HTZ

Business Context and Reporting Period

This summary covers the Form 10-Q for Hertz Global Holdings, Inc. and The Hertz Corporation for the quarterly period ended March 31, 2026. Hertz operates a global vehicle rental business through the Hertz, Dollar, and Thrifty brands, organized into two reportable segments: Americas RAC and International RAC. The company is a large accelerated filer and reported a net loss for the period, though showing improvement over the prior year.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 11% ($191 million) year-over-year, driven by improved pricing and volume in both Americas RAC (+9%) and International RAC (+16%) segments.
• Profitability Improvement: Net loss narrowed by $110 million to $(333) million. Adjusted Corporate EBITDA improved significantly by 47% to $(161) million.
• Expense Management: Depreciation of revenue earning vehicles decreased 10% ($54 million) due to reduced costs associated with vehicle sales and stronger residual values. However, Direct Vehicle and Operating (DOE) expenses increased 5% ($70 million) due to higher volume and personnel costs.
• Interest Expense: Total interest expense decreased 4% ($11 million) to $256 million, primarily due to unrealized gains on the fair value of Exchangeable Notes derivatives, partially offset by higher debt levels.
• Cash Flow: Operating cash flow decreased significantly by $231 million to $20 million, largely due to the payment of a bankruptcy-related litigation reserve and working capital changes.

Guidance, Outlook, and Risks

Management Commentary: Management continues to execute its "Back-to-Basics" roadmap focused on disciplined fleet management, revenue optimization, and cost control. The company revised its definition of Adjusted EBITDA in Q1 2026 to better reflect ongoing operations by adjusting for realized gains/losses on financial instruments, share-based compensation, and foreign currency impacts.

Liquidity: Corporate liquidity (cash plus First Lien RCF availability) stood at $837 million as of March 31, 2026, down from $1,489 million at year-end 2025. The company remains in compliance with all debt covenants, including the First Lien Ratio and minimum liquidity requirements.

Risks and Contingencies:

• Legal Proceedings: The company settled a significant bankruptcy-related litigation (Wells Fargo) in January 2026, paying $346 million. Other active matters include a securities class action regarding EV demand statements (settled in principle) and data breach claims related to a third-party vendor.
• Market Risks: Exposure to interest rate fluctuations, foreign currency exchange rates, and residual value risks associated with the vehicle fleet mix (program vs. non-program vehicles).
• Debt Structure: The company holds significant Exchangeable Notes (Due 2029 and 2030) with embedded derivatives that impact reported interest expense and fair value adjustments.

Investor Verification Checklist

• Vehicle Fleet Economics: Verify the sustainability of the 14% reduction in Depreciation Per Unit Per Month and the impact of residual value assumptions on future earnings.
• Liquidity Position: Monitor the decline in corporate liquidity from $1.49 billion to $837 million and the utilization of the First Lien RCF.
• Derivative Accounting: Review the impact of fair value adjustments on Exchangeable Notes and Public Warrants, which contributed $33 million in gains to the Q1 2026 income statement.
• Legal Reserves: Assess the adequacy of reserves for ongoing litigation, particularly the data breach claims and the remaining appeals in the Wells Fargo matter.
• Segment Performance: Analyze the divergence between Americas RAC (Adjusted EBITDA loss of $103 million) and International RAC (Adjusted EBITDA loss of $2 million) to understand regional profitability drivers.