driving U.S. Hertz loyalty member enrollments up over 90% year-over-year.

Previously, we said we would further diversify revenue streams through our off-airport and rideshare business lines. These combined business lines showed year-over-year sequential revenue improvement, a dynamic which is RPD dilutive, yet RPU and EBITDA accretive. This diversification approach expands scale, drives utilization, especially during truck and shoulder seasons and feeds the flywheel across all four of our verticals.

We are also reexamining every aspect of revenue management. The advancements we are making go well beyond the multiyear transformation of our pricing systems and present a significant opportunity. We are improving the demand funnel with the goal of delivering a healthier upward sloping pricing curve for our various segments. Part of October's pricing improvement can be attributed to this work, and we believe we'll unlock greater value as we progress. We also strengthened our revenue management leadership team with a world-class pricing and revenue management systems leader. His experience will help us deliver smarter pricing strategies that maximize value for both our customers and our business.

Alongside these commercial upgrades, we are transforming how local teams operate, ensuring we are adapting our strategy to each market's unique demand and opportunity. New dashboards and analytical tools now give field leaders visibility into pricing, utilization, and customer satisfaction drivers in real time, equipping them to identify opportunities and act faster. This shift represents more than a process change. It's a cultural one. We are empowering our teams to think like owners and build lasting trust with every customer.

So stepping back, the playbook is working and the results prove it. Better customer experience is increasing loyalty, driving more durable demand. Our revenue management transformation is off the starting blocks led by world-class talent. Revenue metrics improved through the quarter, including a pathway to better RPD.

With that, I'll hand it over to Scott to walk through our financial performance and liquidity.

Thanks, Sandeep. Good morning, everyone, and thank you for joining us. I want to congratulate the team on a great quarter. We achieved our first positive EPS in over 2 years, improved RPD and RPU, record utilization and a major leap in NPS scores. That's great stuff, and we are all proud of the progress, but we're only getting started. Tech, we've barely begun. Our focus doesn't stop with being just the best rental car company. Our vision expands beyond that. If our goal was to just be the same old rental car company in the same old industry that has largely been the same for a couple of generations, the value of our business would be limited.

Now that is not to say that the rental car business isn't important. It is, very important, critical, in fact. And we'll strive to be the best in the world, but we view it as a stepping stone to bigger ideas. We're building a diverse platform of value-enhancing capabilities that could make Hertz considerably more valuable than today. It's hard to look past the near-term quarter-to-quarter year-over-year metrics the industry typically focuses on. We just don't view them as the ultimate predictors of real long-term value creation. It will be our job to figure out how to eventually tell the story in a way that highlights that value.

Over time, we'll publicly release the components of our platform as they become ready, like we have with our digital car sales platform. We had to start with our rental car fleet in order to turn the rental car business up right. There was no avenue to pursue the extended vision until that was progressing. We've been refining our vision over the last year or so and are still doing that today. We have said all along, this wasn't a quick fix, and we couldn't yet articulate our expanded vision. So we are starting to now.

Now changing course, let me give you some details on the numbers for the quarter, our view on Q4 and a framework for 2026. Revenue was $2.5 billion and adjusted corporate EBITDA was $190 million, an 8% margin within guidance and up roughly $350 million year-over-year. We also posted net income of $184 million and positive EPS for the first time in 2 years. Our International segment saw increasingly strong margins with larger RPD and RPU gains as the international market is seeing a strong pricing environment globally, RPU was $1,530, nearly flat year-over-year but improving sequentially through the quarter. Transaction days were almost flat versus Q3 of 2024 despite a 7% smaller fleet, with utilization reaching the highest number in more than 5 years at above 84%, even with more than 2% of the U.S. fleet impacted by OEM recalls. That's the operating model working, tighter fleet, sharper deployment, better productivity.

Our buy right, hold right, sell right strategy continues to anchor fleet unit economics. DPU was $273 per month, in line with expectations, supported by healthy residuals and disciplined channel management. As planned, gains on sale moderated with lower volumes with overall fleet returns remaining balanced. On cost, discipline is sticking. Direct operating expenses declined 1% year-over-year and DOE per day improved both sequentially and annually despite inflation and smaller scale. SG&A remained tightly managed as technology and process leverage flowed through. This is the kind of durable cost posture we set out to build.

We ended the quarter with $2.2 billion of total liquidity, including about $1.1 billion of unrestricted cash and the balance in revolver capacity and generated approximately $250 million in positive adjusted free cash flow. We had a $154 million benefit in the quarter from cash received from the previously disclosed litigation settlement distribution. Our ABS programs remain healthy with ABS vehicle fair values comfortably above net book values and market access is solid.

In September, we completed a $425 million senior unsecured exchangeable notes issuance. We used cap calls to increase the effective strike price of the notes to $13.94. At least $300 million of that will be used to partially redeem our $500 million bond obligation that matures in December of 2026. The remaining balance is our only corporate maturity in 2026.

Looking to Q4, we expect transaction days to be close to flat year-over-year, even with our expected fleet to be down just under 5%. Total fleet utilization will face an elevated number of fleet recalls, but should remain solid. We also expect lower DOE per day by roughly 5%. This outsized number is primarily due to a large true-up expense we took in 2024 related to our insurance claims reserve that shouldn't reoccur this quarter. Excluding that, DOE per day would still be down about 1% to 2%. We are, however, seeing a large number of vehicles being sold at auctions in the quarter, which is having an effect on residuals in the period. We believe this to be isolated to the quarter, but it will likely have an effect on used car pricing for Q4. Given that, we expect net DPU to rise slightly quarter-over-quarter to $280 to $285 per month.

For revenue, while you heard from Sandeep around the positive pricing trends in October, the softness in the remaining months of the quarter seem to potentially be government shutdown related and are likely transitory. We do expect the peaks of the quarter to perform well. The softness will likely sit in the troughs, which Q4 has a large trough to peak spread given Thanksgiving, Christmas, and some New Year's impact.

Also, in October, we experienced three different external system outages at three of our larger infrastructure vendors. Two of the events were isolated to us, but the other one affected multiple companies. We are certainly not happy about the ineffectiveness of the redundancies at our vendors. These outages will likely cost us about $10 million to $20 million of revenue in the fourth quarter. While isolated to this quarter, we are taking further steps to reduce the likelihood of these types of events in the future. As a result of all the Q4 moving pieces, we have updated our Q4 guidance to a slightly negative margin range of negative low to mid-single digits EBITDA margin.

So let's talk 2026. While there has been some recent dust in the air for Q4, we are cautiously optimistic for a stable setup for next year. Our fleet is in a good position for continued rotation and growth of Hertz car sales with model year 2026 vehicle purchases progressing nicely as we now have more than 80% of purchase volume already procured with line of sight to a good bit more. We still expect to have run rate net DPU well below $300 per month.

For capacity, we are looking to start growing the fleet again in 2026, but doing it the right way. With the three usages for vehicles being: one, our on-airport rental business; two, our HLE or off-airport locations; and three, our rental car adjacent mobility business. Each has different levels of maturity and different growth opportunities. For 2026, we expect to grow the mature airport business at GDP-like levels in the low single-digit range. Our HLE or off-airport business is less developed and has more white space for us to grow. So that business will likely grow in the mid-to-high single-digit range. And lastly, our emerging mobility business has a large amount of runway and will likely grow in the 10% to 20% range next year.

All of this together should put us in the mid-single-digit growth range in transaction days and a somewhat smaller number in growth of the fleet with the ability to increase or decrease with minimal lead time based on market dynamics given our fleet flexibility. This is likely the same framework we would see again in 2027 as well. We expect that our continued revenue management initiatives as well as continued cost performance, along with DPU and capacity assumptions in 2026 will drive a significant margin improvement year-over-year. We are targeting a 3% to 6% EBITDA margin for next year and putting us on our way to our target of $1 billion of EBITDA production in 2027.

In closing, I am encouraged by the progress we've made in strengthening our rental car business. However, my true optimism lies in the possibilities unlocked by the diverse platform we're building. Car rental is an important piece of our business, but the horizon is expanding well beyond it. It is exciting to think about what Hertz could look like in the years ahead.

With that, I'll turn it back to Gil for closing remarks.

Thank you, Scott. This is another quarter where we delivered on our commitments. Proof that our strategy is working. That said, we know there's more work to do. We're holding ourselves accountable for the improvements we need to make by driving rigor across each of our North Star metrics and other key financials every day, every month, every quarter. We'll always strive to be the best rental car company we can be for our customers. But as you've heard, this work is more than that. It's about building on our foundation to create a truly diversified value-creating platform that gives our customers more and positions Hertz to thrive across the full spectrum of mobility.

Understanding our customers and evolving to meet their needs is in our DNA. It's driven our success for the past 100 years and it's how Hertz will become more than a rental car company for the next 100. Our philosophy is simple. The best way for Hertz to be part of the future is to be in the service of it. The work we're doing to transform this company is deepening our skills and capabilities across all aspects of our business and giving us a foundation few others have. So while the future of mobility continues to evolve and AVs aren't yet ready for mass deployment, we're building the infrastructure and talent today for when they are, whether it's how our people buy or ride in cars or how the cars themselves change will play a key role.

With that, let's open it up for questions. Back to you, operator.

Our first question today comes from the line of Chris Woronka from Deutsche Bank.

Gil, you've talked -- and this is back in the prepared comments, you talked about kind of becoming this -- I think you said value-creating mobility platform. Can you maybe unpack a little bit for us what that kind of means in practice and what the platform includes and maybe how, I guess, in your mind, creates value beyond the traditional and core rental business?

Yes. Sure, Chris. Yes, thanks for the question. I guess, I would start just by saying, historically, we've subordinated everything to our rental car business, and we see additional growth and value creation well beyond that. So as I -- maybe I unpack some of that, I'll start with the rental car piece first and just reemphasize, this is our core business. It is job one for us to rebuild that core rental car business. We're making progress. I hope you're seeing that in the numbers, but we got a lot of work to do. So we're not going to be distracted from that is the key message, and we're going to remain focused, but we're far more than a rental car company.

So the other pieces that I touched on there, the car sales, service, and mobility, maybe just pulling that back a little bit. The car sales, first of all, the strategy we deployed, the end-to-end buy right, hold right, sell right strategy. That really sets us up well for this, especially with the fleet rotation kind of being in the rearview mirror. And of course, we got an iconic trusted brand. So the way we look at it is we're trading large volume of cars annually, especially as we shorten the hold periods, that volume will increase even further. So we got -- we've also got a pipeline of discounted supply of vehicles. So as I said it earlier, we kind of have used car factories the way I visualize it.

So we're producing well-maintained, low mileage, and I'd just add one owner cars with a natural footprint that puts us in the top 5 used car dealerships in the country. So we have scale and we got ongoing supply. We also take trades on vehicles. We can buy used cars in the market and have in the past. So just like other dealers, which generally is their only source of supply. So we got people, as we talked about, test driving our cars daily and a very large installed customer base. So we, in short, have real strategic advantages to other large dealers in the market that we just hadn't been exploiting. So unlocking the e-commerce side of this gives us capacity along with our existing physical footprint and infrastructure to create a scale retail sales model. So that's how we see the car sales side.

Service, it's more early innings in service candidly. But we've got a deep and I'd just say, much improved core operating competency and infrastructure to service vehicles. And as you know, we've been cleaning and fueling and maintaining cars for over 100 years. So we've got the opportunity to monetize this core competency beyond just servicing our own vehicles and go direct to really a B2B and a B2C customers, and we're starting to action that. Again, the way we look at it, we got a global footprint of car washes, gas stations, EV charging stations, and repair or oil change shops. So a lot of potential with that footprint.

And then finally, last but not least, the mobility part of our business. We're part of the future of mobility. We got great partnerships in rideshare now. We've been piloting some very innovative new models with Uber that we're beginning to start to scale as we go into '26. And of course, I think we're a natural player in the AV space as it continues to evolve. You heard that, I think, on our last earnings call, the rationale behind that. And we've got just an incredible team in the mobility business. So I'm really bullish on mobility as well. But look, everything comes down to execution, and we're staying focused, and we're pushing hard to execute.

Okay. I appreciate all the details there, Gil. Very helpful. As a follow-up, I think we understand the gist of the strategy that's now well underway, which is rightsized fleet, newer cars, very high utilization. I think one of the things that maybe comes with that slightly smaller vehicle size, smaller purchase price, maybe less maintenance, et cetera. But the question is, are the economics on that -- on those, I'm going to call it, smaller vehicle footprint.

Are the economics so much better because you would appear to be giving up a little bit of RPD and pricing on an absolute basis. And I'm curious as to whether that's just the customer mix or utilization, maybe it's rideshare or new accounts, whether it's corporate or leisure. Maybe you can just kind of give us a little tour of like how customer mix and things like that and maintenance and operating expenses are, I guess, accretive from smaller vehicles.

Yes. No, it's well said. I think a couple of things. First, I would say on the mix side, I mean there are some RPD headwinds, as you noted. But the way we look at mix is that it's dynamic. So ultimately, we're trying to optimize and align our car class mix around customer demand, what are the customers booking, their willingness to pay and -- for that class, and then the car class unit economics and doing that at a market level, really.

So when we think about our model year '26 buys in particular, I'll back up. Our model year '25 buys, to some degree, what was available in the market, coupled with our strategy to rotate and refresh the fleet, right, all that led to a fleet mix that was certainly a big tailwind for us on the macroeconomics of fleet, which is the biggest economic lever we have. But as we think about model year '26 and the availability that we're seeing, that gives us the ability to further improve in this area and get it more dialed in at a market level.

So -- and then I think just to touch on model year '26s while I'm talking about it, the buys, as I mentioned, have really come in at the price and volume targets we were seeking, which keeps our DPU well below the North Star target we've been managing to. But it also unlocks our ability to sell off our model year '25 fleet. And as I mentioned, roll into our shorter hold strategy. And that helps us for the unit economics you mentioned, Chris, whether it's maintenance expenses or even our ability to sell easier into the retail side. But the reality is we're really working hard to change our paradigm in the sense of beginning with the end in mind. So when we're buying cars, we're selling them. We're really selling them in mind. So we've got the selling side in mind and trying to develop a real car dealership mindset.

Your next question comes from the line of Chris Stathoulopoulos from Susquehanna International Group.

On the outlook for the sub-300 DPU for next year, I want to understand the moving pieces here. So it sounds like this vehicle recall is perhaps going to spill into early part of next year. The '26 vehicle purchases seem to be largely in place. And so what other work needs to be done, I guess, with respect to mix and mileage to confidently secure that sub-300 number?

Yes. I mean I'll start, Scott, you feel free to jump in. But I think the broader strategy that we've talked about, the end-to-end fleet strategy, buy right, hold right, sell right, that works in any environment for us, right? I mean you think about where we were 1.5 years, 2 years ago as we were really -- I mean, we had fierce headwinds on the fleet itself. And we -- through the fleet rotation, we've turned those around into tailwinds now with the model year '26s and the buys, again, the price and volume that we've seen, that helps us continue that model. In fact, it gets us to the short hold now with the volumes that really perpetuate our ability to hit our North Star DPU targets.

Yes. No, that's right, Gil. I think Chris, good to see you. Yes, I think, look, what we're looking at today is a very similar platform in '26 we saw in '25. We expect generally stable residuals. We have good pricing on '26. So everything we're seeing and also the sort of channel management of how we dispose of vehicles will influence DPU. And one other point is that while this also even excludes the fact that our F&I revenue doesn't even hit DPU. It hits revenue. So we think we still have a good bit of benefit coming from the Hertz car sales that will benefit DPU, but ultimately impact revenue as well. So we're pretty bullish on the channels and how it affects DPU, but also total EBITDA.

Okay. Great. And then, Scott, so I appreciate the color on the composition of the fleet for next year. So as I understand it on the airport side, GDP like off-airport, mid-to-high single digits, mobility 10 to 20. It sounds like you feel where you have the tactics in place to sustainably hit this sub-300. There are several efforts out there with respect to pricing utilization, customer satisfaction that Sandeep outlined that I'm guessing should result in lower DOE. So let's call that low single-digit growth. So is that all of these here, this fleet outlook, this sub DPU? Is it fair to think of those as, I guess, the algo going forward when we think about Hertz and I guess, it's pivoting towards this more of a sort of car sales, digital channel sort of focused platform?

Yes, I'll start. I'm sure Sandeep and Gil want to chime in, too. I think it's a good initial view of the base platform, which is something we've tried to articulate in the call. The base rental car business, yes, DPU-driven DOE per day, RPD, RPU, those sort of historical metrics. Now I think over time, you'll see that get influenced by things that Gil referenced in the first question around some of the services and some of the things that are outside the traditional rental car and even some of the mobility things that we do today that we might do tomorrow.

So obviously, our ability to sort of tell that story with additional metrics, additional color commentary might change over time. But I do think, yes, the base rental car business in the near term will be influenced by those things you mentioned. And we tried to outline that a little bit in our script that obviously, we hope to see organic and industry-supported RPD, RPU growth. We're going to drive some scale and efficiencies to get DOE per day benefits. We think the fleet setup is good for DPU. So all of those are foundational. But over time, I think you'll see a few more tangents start to hit.

Your next question comes from the line of Ian Zaffino from Oppenheimer & Company.

I was just wondering if you could maybe just give us a little bit of color on just the quarter in general as far as what have you seen from international inbounds or corporate? And also maybe any markets that have been particularly strong or particularly weak? I know you referenced the government shutdown. Was that specifically D.C. area or anything else going on there?

And Ian, this is Sandeep here. Just for clarification, you're asking about Q4?

I was -- actually 3 and 4, if you can. So what you've seen and what kind of look -- yes, look at for going forward. Yes.

Awesome. Great. Thank you. So yes -- so overall starting, I think, high level, there was a substantial improvement from a demand profile in Q3 over -- when compared to Q2 on a year-over-year basis, right? When you look at overall airport demand, airport demand was largely, I'd say, slightly negative from Feb all the way through June this year. And then July onwards, it's been positive. So there's been an uptick both on the leisure side of the business in Q3 as well as on the corporate side of the business.

And on -- let me first touch upon the corporate side of the business. There's been a couple of points of improvement when we talk about Q3 over Q4. And I'd say even more of an improvement sequentially within the quarter when you look at August and September, but it was still in negative territory when we talk about corporate. Now that's turned positive in October as we moved into Q4. So positive trends on the corporate side.

Inbound had basically -- it was down double digits when you look at Q2, June -- May and June, right? We know some of the impact that had happened earlier on in the year. And a lot of that reduction was from EMEA as well as Australia and New Zealand. What we've seen since then is basically a couple of points of improvement again in inbound demand through summer and improvement going into October as well. But inbound is still down, I'd say, low single digits as such on a year-over-year basis.

And then finally, we come to the government side of the business. So that was down substantially in Q2, improved a bit in Q3. Since the start of November, given everything around the federal government, we've seen that part of the business come down significantly in November. But again, we believe that in due course, that will be resolved. But right now, we see impact of that in November.

Overall, when I pull up and I ask the question, okay, what does that mean for us? I think Q3 was substantially better from a demand profile perspective relative to Q2, and that was represented in the pricing environment that we had seen at that point in time. As we stepped into Q4 and looked at October, further improvement on the demand profile and I would say, a pretty solid pricing environment as well. So that's the way things have shaped out so far.

Okay. And then just maybe as a follow-up, can you talk about the strategy of -- as you go more off-prem, is that insurance replacement? Is that other? How do we think about maybe the competitive dynamics there? And what you kind of expect as far as metrics, whether vis-a-vis what they would look like on-prem versus off-prem?

Yes. I'll jump in and then, Sandeep, you can add a lot more color. At least the way we look at it, look, it's a really big market. It's more less cyclic than the airports. We're in the space. We have the footprint and the opportunities are both B2C and B2B opportunities there, including retail.

Yes, it's -- to be transparent, that was a less mature part of our business in terms of how we handle that part of the business. I'd say from a demand generation perspective as well as from how we kind of operated that part of the business. And we've been working on improving our ability to generate demand there. There's been improvement on the replacement side of the business, but also, in general, a greater demand coming from direct retail customers as well as from our partnership business. So I'd say, overall, the -- there's a commercial engine that's working on growing greater durable demand for Hertz as a brand overall. And that powers both airport as well as off-airport business.

Your next question comes from the line of Stephanie Moore from Jefferies.

Great. I wanted to touch on the early -- kind of early view on 2026, particularly the margin commentary. Very helpful to have the range that you provided. But given you guys have made tremendous steps forward in your own execution, it does remain a pretty volatile underlying market in general. Maybe just talk about what we would need to see to either hit the high end of that margin range or on the other side, if it ended up coming at the lower end of the range? And how do you kind of balance between actions that are more within your control and then again, the uncertainty of an underlying environment?

Stephanie, this is Scott. I'll start. Yes, I think there's a few things there. One, obviously, this is just a first indication of how we're kind of viewing '26. I think some of the details are still to be played out through our internal budget process and plus through as the fourth quarter starts to materialize, giving us a better foundational view for '26. But look, I think there's a few things that we impacted a little bit in some of my comments, but the plan is to generate a little bit of scale in the right way, as I mentioned, less so on airport and more so off-airport and mobility. We think those businesses have a lot of room to grow.

So I think as Sandeep talked about some of the maturity we have from a revenue management perspective and that scale will generate a little bit of DOE benefit with continued process efficiency. Like I think those alone, I think, are sort of the foundational components. I think we're cautiously optimistic, too, about the benefit of sort of DPU and the distribution channel, specifically Hertz car sales, which could drive further DPU benefit and/or revenue benefit.

So I think as we sort of think about the boundaries of that, I think the upside, obviously, there's additional sort of industry movement on sort of pricing that gives potential upside. But putting some of that to the side, internally, we think it's our ability to ramp up the sort of percentage of flow-through of car sales through our Hertz car sales. Today, we're sort of 20%, 25% of cars through that side. Our ability to get to north of 75%, 80-plus percent will be a big driver of value. So in our internal views, that's probably the component that really drives us to the top end or beyond.

Great. That's very helpful. And then I just wanted to follow up to your point on the incremental growth for next year. Could you maybe talk about how much net fleet CapEx you would expect to meet those plans? And then secondly, as you're thinking about this overall net fleet itself, maybe talk a little bit about how the 2026 purchases are shaping up and how we should think about in terms of the fleet mix for 2026 versus 2025?

Yes. Okay, Stephanie, I'll start. I'm sure Gil want to chime in, too. But yes, there will be a CapEx to the growth, probably in the, I'll call it, in the $100 million, $150 million range. The specific number will sort of depend on a number of factors. including vehicle type program versus risk, a number of other things, but probably in that range.

And yes, I think you'll probably see us -- and Gil mentioned this, too, the fleet plan and our fleet mix in any given year is dependent on a large number of factors. But I think we'll probably -- we have an opportunity next year to probably look at a shift into some slightly larger vehicles, which we think can play out in a number of geographies for us. But I don't think you're going to see a dramatic shift in our fleet plan, but we have an opportunity to grab some vehicles that we think will be fruitful for us overall. But I think I mentioned, I think, in my script, that we're probably 80% of the way, maybe even north of 80% of the way and line of sight to some good opportunistic buys in '26. So we feel good about where it sits today. So I don't know, Gil, do you want to add.

No, I mean that's a good summary. Thanks. All I would say is the volume of model year '26 has been there. We've locked up kind of our primary needs. But we also see spot buy opportunities as we come out throughout the year. We've already done several of those post our original round. So we've got -- we're in a -- and price as well has hit our target. So we are in a position to be far more selective than last year. And I think Scott said it, we'll end up with probably a larger, you call it, richer mix of vehicles than we currently have. But that's all aligned with what we're trying to achieve at a local market level. And I would also say that as, again, we're thinking about when we're buying cars selling them and have that dealership mindset.

I would say some of the trim that normally we would default for just for cost purposes for lower cost vehicles, we're thinking more about the sales side of that and can we get paid for different trim packages, especially at a location level, all-wheel drive, 4-wheel drive probably being the most notable example, but there's a lot of trim packages that we're thinking more about on the sales side and what the residual value impacts are than just for cost. So I'll just say we keep refining that model.

And then probably one other last thought. There are definitely more program cars available than I think we've seen over the last few years. So that gives us some additional flexibility with mix, especially seasonally when it's a little harder to hit the peaks with large SUVs and luxury vehicles. We've got more flexibility than we've had in the past through program cars to manage that.

Your next question comes from the line of Dan Levy from Barclays.

I wanted to ask about the plans to grow the fleet next year. And specifically in light of the comments in your deck that some of the underlying RPD pressure is still being driven by market pricing pressure. So question is, do you think that fleet levels are rightsized in the industry? Or is there excess fleet? And how do you think the market will absorb your plans to grow fleet? How can you ensure that you will have positive RPD when expanding your fleet next year?

Yes. Let me start. I know Sandeep has got thoughts and probably Scott as well. It's a good question, right? So I think Scott laid it out our view well in that you've got to look at this at a segment level because all segments are not created equal, right? And I think, again, airport, off-airport and mobility, off-airport mobility will grow at faster rates than GDP because we've got the ability from a demand generation to generate that and continue the momentum we're already seeing in those businesses.

The airport piece of the equation, I think where most of the root of your question comes from, right, is we -- I mean, we view it more in terms of we can grow more or less at GDP. We're not -- I'll just say we're not after gaining market share here. But there is a natural growth now that we've done our fleet rotation and have our unit economics more in line with where they should be, that gives us the right to grow again in all three segments. But we're going to be very disciplined in our approach here.

Yes. And the only thing I'll add here is basically even at the airports, I think if I look at the overall pricing environment from the start of the year until where we're sitting here right now, I think that pricing environment in -- especially in Q3 and then as we look so far what we've seen in Q4 is much improved, right? And I'm talking about just the overall industry backward looking, it's much improved.

And then the slate of commercial initiatives that we had outlined there's momentum there, and you've seen the impact of that in -- at the tail end of Q3. And so I expect that to take a further foothold in the coming quarters and have an impact in 2026.

Okay. Great. As a follow-up, I wanted to just ask about the utilization in the quarter. And maybe you can just unpack, and I see the commentary here in the deck, but it was -- it seems like close to a quarterly record. Just how sustainable is that? And what type of utilization can we expect into next year?

Yes. No, great question. I see we've been building momentum with utilization over the last several quarters. And I attribute it principally to our operational processes are starting to get some real traction to eliminate out-of-service vehicles and idle time in general, along with the commercial team has done a great job with better demand generation. It all starts with demand generation, but we're starting to sweat our assets.

And as you've seen, I think we made some big leaps here. I think there's more room to run candidly, albeit the spike in the recalls create a headwind for us in the short run. The fourth quarter is even more of a headwind than we saw in the third quarter. But I want to say we'll never be satisfied with our performance in this area. We're just the team's wired for continuous improvement. And I think the other big item aside from the kind of operational processes is -- plays into how we're selling cars because traditionally, -- and Sandeep talked about total utilization, which is really the way we look at it internally. It's not just operational, it's total utilization because we own those vehicles.

The big difference being the inventory we have that is for sale for cars that take the turnaround times there have been very long. So we've process engineered that and some big improvements, which you see in the quarter on total you. But ultimately, as we sell digitally and we can continue to operate vehicles to the point of sale without taking them out of service for a month or 2 to sell, that creates tremendous opportunities for total utilization. So that's really our focus and strategy.

And this concludes the Hertz Global Holdings Third Quarter 2025 Earnings Conference Call. Thank you for your participation.