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Date
Tuesday, Nov. 4, 2025 at 9 a.m. ET
Call participants
Chief Executive Officer — Gil West
Chief Commercial Officer — Sandeep Dube
Chief Financial Officer — Scott Haralson
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Risks
Q4 revenue impact from system outages — CFO Scott Haralson stated that three separate vendor infrastructure outages in October will "likely cost us about $10 to $20 million of revenue in Q4 2025."
Used car pricing pressure in Q4 — Haralson noted, "We are, however, seeing a large number of vehicles being sold at auctions in the quarter, which is having an effect on residuals." This is expected to be isolated to the quarter, but it will likely have an effect on used car pricing for Q4.
Government business decline — CCO Sandeep Dube said, "Since November, given everything around the federal government, we've seen that part of the business come down significantly in November."
Takeaways
Revenue -- $2.5 billion in revenue.
Adjusted corporate EBITDA -- $190 million adjusted corporate EBITDA, an 8% margin, representing an approximately $350 million year-over-year improvement.
Net income -- Net income of $184 million, with positive EPS achieved for the first time in two years.
Fleet utilization -- 84%, the highest since 2018, despite more than 2% of the U.S. fleet under recall and a 7% smaller overall fleet.
RPU (Revenue Per Unit) -- Total fleet RPU up 2% year-over-year.
DPU (Depreciation Per Unit) -- $273 per month, in line with expectations and under the company's sub-$350 target.
DOE (Direct Operating Expense) per day -- Lowered both year-over-year and sequentially. Direct operating expenses declined 1% year-over-year.
Liquidity -- $2.2 billion at quarter end, including about $1.1 billion in unrestricted cash and positive adjusted free cash flow of approximately $250 million.
Hertz Car Sales digital channels -- Digital e-commerce initiatives, including Cox Automotive and Amazon Autos partnerships, now deliver "$2,000 or more incremental margin benefit per vehicle versus wholesale channels," as discussed, according to Gil West.
Net Promoter Score (NPS) -- North American NPS rose nearly 50% year-over-year, with noted improvement in ease of rental and confidence in vehicle quality.
Model year 2026 fleet procurement -- Over 80% of purchase volume for model year 2026 vehicles is already procured at management target price and volume.
2026 guidance -- Targeting a 3%-6% EBITDA margin (non-GAAP) for 2026, with anticipated mid-single-digit transaction day growth, sub-$300 net DPU, and potential mobility segment growth of 10%-20%.
Q4 2025 guidance -- Slightly negative EBITDA margin range (low to mid-single digits), with transaction days expected to be nearly flat year-over-year and net DPU forecasted at $280-$285 per month for Q4 2025.
Summary
Hertz Global Holdings (HTZ +36.23%) reported a $350 million year-over-year improvement in adjusted corporate EBITDA. Driven by disciplined fleet management, cost control, and a completed fleet refresh, despite headwinds from fleet recalls. The company achieved record-high utilization above 84% and improved operational efficiency. Translating into its first positive EPS in over two years and a marked increase in Net Promoter Score. Management emphasized rapid adoption and monetization of digital car sales channels, with strategic partnerships contributing to significant incremental margin benefits and supporting future diversification beyond core rentals.
CEO West described the retail car sales operations as transforming "from a simple fleet rotation mechanism into a profit-accretive engine," with rent-to-buy conversion rates at 70%, as stated on the earnings call.
Haralson introduced EBITDA margin guidance for 2026, indicating a strategic emphasis on sustainable margin expansion through channel management and process improvement, with a targeted EBITDA margin range of 3% to 6%.
CCO Dube highlighted that off-airport and rideshare business lines delivered sequential revenue growth and higher EBITDA, even though these segments are RPD dilutive.
Management stated model year 2026 fleet buys hit both price and volume targets, enabling accelerated execution of the short-hold strategy to optimize utilization and cost.
Hertz Car Sales’ digital channels are positioned to drive future revenue, with management targeting sales of the "vast majority of vehicles" according to Gil West through e-commerce retail over time.
Industry glossary
DPU (Depreciation Per Unit): Average monthly depreciation expense per vehicle in the rental fleet, reflecting capital cost management.
RPU (Revenue Per Unit): Average monthly revenue generated per fleet vehicle, including both rate and utilization effects, used for performance assessment.
DOE (Direct Operating Expense): Per-day direct expenses related to operating the rental fleet, important for cost discipline and margin optimization.
RPD (Revenue Per Day): Daily revenue generated per rental unit, a core pricing and profitability metric in the car rental sector.
Net Promoter Score (NPS): Customer satisfaction metric indicating the likelihood of customers recommending the brand, widely used in service industries.
Short hold strategy: Fleet management approach focused on reducing average vehicle holding periods to sustain favorable economics and sales agility.
ABS (Asset-Backed Securities): Debt instruments backed by pools of operational assets, commonly used by fleet-intensive businesses to finance vehicles.
Full Conference Call Transcript
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.
Gil West: 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 to 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 and setting a new standard for ourselves 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 US 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 Global Holdings, Inc. is an asset management company built on a century of buying, renting, and selling vehicles at scale. That's why we set NorthStar 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 $100. 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 relentless customer focus, we're simultaneously laying the groundwork for diversified value-creating platforms. 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 Global Holdings, Inc. 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 US 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 twelve 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 target, 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 fifty 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 building 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 Global Holdings, Inc. 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. 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 Global Holdings, Inc. 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 Global Holdings, Inc. 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, 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 Global Holdings, Inc. 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.
Sandeep Dube: Thanks, Gil. Good morning, everyone. As we continue to improve fleet economics and agility, we're leveraging that momentum to action our commercial strategy. By maximizing asset productivity and strengthening pricing through 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 segment, 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 our 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 266 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 406 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've 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. 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 leverage technology to deliver a smoother customer experience, including making it easier to modify reservations and purchase upgrades digitally, enabling 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 US 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 US, 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. 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 trough and shoulder season, 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 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're 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 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 block, 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.
Scott Haralson: 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 two years, improved RPD and RPU, record utilization, and a major leap in NPS score. That's great stuff, and we are all proud of the progress, but we're only getting started. Heck, 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 capability that could make Hertz Global Holdings, Inc. 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 upright. 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 the 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 two years. Our international segments 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 2024, despite a 7% smaller fleet, with utilization reaching the highest number in more than five years, at above 84%, even with more than 2% of the US 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 is $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 strong. 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 flow 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 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 seems 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 trough, 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 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. We are cautiously optimistic for a stable setup for next year. While there has been some recent dust in the air for Q4, 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 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, 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 Global Holdings, Inc. could look like in the years ahead. With that, I'll turn it back to Gil for closing remarks.
Gil West: Thank you, Scott. This is another quarter where we delivered on our commitments to prove 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 Global Holdings, Inc. 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 one hundred years, and it's how Hertz Global Holdings, Inc. will become more than a rental car company for the next hundred. Our philosophy is simple: The best way for Hertz Global Holdings, Inc. 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, we'll play a key role. With that, let's open it up for questions. Back to you, operator.
Operator: We will now open the line for questions. Please limit your questions to one question per speaker and one follow-up if needed. To ask a question, please dial 1 on your phone. If you wish to cancel your question, dial 1 again. Our first question today comes from the line of Chris Woronka from Deutsche Bank. Your line is open.
Chris Woronka: Hey, good morning. Thanks for all the details so far and taking the questions. Gil, you've talked, and this is back in the prepared comments, 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, what the platform includes, and maybe how, I guess, in your mind, it creates value beyond the traditional and core rental business?
Gil West: Yeah. Sure. Sure, Chris. Yeah. Thanks for the question. You know, I guess I would start just by saying historically, you know, we've subordinated everything to our rental car business, and we see additional growth and value creation well beyond that. So it's like, maybe I unpack some of that. I'll start with the rental car piece first and just reemphasize. Like, this is our core business. It's job one for us to rebuild that core rental car business. You know, 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 gonna be distracted from that is the key message, and we're gonna 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 kinda 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've also got a pipeline of discounted supply of vehicles.
So as I said it earlier, we kinda have used car factories the way I've visualized it. So, you know, we're producing well-maintained, low mileage, and I just add one owner of cars with a natural footprint that puts us in the top five used car dealerships in the country. So we have scale supply 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, you know, this is more early innings in service candidly. But we've got a deep and I 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 a hundred years. So we got the opportunity to monetize this core competency beyond the servicing our own vehicles and go direct to really a B2B and a B2C customers, and we're starting to action that.
You know, 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, you know, a lot of potential with that footprint. And then finally, last but not least, the mobility part of our business. You know, we're part of the future of mobility. We got great partnerships in Rideshare Now 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.
Chris Woronka: Okay. Yeah. I appreciate all the details there, Gil. Very, very helpful. And as a follow-up, I think we understand the gist of the strategy now well underway, which is, you know, right-sized fleet, newer cars, very high utilization. I think one of the things that maybe comes with that is a slightly smaller, you know, vehicle size, smaller purchase price, maybe less maintenance, etcetera. But the question is, are the economics on that, on those, I'm gonna call it, smaller vehicle footprint, are the economics, you know, so much better because you would appear to be giving up a little bit of RPD pricing on an absolute basis.
So I'm curious as to whether that's just the customer mix or utilization, maybe it's rideshare or, you know, new accounts, whether it's corporate or leisure. Maybe you can just kinda give us a little tour of, like, how the customer mix and things like that and, you know, maintenance and operating expenses are, I guess, accretive for smaller vehicles?
Gil West: Yeah. No. It's well said. I think a couple of things. You know? 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 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, you know, 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 availability that we're seeing, you know, that gives us the ability to further improve in this area and get it more dialed in at market level. So and then I think just to touch on model year '26 while I'm talking about it.
You know, 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, as I mentioned, being rolled into our shorter hold strategy. And, you know, that helps us for the unit economic 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, you know, in the sense of beginning with the end in mind.
So when we're buying cars, we're selling them or we're really selling them in our mind. So we've got the selling side in mind and trying to develop a real car dealership mindset.
Chris Woronka: Okay. Super helpful. Thanks for all the details, Gil. Thank you.
Operator: Your next question comes from the line of Chris Stathoulopoulos from Susquehanna International Group. Your line is open.
Chris Stathoulopoulos: Hey, good morning, everyone. 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 gonna spill into, you know, the 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, you know, secure that sub-300 number?
Gil West: Yeah. I mean, I'll start, Scott, you feel free to jump in. But, no, I think the broader strategy that we 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, you know, a year and a half, two 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 '26 and the buys, you know, 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, you know, our ability to hit our North Star DPU targets.
Scott Haralson: Yeah. No. That's right, Gil. I think, hey, good morning too, Chris. Good to see you. I think, look, what we're looking at today is a very similar platform in '26 as it was 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, you know, 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 that.
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.
Chris Stathoulopoulos: Okay. Great. And then, Scott, so 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 get this sub-300. There's several efforts out there with respect to price 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, the fleet outlook, this sub-DPU? Is it fair to think of those as, I guess, the algo going forward when we think about Hertz Global Holdings, Inc.?
And I guess it's pivoting towards this more of a sort of car sales digital channel sort of focused platform?
Scott Haralson: Yeah. I'll start. I'm Sandeep and Gil wanna 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. Nothing over time you'll see that get influenced by things that Gil referenced, you know, 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, yeah, the base rental car business in the near term will be influenced by those things you mentioned. And then we tried to outline that a little bit, you know, in our script. That obviously we hope to see organic and industry-supported RPD, RPU growth. We're gonna drive some scale and efficiencies to get DOE per day benefits. Think the fleet setup is good for DPUs. All of those are foundational. But over time, I think you'll see, you know, a few more tangents start to hit.
Chris Stathoulopoulos: Okay. Thank you.
Operator: Your next question comes from the line of Ian Zaffino from Oppenheimer and Company. Your line is open.
Ian Zaffino: Hi, thank you very much. I was just wondering if you could maybe give us a little bit of color on just the quarter in general as far as, you know, 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 DC area or anything else going on there? Thanks.
Sandeep Dube: And, Ian, this is Sandeep here. Just for clarification, you're asking about Q4 or Q3 and 4 if you can. So what you're seeing and what you kinda look forward to.
Ian Zaffino: Yeah. Thanks.
Sandeep Dube: Awesome. Great. Thank you. So yeah. So there was substantial improvement from a demand profile in Q3 over when compared to Q2 on a year-over-year basis. Right? When you look at the overall airport demand, airport demand was largely, I'd say, slightly negative from Feb all the way through June this year. So there's been an uptick 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. 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, yeah, I'd say low single digits as such on a year-over-year basis.
And then finally, come to the government side of the business. So, you know, that was down substantially in Q2, improved a bit in Q3. Since 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've seen at that point in time.
As we stepped into Q4 and looked at October, further improvement on the demand profile and I'd say a pretty solid pricing environment as well. So that's the way things have shaped out so far.
Ian Zaffino: Okay. Thanks. And then just maybe there's a follow-up. Can you talk about the strategy of off-prem, you know, as you go more off-prem, is that insurance replacement? That other? How do we think about maybe the competitive dynamics there? And what you kind of expect as far as metrics whether, you know, vis-a-vis what they would look like on-prem versus off-prem. Thanks.
Gil West: 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 or 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.
Sandeep Dube: Yeah. I'm like, 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 as well as from how we kind of operate at 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, there's a commercial engine that's working on growing greater durable demand for Hertz Global Holdings, Inc. as a brand overall.
And that powers both airport as well as off-airport business.
Ian Zaffino: Okay. Thank you very much.
Operator: Your next question comes from the line of Stephanie Moore from Jefferies. Your line is open.
Stephanie Moore: Great. Thank you so much. I wanted to touch on the early view on 2026. Particularly the margin commentary, you know, very helpful to have the range that you provided. But given, you know, you guys have made tremendous steps forward in your own execution, it does remain a pretty volatile underlying market in general. Maybe 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? Thank you.
Scott Haralson: Hey, Stephanie. This is Scott. I'll start. Yeah. I think there's a few things there. One, you know, obviously, 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, you know, through our internal budget process and plus through as the fourth quarter starts to materialize, giving us a better foundational view for '26. But like, I think there's a few things that we impact a little bit in some of my comments, but, you know, the plan is to generate a little bit of scale, you know, in the right way as I mentioned. Less so on airport and more so off-airport 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 channels, specifically Hertz car sales, which could drive further DPU benefit and or revenue benefit.
So I think, you know, as we sort of think about the boundaries of that, you know, I think the upside obviously, there's additional sort of industry movement on sort of pricing that gives potential upside. But, you know, 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. You know, we're sort of, you know, 20%, 25% of cars through that side. Our ability to get to north of 75%, 80% plus 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.
Stephanie Moore: Great. That's very helpful. And then I just wanted to follow-up to your point on the incremental growth for next year. Can you talk about how much net fleet CapEx you would expect to meet those plans? And then secondly, as you're thinking about this overall, 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. Thanks.
Scott Haralson: Yep. Okay. So, I'll start. I'm sure Gil won't chime in too. But yeah. There will be a CapEx to the growth probably in, I'll call it, the $100 million to $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, yeah, I think you'll probably see us, you know, and Gil mentioned this too. The fleet plan and our fleet mix in any given year is dependent on a larger number of factors.
But I think we'll probably 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 gonna see a dramatic shift in our fleet plan, but, you know, we have an opportunity to grab some vehicles that we think will be, you know, fruitful for us overall. But I think, you know, I mentioned, I think in my script that we're probably 80% of the way, maybe even north of 80% of the way, in 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, you wanna add?
Gil West: No. I mean, that's a good summary. Thanks. All I would say is, you know, the volume of model year '26 have been there. We've locked up kind of our primary needs 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 will end up with a 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 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, four-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, you know, 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, you know, hit the peaks with, you know, large SUVs and luxury vehicles. We've got more flexibility than we've had in the past through program cars to manage that.
Stephanie Moore: Thank you very much.
Operator: Thanks, Stephanie. Your next question comes from the line of Dan Levy from Barclays. Your line is open.
Dan Levy: Hi, good morning. Thanks for taking the question. Wanted to ask about the plan to grow the fleet next year. Specifically in light of, you know, the comments in your deck that some of the underlying RPD pressure is still being driven by market pricing pressures. So the question is, do you think that fleet levels are right-sized 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 mix next year?
Gil West: Yeah. Let me start. I know Sandeep and Scott Dalton, probably Scott as well. It's a good question. Right? So I think Scott laid it out, you know, our view well in that you've to look at this at a segment level because all segments are not created equal. Right? And I think, you know, 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, you know, more or less at GDP. We're not, I'll just say it, we're not 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, gives us the right to grow again in all three segments. But we're gonna be very disciplined in our approach here.
Sandeep Dube: Yeah. 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, 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 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.
Dan Levy: Okay. Great. Thank you. As a follow-up, wanted to just ask about the utilization in the quarter and maybe you can just unpack, you know, and I see the commentary here in the deck, but it was, seems like, you know, close to a quarterly record. Just how sustainable is that and what type of utilization can we expect into next year?
Gil West: Yeah. No. Great question. You know, I see, you know, we've been building momentum with utilization over the last several quarters. And I attribute that 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, you know, the commercial team's 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 honestly, 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 operational processes is plays into how we're selling cars. Because, you know, traditionally, and Sandeep talked about total utilization, which is really the way we look at it internally. It's not just operational unit. It's total utilization because we own those vehicles. The big difference being the inventory we have that is, you know, for sale for cars that, you know, 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 utilization. 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 two to sell, that creates tremendous opportunities for total utilization. So that's really our focus and strategy.
Dan Levy: Great. Thank you.
Operator: And this concludes the Hertz Global Holdings, Inc. third quarter 2025 earnings conference call. Thank you for your participation.