Hertz Global Holdings, Inc

Welcome to Hertz Global Holdings' third quarter 2025 earnings call. Currently, all lines are in listen-only mode. Following management's commentary, we will conduct a question-and-answer session. 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, Johan 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 change 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 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 Harrelson, our Chief Financial Officer, who will discuss our financial performance and liquidity. I'll now turn the call over to Gil.

Thanks, Johan. 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 two years. In Q3, we completed our transformative fleet refresh. hitting another major milestone in 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 that 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 studied, 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 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 underleveraged 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 three-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. Seventy percent 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 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 omni-channel experience that we believe only Hertz can offer. 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. 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 discipline 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.