HTZ

Business Context and Reporting Period

Company: Hertz Global Holdings, Inc. (Hertz Global) and The Hertz Corporation (Hertz).
Filing Type: Form 10-Q (Unaudited Quarterly Report).
Reporting Period: Quarter and six months ended June 30, 2026.
Business Overview: Global vehicle rental and leasing operations primarily through Hertz, Dollar, and Thrifty brands. The company operates in two reportable segments: Americas RAC and International RAC.

Key Financial Metrics

Note: Hertz Global results include non-operating gains/losses on Public Warrants not present in Hertz results.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 10% year-over-year for both Q2 and the six-month period, driven primarily by improved pricing (Total Revenue Per Transaction Day increased 10% in Americas RAC and 3% in International RAC for Q2).
• Profitability Improvement: Hertz Global reported a net income of $64 million in Q2 2026, a significant turnaround from a $294 million loss in Q2 2025. This was largely aided by a $98 million gain from the change in fair value of Public Warrants.
• Expense Trends:
  • Depreciation: Increased 17% in Q2 2026 due to reduced gains on vehicle disposals and residual variability.
  • Interest Expense: Non-vehicle interest expense decreased 59% in Q2 2026, primarily due to unrealized gains on exchangeable note derivatives offsetting higher debt levels.
  • Direct Operating Expenses: Increased 4% in Q2 2026, driven by higher collision, refueling, and maintenance costs.
• Capital Structure: Total debt increased to $18.7 billion. In Q2 2026, the company issued $350 million in Exchangeable First Lien Notes Due 2030 and $1 billion in vehicle debt (HVF III Series 2026 Notes).

Guidance, Outlook, and Risks

Management Commentary:

• Management continues to execute the "Back-to-Basics" roadmap focusing on disciplined fleet management, revenue optimization, and cost control.
• Vehicle utilization remained stable at 83% in Americas RAC and 80% in International RAC for Q2 2026.
• The company expects to continue evaluating sales and leasebacks of non-vehicle capital assets through the end of 2026.

Risks and Contingencies:

• Legal Proceedings: A significant bankruptcy-related litigation (Wells Fargo) was resolved in January 2026 with a payment of $346 million. A new securities class action was filed in July 2026 alleging misrepresentations regarding liquidity and used car market softness.
• Market Risks: Exposure to residual value risk on non-program vehicles, supply chain disruptions, and volatility in interest rates and foreign currency exchange rates.
• Liquidity: Corporate liquidity decreased to $984 million from $1.5 billion at year-end 2025, though the company asserts sufficient funds for the next 12 months.

Unusual Items:

• Public Warrants: A $98 million gain in Q2 2026 (vs. $115 million loss in Q2 2025) significantly impacted Hertz Global's net income but is excluded from Hertz's results.
• Asset Sales: Recognized a $64 million pre-tax gain on the sale of non-vehicle capital assets in Q2 2026.

Investor Verification Checklist

• Debt Maturities: Verify the impact of $2.4 billion in vehicle debt and $209 million in non-vehicle debt maturing in the remainder of 2026.
• Residual Values: Monitor the "Depreciation Per Unit Per Month" metric ($304 in Americas RAC for Q2 2026), which increased 22% year-over-year, indicating potential pressure on used car residual values.
• Derivative Volatility: Assess the sustainability of the $51 million net gain on financial instruments in Q2 2026, which is driven by fair value changes in exchangeable notes and warrants.
• Liquidity Covenants: Confirm continued compliance with the minimum liquidity covenant ($400 million for Q2/Q3) and the First Lien Ratio (3.5x for Q2).
• Legal Exposure: Track the status of the July 2026 securities class action regarding liquidity disclosures and the outcome of the settled Wells Fargo litigation.