Hertz Q3 2025: Contradictions Emerge on Vehicle Sale Strategy, Fleet Management, and Pricing Trends

Date of Call: None provided

Financials Results

• Revenue: $2,500,000,000, up roughly $350,000,000 year over year
• EPS: Positive EPS for the first time in two years (net income $184,000,000)
• Operating Margin: Adjusted corporate EBITDA margin 8%, within guidance (adjusted corporate EBITDA $190,000,000, up ~$350,000,000 YoY)

Guidance:

• Q4: transaction days expected to be close to flat year‑over‑year; total fleet down just under 5%.
• Q4 DOE per day expected to be roughly 5% lower (largely due to a nonrecurring 2024 insurance true‑up; ex‑item DOE down ~1–2%).
• Q4 net DPU expected to rise slightly to $280–$285 per month.
• Updated Q4 EBITDA margin to negative low‑to‑mid single digits; vendor outages may reduce Q4 revenue by $10–$20M.
• 2026 target: 3–6% EBITDA margin; fleet growth planned (airport low single digits, off‑airport mid‑high single digits, mobility 10–20%).

Business Commentary:

* Revenue and Profitability Growth: - Hertz Global Holdings achieved $2,500,000,000 in revenue for Q3, delivering adjusted corporate EBITDA of $190,000,000, a $350,000,000 year-over-year improvement. - The growth was driven by disciplined fleet management, revenue optimization, and rigorous cost control, resulting in positive EPS for the first time in two years.

• Fleet and Utilization Improvement:
• The company completed its fleet refresh, achieving a record high utilization rate of 84% since 2018.

• This improvement was facilitated by better process management of car sales inventory, strategic fleet deployment, and managing recalls, even with more than 2% of the U.S. fleet impacted.

• Digital Innovation in Car Sales:

• Hertz Car Sales launched on platforms like Amazon Autos, aiming to capture $2,000 or more incremental margin per vehicle via digital retail channels.

• The strategy aims to convert renters into buyers, leveraging the company's extensive customer base and fleet size.

• Focus on Customer Experience and Loyalty:

• The Net Promoter Score rose nearly 50% year-over-year in North America, indicating improved customer satisfaction.
• This was driven by enhanced customer experience training, technology improvements, and strategic initiatives to boost repeat business and brand advocacy.

  Sentiment Analysis:

  Overall Tone: Positive

  • Management reported $2.5B revenue, $190M adjusted corporate EBITDA (8% margin), positive EPS and net income $184M; NPS up nearly 50% YoY and record utilization above 84%, while reiterating disciplined fleet, pricing and cost actions driving momentum.

Q&A:

• Question from Chris Woronka (Deutsche Bank): Can you unpack what becoming a "value creating mobility platform" means in practice, what the platform includes and how it creates value beyond the core rental business?
  Response: Hertz is expanding beyond rentals into four pillars—rent­a­car, fleet, service and mobility—leveraging a modern fleet, e‑commerce (Cox, Amazon), rent‑to‑buy programs (70% conversion) and service capabilities to capture incremental margin per vehicle and new recurring revenue streams.

• Question from Chris Woronka (Deutsche Bank): Are the economics of the newer/smaller vehicle footprint materially better despite some absolute RPD pressure? How do mix, utilization, maintenance and customer mix play into that?
  Response: The buy‑right/hold‑right/sell‑right approach and model‑year 2026 buys (price and volume on target) enable a short‑hold strategy that improves unit economics (lower maintenance, better retail sales), offsetting some RPD mix headwinds.

• Question from Chris Strythopoulos (Susquehanna International Group): On the outlook for sub‑$300 net DPU next year, what work remains around recalls, mix and mileage to secure that target?
  Response: Management is confident the fleet strategy, channel management (Hertz Car Sales and F&I), stable residuals and 2026 vehicle purchases (majority locked) will drive DPU below $300 alongside disciplined disposal and pricing actions.

• Question from Chris Strythopoulos (Susquehanna International Group): Is the future 'algo' for Hertz a mix of DPU/DOE/RPD metrics plus digital car sales focus—i.e., pivot toward car sales and platform metrics?
  Response: The rental business fundamentals (DPU, DOE, RPD/RPU) remain foundational, but over time scaled Hertz Car Sales, services and mobility will materially augment revenue and margins and become meaningful complementary metrics.

• Question from Ian Zaffino (Oppenheimer and Company): Can you give color on Q3 and early Q4 demand—international inbounds, corporate, markets strong/weak—and impact of the government shutdown?
  Response: Q3 demand improved vs Q2 (airport demand turned positive from July); corporate returned positive in October; inbound remains down low single digits Y/Y but improving; government segment fell materially in November due to the shutdown and is expected to be transitory.

• Question from Chris Strythopoulos (Susquehanna International Group): As you expand off‑airport, is this driven by insurance replacement or other demand and how should we think about competitive dynamics and metrics vs on‑airport?
  Response: Off‑airport is a less mature, less cyclical growth area with B2B and B2C opportunities (including replacement, partnerships and retail); improved commercial engine and demand generation are driving durable, EBITDA‑accretive RPU despite being RPD‑dilutive.

• Question from Stephanie Moore (Jefferies): For the 2026 margin range (3–6% EBITDA), what would drive upside to the high end versus downside to the low end, and how do controllable actions vs market factors balance?
  Response: Key controllables are revenue management improvements, scale in off‑airport/mobility, continued DOE per day gains and substantially higher flow‑through of Hertz Car Sales (targeting >75–80% retail mix) which would drive upside; industry pricing is incremental upside risk.

• Question from Stephanie Moore (Jefferies): What net fleet CapEx will support next‑year growth and how will 2026 fleet mix differ from 2025?
  Response: Expected net fleet CapEx to support growth ~$100–$150M; >80% of 2026 purchase volume is already procured, with selective buys and some shift toward slightly larger or better‑trimmed vehicles and opportunistic program cars to improve retail economics.

• Question from Dan Levy (Barclays): With continued RPD pressure, are industry fleet levels right‑sized and how will Hertz ensure positive RPD while expanding fleet next year?
  Response: Hertz will grow disciplined by segment (airport ~GDP growth, off‑airport mid‑high single digits, mobility 10–20%), relying on demand generation, revenue management and selective fleet purchases rather than aggressive airport share growth to protect RPD.

• Question from Dan Levy (Barclays): You reported record utilization in the quarter—how sustainable is that level and what can we expect into next year?
  Response: Higher utilization is sustainable through operational improvements (reducing out‑of‑service time, faster car sales turnarounds) and better fleet deployment; there is further upside, though recalls and seasonal factors create transient headwinds.

Contradiction Point 1

Vehicle Sale Strategy and Fleet Size

It involves changes in the company's strategic approach to vehicle sales and fleet management, which can impact revenue, operational efficiency, and investor expectations.

Do smaller vehicle footprints offer economic benefits from lower maintenance and operating costs? - Chris Woronka (Deutsche Bank)

2025Q3: Our mix is dynamic, and we're optimizing it around customer demand and preferences. Model year 2026 buys align with our DPU targets. We're also selling cars with a car dealership mindset, focusing on selling well rather than just acquiring vehicles at the lowest cost. - Gil West(CEO) and Sandeep DuBo(CRO)

How much of the sales volume was due to structural changes compared to higher dispositions? - Ryan Joseph Brinkman (JPMorgan Chase & Co)

2025Q2: Our strategy of buy right, hold right, sell right is robust. We've secured 80% of our 2026 vehicle purchases with good residuals and price targets, enabling us to sustain our DPU targets. - Gil West(CEO) and Scott Harrelson(CFO)

Contradiction Point 2

Pricing and Market Conditions

It concerns differing perspectives on market pricing trends and their impact on the company's financial performance, which are crucial factors for investors.

What are the key factors for achieving sub-$300 DPU in 2026, including vehicle recalls and fleet plans? - Chris Strythopoulos (Susquehanna International Group)

2025Q3: Overall, we believe pricing trends are improving worldwide. International markets, on average, are still in a declining pricing environment, but the rate of decline is improving. - Sandeep DuBo(CRO)

Can you break down RPD and RPU performance for Q2 and the second half of the year? - Chris Jon Woronka (Deutsche Bank AG)

2025Q2: RPD in isolation was down about 5% in Q2, normalizing to around 2 to 3 points better due to fleet mix changes. Overall market pricing was down mid- to high single digits. - Sandeep DuBo(CRO)

Contradiction Point 3

Fleet and Vehicle Strategy

It involves the company's stance on fleet management and vehicle acquisition strategy, which directly impacts operational costs and revenue generation.

What does it mean to be a value-creating mobility platform beyond traditional rental business? - Chris Woronka (Deutsche Bank)

2025Q3: Our focus remains on the core rental car business, but we're far more than just a rental car company. Our strategy spans four areas: rent a car, fleet, service, and mobility. - Gil West(CEO)

How many vehicles are affected by over-fleeting in the fleet? - Ian Zaffino (Oppenheimer)

2025Q1: Hertz is not over-fleeted at the macro level, but there were local market impacts due to pulling forward vehicle deliveries to avoid tariffs. - Gil West(CEO)

Contradiction Point 4

Vehicle Sales Strategy and Channels

It involves the company's approach to vehicle sales, which is a significant part of their strategy to improve unit economics and financial performance.

What are the key factors for achieving sub-$300 DPU by 2026, given vehicle recalls and fleet plans? - Chris Strythopoulos (Susquehanna International Group)

2025Q3: Our strategy of buy right, hold right, sell right is robust. We've secured 80% of our 2026 vehicle purchases with good residuals and price targets, enabling us to sustain our DPU targets. - Gil West(CEO), Scott Harrelson(CFO)

What are the vehicle disposal options and pricing dynamics? - Harold Antor (Jefferies)

2024Q4: We aim to move towards higher-margin sales channels, increasing retail sales through digital experiences and strategic partnerships. The goal is to reduce dependence on auction channels to less than 10%. - Wayne West(CEO)

Contradiction Point 5

Residual Values and Market Conditions

It highlights differing views on the state of residual values and market conditions, which are crucial for fleet management and financial forecasting.

What are the key factors to achieve sub-$300 DPU by 2026, considering vehicle recalls and fleet plans? - Chris Strythopoulos (Susquehanna International Group)

2025Q3: Our fleet strategy is guided by the principle of buy right, hold right, sell right. With year 2026 buys now 80% secured, we expect to generate approximately $2.1 billion in revenue from off-fleet sales this year. - Sandeep Dube(CMO)

How many vehicles are affected by over-fleeting, and what is the extent of this issue? - Ian Zaffino (Oppenheimer)

2025Q1: Residuals for younger cars are rising disproportionately due to supply constraints. - Sandeep Dube(CMO)