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 tube which would bring our pro-forma liquidity post-transaction to slightly over one billion dollars. 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 and 1.4 billion dollars 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 stub 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 investments and how we manage fleet levels throughout the year particularly as it pertains to working capital recognizing that decisions around fleet timing and seasonality can have a nine-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 and $325 million, with positive earnings per share for the quarter. Transaction days should be up approximately 1% year-over-year, and net DPU is 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 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, 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 2027. 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, but 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 Gail for closing remarks.

Yeah, 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 five, 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 two 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.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Stephanie Moore with Jeffries. Your line is open. Please go ahead.

Hi, good morning. Thank you. So it looks like a good. Hi there. So, you know, honestly, it looks like a good print and it sounds like you guys feel pretty confident about where the business is going. So, you know, 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.

Yeah, thanks, Stephanie. This is Gil. I'll chime in. I'm sure Scott will want to add. Well, I mean, great question. Certainly keeping us up at night. Candidly, the valuation of the business today is tough to understand. You know, 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 Hertz over the last quarter. And the way I think about it is at the end of the first quarter, we set at roughly a billion and a half 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 third 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 a billion dollars, which was consistent with what we'd guided. And we expect to build liquidity throughout the year and to be pre-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 deliver the business. And then I think the EBITDA results as well, right, for the quarter and year-over-year improvements, despite some headwinds. And the commercial momentum, revenue that Sandeep talked about, you know, really doing more with less. The revenue up 10% with a 1% smaller fleet. So the strategies and the hard work the team's been doing is paying off, and we expect more ahead. And then depreciation as well effectively hit our North Star target. And even though we accelerated the rotation of older vehicles, we got a really healthy fleet, and that ought to bode well for DPU as we sell those through more lucrative channels. So I think the other upside we see is 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, you know, we're focused on, you know, executing the strategies that we have. We know ultimately the stock price will take care of itself. So, you know, that's really key for us to stay focused and keep moving.

Yeah. Hey, Stephanie. Look, I think Gil outlined it well. I think the point is the fundamentals of the business are different than they were two years ago. How we're talking about the business today is different. You know, the traditional rental car portion of our business is strong. Foundational elements of RPD and 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, you know, in the marketplace. And that's understandable. Look, I mean, I talked about the prepared remarks. You know, we recognize that our investors are focused on the capital structure and the upcoming debt maturities, and that's okay. You know, our job is to continue to execute over and over again, and all that stuff will play out over time.

Thank you. 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 two-part question. 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? 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. That's it for me.

No, I appreciate it. I'll start. And I think, Scott, you can talk more about the liquidity and the franchising piece. Yeah, look, I mean, we're, as I said earlier in the prepared remarks, you know, we've been facing a lot of headwinds, right, for different reasons. You know, some are some macros, you know, that I mentioned. And others are just working through issues, you know, historically, you know, not to not to relitigate some of the fleet discussions. But, you know, we had to rotate the fleet for a variety of reasons. That was hard to do, especially the liquidity ad. But we've come out the other side. So, look, I think we've been facing headwinds and attacking them heads up head on. You know, we know things can 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, you know, we managed through that and then come out in a much better place. So we've got what I would say, you know, 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.

Yeah. Hey, Stephanie, real quick on liquidity and maybe a little on franchise. Look, I think over the last two years, much of our discussion has centered around capital structure and really centered on liquidity, ensuring that we had 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 two 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.

Thank you, guys. Really appreciate it.

The next question is from the line of Chris Wuronka with Deutsche Bank. Your line is now open. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions and for all the details. Yeah, morning. So I was hoping 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. um relative to what you thought maybe three or six months ago is this more an issue of the market temporarily moved against you for a specific kind of you know model or something or um is this really about channel mix um not being quite what you thought or hoped and if it's you know if it's the latter if it's channel mix what what what how confident are you and and you know what are some of the steps you're taking to to get the mix more favorable um going forward and then i'll have a follow-up thanks yeah sure chris thanks uh uh good to hear from you good question yeah i what i would say on residuals um you know and i i tried to cover it you know in the prepared remarks but

i think we saw some things that were unique to the quarter that affected us um uh the the broader outlook and and keep in mind the the backdrop of the dynamics right we um 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, you know, February, March up, you know, 7, 9%, you know, in the rental car index. So I think what we saw in the second quarter, again, is, you know, 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 kind of fall off. And I think that was part of it might have been that pull forward for 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, and 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, you know, periodically we have volume to move and we need the capacity to do that. So, you know, the channel mix side is, you know, 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, you know, our direct retail, both physical and digital area, we focused on partnerships or another area. But just know, we continue to iterate and figure out how do we move from, you know, kind of, you know, call it 70 to 80, you know, plus percent wholesale volume into flipping that equation to more lucrative channels.

So it's a big area of our focus and and has the opportunity to create a lot of value for us okay uh thanks gill appreciate that and then um 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 like do you envision that you would have some kind of um 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?

Yeah. Hey, 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 couple things. One, this isn't new for us. We've been doing this for a long time. We just haven't fed 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% for branded revenues franchise. We think that number could be, you know, directionally higher. You know, 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. We have very high-quality franchisees today, and we'll continue to look for high-quality franchisees that can operate this complex business. We're excited about where it goes, especially from a capital perspective. I think it's a much more efficient use of our capital and creates a consistent level of EBITDA. We'll give you more as we go down the path on this, but we're excited where this can go. Okay. Thanks, guys.

Appreciate it.

The next question is from Rajat Gupta of J.P. Morgan. Your line is now open. Please go ahead.

Hi, good morning. This is Josh Bhattwa on for Rajat Gupta. Thanks for taking our questions. I just wanted to start on the retail disposition mix, and if we could get an update where that's in Q2 and how should we think about the runway to expand it from your, is there a natural ceiling or a clear path toward that higher aspiration? It'll also be helpful to understand how the partnerships you've built over the past couple of years with Amazon, eBay, Cox, how are those, you know, factoring into your retail disposition channels? Thanks and have a quick follow-up.

Yeah, sure. Comments in some of this may be repetitive, but again, you know, I think it's obvious why we want to try to lean heavier into the higher margin channels. And we think of it as any process. It's, you know, how do we increase throughput in those and net yield and so we've taken a multi-pronged approach as we've talked about you know 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 the point I would make there is, you know, 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, you know, that approach can create a lot more mutual value between us, which then we can each share in, right? Right now, it's, you know, it's been more transactional, if you will. And there's, there's, you know, value to create, certainly on the price, certainly on the back end F&I, reconditioning costs, also kind of our, 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 to work in capital with that. So I think there's a number of opportunities to create a lot of value between us. Scale matters in that environment. And then, you know, we partnered with other retailers, Amazon, eBay, and others, right, for really to leverage, and Cox as well, to leverage our own direct retail car sales. And progress is being made. I don't want to indicate otherwise. But, you know, 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, 80 ish percent wholesale now, depending on, you know, seasonally in the month and the volume we're moving to more of a, we want to see, you know, 70 to 80 percent moving through the more lucrative channels. So that's been, you know, that's been the approach.

That's very helpful. Thank you for the color. 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, you know, autonomous players as the ecosystem shakes out, or is it purpose-built to this one-specific partner? Thank you.

Yeah, no, thanks. Great question. Yeah. You know, as I mentioned earlier, we're really excited about, you know, where Oro's heading and the capabilities and kind of our rightful place in AVs. You know, what I would say about the infrastructure, and this is really the benefit of Hertz as a background, is, you know, we have a lot of infrastructure footprint. We're operating on it. We can pivot, you know, 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, is 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 helped play out with ORO as well. So, and I think, as I said earlier, you know, if you think about kind of the infrastructure that we have, the ability to operate fleets at scale, own and finance vehicles, you know, trying to replicate all that would take a whole lot of time and a lot of money. So that's kind of the going in foundation with Oro that we have. And, you know, we're excited about the role we will play in AVs. 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, you know, it's required, and we've got a big running start on it, so.

That's good, Carlo. Thank you, and good luck. Thank you.

The next question is from Dan Levy from Barclays. Your line is now open. Great.

Good morning. Thank you for taking the questions. I wanted to start first with a question on the DOE, And I think you referenced this before that, you know, 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?

Yeah. Hey, Dan, this is Scott. And I'll also apologize to everyone, too. We're going to be close on time here, given the extended remarks and some of the answers were a bit extended as well. But yeah, to DOE, look, I mean, I think scale is one of the components we've talked about, not the only one, obviously. You know, we think that a lot of the initiatives that we have in place are obviously moving in the right direction. We talked about core operating expenses down 2% year over year on basically flat days. That's an important baseline to start from. I mean, obviously, we have headwinds thinking about RPD-related costs and sell lease vacs, financing costs, but 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 a billion or beyond. Cost is not our only lever here. It's make it, you know, stated that's the case. We do think there is room to run on DOE per day and unit cost, but it's one of multiple levers, including RPD, RPU, DPU. all of those things are going to be contributors. So there is room to run, but it's not the only lever that we have.

Okay, great. Thank you. As a follow-up, I wanted to ask about the liquidity dynamics. And just, A, maybe you can talk about, you know, what change in the liquidity guidance you previously said ending the year with in excess of a billion and a half, and you're saying one to 1.4.

But as you're looking at these maturities on the debt side in 28 and 29, two and a half billion dollars a year uh 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 yeah hey hey dan um just to clarify on the liquidity yeah previous guide was about 1.5 and i outlined in the prepared remarks that we removed atm proceeds from that forecast um so that's naturally going to bring it down and but we did say that look we're going to have the ATM in place and it remains available, you know, and it's a viable option, but it's not in the forecast, you know, really given where stock prices are. But look, we think we have the right amount of liquidity to fund 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 two years, the underlying business is strong and the economics are improving. Plus, we have a good strategic plan that we're executing, too, 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 it as 2026 set maturities in 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, you know, 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, you know, a number of those levers line up with our strategic initiatives around franchising and ORA. So we feel good about where we are and where the business is headed, and we'll deal with the maturities in due course. Great. Thank you.

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