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

Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information which can be accessed through the Investor Relations section of our website. I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance and, by their nature, are subject to inherent risks and uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements, including factors that could cause our actual results to differ, is contained in our earnings press release and in the Risk Factors and Forward-Looking Statements section in the filings we make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website. Today, we'll use certain non-GAAP financial measures which are reconciled with GAAP numbers in our earnings press release available on our website. We believe that these non-GAAP measures provide additional useful information about our operations, allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business. On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss strategy, operational highlights, and our fleet. Our Chief Commercial Officer, Sandeep Dube, will share insights into our commercial strategy followed by Scott Haralson, our Chief Financial Officer, who will discuss our financial performance. I'll now turn the call over to Gil.

Thanks, Johann. Good morning, everyone, and thank you for joining us. I want to start by thanking the Hertz team; their focus, discipline, and resilience, especially those serving our customers in the field, was evident throughout the year but particularly during the fourth quarter holiday travel season, which is historically one of our most operationally intensive periods. Together, they executed consistently against our goals and made real progress, building momentum for the year ahead. 2025 marked the first full year operating under the back-to-basic strategy. Guided by our North Star metrics, we brought greater discipline to fleet management, revenue optimization, rigorous cost control, and improving the customer experience. The work is far from finished, but the progress we made this year materially strengthened the foundation of our business for the long term. In 2025, we achieved a full year adjusted EBITDA improvement of more than $1 billion year-over-year. We drove sequential improvements in revenue, RPU, and RPD, and improved utilization by maximizing our assets, driving DPU down in line with our North Star target. We also successfully secured our model year '26 buys at our target prices and volumes, allowing us to begin selling model year '25 through our enhanced retail channels, continue our short hold strategy, introduce a more optimized mix of car classes, and achieve our lowest average fleet age in almost a decade. Additionally, we delivered a nearly 50% improvement in customer satisfaction. As we turn to the fourth quarter, the typically challenging seasonal environment was amplified by several external headwinds primarily isolated to the quarter, including a government shutdown, FAA cancellations, multiple technology vendor outages, an unfavorable residual value environment, and elevated recall volumes. Together, these created outsized pressure of well over $100 million on our business and kept us from hitting some of our targets. Even within that environment, we made progress. In the fourth quarter, adjusted EBITDA improved $150 million year-over-year, but our strongest result this quarter was revenue. In fact, it was our strongest revenue result in nearly 2 years. If you remember, we entered 2025 with revenue down double digits year-over-year, and by the end of the fourth quarter, we were nearly flat in revenue with a 3% smaller fleet—significant accomplishment driven by our ability to sequentially improve RPU and RPD, with sustained utilization and transaction days—all with a smaller fleet. We also saw a more stable industry pricing backdrop throughout the quarter, particularly noteworthy given the very polarized peak and off-peak dynamics that play out during this period every year. This is evidence that both our commercial investments in pricing and demand generation are paying off and that the industry setup is more positive than in prior periods. While DPU, as I mentioned, was in line with our North Star target for the year, in the fourth quarter, it moved above our North Star target due to a revised Black Book residual value forecast and lower-than-expected wholesale prices. Recall volumes peaked in mid-November and December, taking over 20,000 cars out of service, which is almost 3 times higher than the normal rate. This resulted in us carrying more fleet than we had planned, limiting our performance, which had ripple effects across the business and impacted our fleet utilization, particularly for our rideshare business. We're actively working with our OEM partners to find solutions to minimize downtime, and recall volumes have moderated slightly. Q4 presented real challenges, but the decisions we made throughout 2025 held up under pressure and reinforced that our strategy is the right one. Today, Hertz stands on a meaningfully stronger foundation than it did a year ago. A healthier fleet, improved unit economics, a more disciplined operating model, and a better customer experience. The improvements we're seeing in the business are structural; they're permanent. The headwinds we faced and continue to navigate are transitory. That difference matters, and it's what gives me confidence in the trajectory ahead. Q1 trends in both revenue and RPD are positive year-over-year, a particularly encouraging sign given that this is typically a seasonal trough period for the industry. Looking ahead, we remain focused on accelerating revenue, RPD, and RPU growth while staying disciplined on cost, putting core rental business firmly on the path to profitability. Our transformation is about becoming more than a single line of business. We're executing with discipline in the business that powers us now, but we're intentionally building the capabilities that will power what's next. The Hertz platform spans rent-a-car, service, fleet, and mobility. While it's still early days, each presents meaningful upside, both near and long term. In rent-a-car, we'll maintain steady momentum in our mature airport locations by driving pricing, utilization, demand generation, and asset management. We see real near-term upside from growth in our off-airport locations and small business. We're also sharpening our focus to unlock additional value in our franchise footprint. We see a particularly strong runway in fleet through Hertz car sales and in mobility, where the long-term opportunity has the potential to become as, if not more meaningful than our core rent-a-car business. We're transforming Hertz car sales into a truly omnichannel experience. The opportunity here is significant. We are a used car factory with a building customer base. Our improved website has a wide variety of vehicles for sale, an intuitive interface, enhanced imagery, and more detailed descriptions to help customers shop more confidently. Our improved digital channels will ultimately rival the largest used car dealers. Our focus on leveraging fleet ownership, large-scale operations, world-class maintenance, and vehicle fleet financing is evolving to meet the mobility needs of tomorrow. Our journey in mobility began by renting cars to Uber and Lyft drivers, and we now operate the largest rideshare rental fleet in the world. While it's challenging to quantify the full growth potential of our mobility business at this stage, the opportunities are significant. For context, Uber's CEO has described autonomous vehicles as potentially a multitrillion-dollar market. We're building the capabilities now to ensure Hertz is positioned to play a significant role in that ecosystem. Today, our rental car business remains the largest consumer of our time and operational focus, but as we scale the broader platform, the mix will evolve.

Thanks, Gil, and good morning, everyone. I want to jump right into the highlights of our revenue this morning. The fourth quarter, which is typically a trough period for the industry with volatile seasonal demand, represented Hertz's strongest year-over-year revenue result since Q1 2024. In Q4 2025, we drove year-over-year revenue growth, primarily driven by RPD, which was nearly flat on a year-over-year basis. Most importantly, RPD for the airports in the Americas, our largest segment, was positive year-over-year for the quarter. We achieved this improvement despite headwinds, including a lower car class mix, the extended government shutdown, and elevated recalls. In Q4, we achieved the difficult feat of improving both year-over-year pricing and days sequentially, primarily driven by Hertz's commercial strategies. Our revenue metrics showed good sequential progression. Q4 2025 adjusted revenue was 4 points better sequentially, moving from down 4% to about flat. The driving factors for these improvements included enhancing customer experience, generating durable demand from higher-margin channels, improving our pricing tactics, and monetizing our higher RPU assets effectively. These commercial strategies primarily drove the positive momentum in Q4 2025, raising the baseline productivity of our revenue and RPD production, which we expect to persist irrespective of macroeconomic conditions. In summary, the sequential improvement through 2025 results from our back-to-basic strategy, narrowing the gap between revenue and RPD on a year-over-year basis by the end of the year and turning positive early in 2026. January has shown positive year-on-year revenue and unit revenue growth, supporting a constructive industry environment compared to Q4 2025. For the rest of 2026, we will manage our growth in a disciplined manner, targeting airport growth at or below TSA levels while pursuing off-airport and mobility opportunities. Our improvements in the Net Promoter Score indicate that our work to create a consistent, convenient, and caring customer experience resonates with our customers.

Thanks, Sandeep, and good morning, everyone. As you heard from Gil and Sandeep, the fourth quarter had several items that clouded the results. But once you get past the transitory impacts, you can see some foundational elements. Our revenue trends are improving, our fleet is rotated, and model year 2026 buys have been secured at expected prices and volumes. Despite a richer fleet mix, which will provide a tailwind to RPD, we still expect to keep DPU for the year below $300 per unit. We achieved a significant leap in our Net Promoter Score and that should continue. Our digital customer experience, operational consistency, and customer-focused initiatives are recognized by our customers. We've found a balance between utilization and NPS scores, focusing on improving both simultaneously. Throughout 2025, we lowered unit costs while simultaneously reducing units, despite a heavy fixed cost and complex operational model. We expect growth opportunities in 2026, especially in our off-airport locations and mobility business. We've made significant technological advancements in our digital car sales process. While early on, we expect meaningful progression in the percentage of our car sales transacted through retail channels. As we scale the broader platform across rent-a-car, service, fleet, and mobility, the structure will evolve. I will quickly walk through some details from the quarter, about our liquidity, and cover our 2026 outlook. For Q4, we reported revenue of $2.0 billion, exceeding consensus expectations with RPD broadly in line and down approximately 1% year-over-year. Adjusted EBITDA for the quarter was a negative approximately $200 million, which improved $150 million year-over-year but was still about $100 million off of our target due to vehicle carrying costs. We incurred significant additional costs to compensate for elevated recalls, and we also saw a loss due to large numbers of cars impacting residuals. Despite this, underlying business performance was better than reported adjusted EBITDA indicates. Transaction days were nearly flat year-over-year, and adjusted DOE per day improved 6% year-over-year, reflecting the positive impact of our cost initiatives, although we did face challenges regarding higher repair costs and ongoing elevated insurance costs. We still have work ahead, but our improvements across labor, facilities, and maintenance costs are significant. As we approach Q1 2026, we anticipate transaction days and fleet to increase low single digits year-over-year, with total fleet utilization likely flat due to weather impacts and elevated fleet recalls.

Thank you, Scott. 2025 was a year of back to the basics, focused on rebuilding the core and transforming Hertz for the long term. We first tackled our fleet alongside cost and revenue while elevating customer experience. Through our fleet strategy and rotation, our team turned what was once a massive headwind into a competitive advantage, which positions us well for 2026 and beyond. We've delivered year-over-year improvements in unit cost even with a smaller fleet, and we see a long runway of cost and productivity initiatives across all aspects of our business. Together with the operational leverage from future growth, this should help propel us forward. At the same time, we are developing our platform to unlock value beyond our core business, leveraging the operational discipline, cost controls, and revenue optimization that define this turnaround. With that, let's open it up for questions. Back to you, operator.

Our first question comes from Chris Woronka with Deutsche Bank.

I guess, Gil, to start off, one of your competitors recently took about a $500 million write-down related to EVs. Can you maybe give us a refresh on where you guys are in EVs and how your strategy has changed or evolved recently?

Yes, Chris, thanks for the question. Many headlines are swirling across the automotive industry on EVs of late. We're probably a bit further down the road than most, with a distinct strategy. We are the largest fleet supplier to rideshare globally, making it crucial to get that fleet right, especially with different needs in our traditional rack business. EVs are central to rideshare, remaining a long-lived asset in that fleet. We have built significant operational expertise surrounding EVs over the years. We've aligned our EV fleet to meet natural demand by redeploying it into the rideshare business, which provides high-intensity operating environments that help us accelerate our learning curve. For our Tesla fleet, we are refreshing interiors to extend the life of those assets while economically benefitting us. Moving forward, we've built operational capabilities that position Hertz well for autonomous vehicles—most of which will likely be EVs—benefiting from our existing expertise.

Gil, if you could go into the future potential of the mobility business for Hertz? What does that look like—1, 3, 5 years? More detail on how you're thinking about that would be helpful.

Thanks, Chris. The potential in mobility is significant, and we continue positioning Hertz for the future. We're clearly a vital player in the evolution of rideshare into autonomous, and we are beginning to pilot innovative models. We possess the necessary ingredients to be a major player, from operational excellence to advanced maintenance capabilities. Our core business involves operating large fleets of vehicles while having the financial capability to support these ventures. The experiences we've built in managing EVs also play a critical role, as future AVs will likely be EVs. We're focused on achieving our core business goals without distraction, but mobility is a big part of our future.

I wanted to discuss DPU and how you can sustainably maintain it at $300, given vehicle inflation. What offsets do you have to get it down to that target? What is your confidence on that?

Thanks, Dan. We are confident that our end-to-end fleet strategy will allow us to maintain the sub-$300 DPU threshold this year, regardless of the conditions. We've rotated the fleet and secured model year '25 and '26 vehicles, and the used car market set-up looks good. We are shifting towards heavier retail car sales and shorter hold periods, which should be tailwinds. Managing buy, hold, and sell strategies at a trim level will help maximize retention value over the entire holding period, ensuring a path to our DPU targets.

Yes, and just to add a mathematical perspective here: we buy vehicles significantly below MSRP, allowing for a value proposition if we can swiftly monetize that. A shorthold strategy creates complexity but the right inflow of vehicles supports our ability to optimize DPU. Historically, the rental car business has managed below $300, and we are determined to achieve that level.

I would like to ask about liquidity dynamics. You mentioned Q2 being the trough, but what capital raise options do you have to ensure liquidity until you reach cash flow positivity?

Yes, we'll make significant strides in cash flow generation in '26. While our focus is on reaching free cash flow, we have plans for $200 million in liquidity boosts and other initiatives that could add over $500 million. We have real estate assets that can be monetized and our ABS structure remains strong, allowing us liquidity options. With the planned disciplined growth, we expect to address liquidity while investing in fleet and eventually end the year with improved free cash flow.

Gil, I wanted to clarify your comments on off-airport growth and how it relates to the mobility business and the potential interest in re-entering the insurance business.

Thank you, John. When referencing off-airport, it pertains to our rental car business and excludes mobility. Within rental, we've been managing our fleet effectively. Now, as we look to off-airport business growth in '26, we aim to return to previous levels while continuing to control capital and vehicle availability. Demand for off-airport rentals continues well, and we're in a strong position moving forward.

John, to further clarify, we view the airport and off-airport segments differently due to their distinct demand profiles. Therefore, we typically manage airport and off-airport growth metrics separately, given their differing seasonal cycles and profitability characteristics.

Considering your EBITDA margin targets, does hitting the high end of that range bring you closer to cash flow breakeven? What thoughts do you have about the approach to deleveraging moving forward?

Yes, the business must reach free cash flow breakeven to begin focusing on debt repayment. At the high end of our margin target, we're nearing breakeven. Additionally, refinancing opportunities for deleveraging remain while exploring new geographical franchise opportunities to potentially enhance our capital structure in the future.

With regard to the Hertz car sales strategy, how do you expect the percentage of vehicles disposed of to change in 2026 relative to 2025? Furthermore, how does this factor into your North Star target for per unit depreciation?

We are shifting our sales strategy to prioritize retail channels, targeting an increase from 1/3 to about 80% of our car sales through those channels. While the business growth doesn't currently factor into the EBITDA targets, we're focusing hard on channel shifts to improve sales performance while maintaining high standards in margin per sale.

We are improving pricing across both channels, leading to notable improvements in our rental business and car sales. We are committed to continuous improvement in pricing and customer experience, whether through operational channels or additional technological methods.

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