Hertz Global Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request identifies 2023 Q4, this filing reports annual results; it does not provide a clear set of standalone fourth-quarter financial results in the supplied text. Hertz Global is a holding company; its operating subsidiary, The Hertz Corporation, conducts nearly all operations. Amounts below are in U.S. dollars.
Business context and key results
Hertz rents vehicles through Hertz, Dollar and Thrifty brands, with Americas RAC and International RAC as its reportable segments. At year-end it operated approximately 11,400 company-operated and franchise locations in about 160 countries and jurisdictions.
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Revenue | $9.371 billion | $8.685 billion | Up 8%, principally on higher rental volume |
| Net income attributable to Hertz operating company | $452 million | $1.355 billion | Down 67% |
| Net income attributable to Hertz Global | $616 million | $2.059 billion | Includes holding-company warrant accounting and tax effects |
| Adjusted Corporate EBITDA | $561 million | $2.305 billion | Down 76%; approximately 6.0% of revenue versus 26.5% in 2022 |
| Operating cash flow | $2.474 billion | $2.538 billion | Down $64 million for Hertz Global |
| Net vehicle investment cash flow | $(4.016) billion | $(4.098) billion | Vehicle purchases less disposal proceeds |
| Cash and cash equivalents | $764 million | $943 million | Plus $442 million restricted cash at year-end |
| Total debt | $15.691 billion | $13.863 billion | $12.242 billion vehicle debt; $3.449 billion non-vehicle debt |
Performance and material changes
- Americas RAC revenue increased 6% to $7.722 billion; Adjusted EBITDA fell 74% to $585 million. Transaction Days rose 12%, while Total Revenue Per Transaction Day declined 5% to $61.65 as pricing eased from elevated post-pandemic levels. Utilization improved to 81% from 79%.
- International RAC revenue increased 17% to $1.649 billion; Adjusted EBITDA fell 14% to $302 million. Transaction Days rose 15%, pricing was broadly flat, and utilization improved to 76% from 73%.
- Vehicle depreciation and lease charges rose to $2.039 billion from $701 million. The increase reflected lower gains on vehicle sales, a larger average fleet and fewer vehicle dispositions, as well as a $245 million write-down tied to the EV fleet disposal plan.
- Direct vehicle and operating expenses rose 13% to $5.455 billion, including increased volume-related, collision and damage costs. Net interest expense increased to $793 million from $328 million, mainly due to higher rates and debt levels.
- Hertz Global reported a $330 million income tax benefit, versus a $390 million provision in 2022. FY2023 earnings therefore should be considered alongside the tax benefit and other non-operating items; Hertz Global also recorded a $163 million gain from the change in fair value of Public Warrants.
Liquidity, debt and outlook
- Year-end corporate liquidity was $2.030 billion, comprising $764 million cash and $1.266 billion available under the First Lien revolving credit facility. The filing says management expects operating cash, vehicle-sale proceeds and financing access to fund obligations for at least the next 12 months and foreseeable future.
- Vehicle financing capacity is collateral-dependent: although stated remaining capacity across vehicle facilities was $2.603 billion, availability under borrowing-base limits was only $1 million at year-end. Vehicle-value declines could require additional collateral or debt repayment.
- Contractual debt obligations include $2.322 billion of vehicle debt due in 2024; the company says it expects and intends to refinance maturities as appropriate. It was in compliance with its First Lien financial covenant at year-end.
- Management expects 2024 net vehicle investment to increase as it buys new vehicles and disposes of vehicles with lower expected residual values. It expects the EV fleet reduction to lower certain depreciation and operating costs and improve results, but cautions that benefits depend on successful execution and disposition timing. No specific full-year earnings guidance is provided in the supplied filing text.
- In December 2023, Hertz decided to significantly reduce its global EV fleet, citing supply exceeding demand, higher collision and damage costs, and declining EV residual values. The EV disposal group had a $542 million carrying value after the $245 million write-down and was expected to be sold primarily through normal channels during 2024.
Risks, contingencies and unusual items
- Residual-value exposure is significant because most of the fleet is non-program; only 12% of vehicles purchased in 2023 were under manufacturer repurchase or guaranteed-depreciation programs. Used-vehicle values had declined, with further potential declines identified as a risk.
- Substantially all consolidated assets are pledged or encumbered for secured financing. Higher interest rates, weaker vehicle collateral values, or restricted access to asset-backed financing could pressure liquidity and fleet funding.
- A Wells Fargo bankruptcy-related proceeding seeks approximately $272 million in redemption premiums and post-petition interest, or alternatively approximately $125 million in post-petition interest, plus possible prejudgment interest. The appeal was pending before the Third Circuit at filing; an adverse result could be material.
- Other notable exposures include self-insured liabilities of $471 million, including $336 million for Americas RAC, and ongoing litigation related to alleged false arrests. A 2022 settlement with 364 claimants cost approximately $168 million; claims against remaining insurers continued.
- Hertz Global repurchased $291 million of shares in 2023; approximately $874 million remained authorized under its repurchase program at year-end. The program is discretionary, and litigation challenging the repurchase programs was pending. Hertz Global paid no common-stock dividends in 2023 and does not expect to do so for the foreseeable future.
- The business is seasonal and exposed to travel demand, intense price competition, vehicle supply and recall risks, labor negotiations, cybersecurity and privacy events, regulatory changes, and EV economics. The filing reports no indication that prior cybersecurity attempts had a material effect as of the filing.
Important facts for investors to verify
- Whether the $245 million EV write-down and fleet reduction translate into lower collision costs, improved depreciation and successful vehicle sales in 2024.
- Used-vehicle residual values, vehicle disposition gains or losses, fleet age, utilization and the pace of fleet replacement.
- Whether rental pricing and transaction volume sustain revenue while operating costs, depreciation and interest expense remain elevated.
- Refinancing progress for 2024 vehicle maturities and actual borrowing-base availability, collateral requirements and covenant headroom.
- The outcome and potential financial exposure of the Wells Fargo appeal and other material litigation or insurance recoveries.
- The drivers and durability of the FY2023 tax benefit and the distinction between Hertz Global’s reported net income and the operating company’s results.